By Greg Bensinger and Jeff Green
July 15 (Bloomberg) -- General Motors Corp., buffeted by a U.S. sales collapse and three years of losses, suspended its stock dividend, cut salaried worker costs by 20 percent and proposed selling assets to raise at least $15 billion in the next 18 months.
GM said the reductions in salaried jobs and eliminating the 25-cent quarterly dividend will help shrink annual operating expenses by $10 billion. The company also plans to raise $4 billion to $7 billion through asset sales and new bank loans.
"At first blush, these would be positive steps for liquidity, but we would view them as absolute necessities given the current market conditions,'' said Gregg Lemos Stein, a credit analyst at Standard & Poor's in New York.
The moves may help Chief Executive Officer Rick Wagoner, 55, counter claims that the weakest U.S. auto demand in more than a decade puts GM at risk of bankruptcy. Merrill Lynch & Co. said July 2 that GM may need to raise $15 billion and a Chapter 11 filing is "not impossible'' should sales continue to deteriorate. GM last eliminated its dividend in 1922.
The increased cash means the automaker will have enough to operate should the U.S. market fall to 14 million cars and trucks this year and next, lower than analysts expect, Wagoner said today in a broadcast to employees. GM also figures on oil costing $130 to $150 a barrel, compared with $146 currently.
"Overall, we believe that the cost cutting is ahead of market expectations -- and relatively credible, while the fundraising provides less up front cash than we and the market had been looking for,'' Lehman Brothers Analyst Brian Johnson wrote in a report today.
GM fell 35 cents, or 3.7 percent, to $9.03 at 10:38 a.m. in New York Stock Exchange composite trading.