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GM to close four plants to favor efficient vehicles

Latest update : 2008-06-04

General Motors announced Tuesday it will shut down four plants and refocus its strategy on fuel-efficient vehicle production. Rising gas prices may even force the company to revamp its emblematic Hummer model.

General Motors predicted Tuesday the end of the era of gasoline guzzlers as it announced plans to close four North American truck and sport utility vehicle plants and ramp up production of new fuel-efficient vehicles.
   
The automaker said it was also considering revamping or even selling its hulking Hummer brand as high fuel prices have dramatically shifted consumer demand.
   
"These moves are all in response to the rapid rise in oil prices and the resulting changes in the US, changes that we believe are more structural than cyclical," said Rick Wagoner, GM chairman and chief executive.
   
"We at GM don't think this is a spike or temporary shift; we believe that it is, by and large, permanent," Wagoner said at a news conference at GM's annual shareholder meeting in Wilmington, Delaware.
   
The Big Three US automakers -- GM, Ford and Chrysler -- managed to sustain their profitability in the 1980s and 1990s in the face of a steady loss of market share to Asian competitors because of their dominance in the truck and sport utility vehicle (SUV) market.
   
But they were slow to match the more fuel-efficient car-based SUVs of their competitors and have been forced to implement massive restructuring plans in recent years in the face of multibillion dollar losses.
   
GM alone has eliminated 71,000 jobs in the United States since 2000 and lost more than 54 billion dollars since 2005.
   
"While some of the actions, especially the capacity reductions, are very difficult, they are necessary to adjust to changing market and economic conditions and to keep GM's US turnaround on track and moving forward," Wagoner said.
   
Wagoner declined to say when GM expects to return to profitability but said the automaker remained committed to restructuring itself "for sustained profitability and growth."
   
"While we remain reasonably constructive on the long-term prospects for the auto industry in the United States, we view the near-term US economic and auto market environment with considerable caution," Wagoner told reporters.
   
The White House called the announcement a sign that the auto giant was "adapting well" to market shifts.
   
"It's a sign that Detroit continues to adapt and evolve and address the change in consumer tastes and attitudes. And I think that they're adapting well," spokeswoman Dana Perino said.
   
The announcement came hours before GM reported an annual 28 percent drop in May US sales to 272,363 vehicles as car sales fell 14 percent to 130,115 and light truck sales fell 37 percent to 138,777 vehicles.
   
GM said its board has approved funding for the Chevrolet Volt extended-range plug-in electric vehicle which it hopes to have ready for customers by the end of 2010.
   
The company will also launch a new global compact car program for the Chevrolet brand, including a next generation for its subcompact Aveo model and the introduction of a high-efficiency engine module for the US market.
   
The company is adding third shifts for production of its Chevy Malibu, Chevy Cobalt and Pontiac G6 models at two plants in Michigan and Ohio to respond to growing demand for smaller vehicles.
   
GM plans to shutter production at its Toluca, Mexico, pickup truck at the end of the year and its Oshawa, Canada, plant will be closed in 2009. Plants in Moraine, Ohio, and Janesville, Wisconsin, are slated for closure in 2010 "or sooner if market demand dictates," GM said.
   
GM expects to see additional structural cost savings of more than one billion dollars by 2010 for its North America operations as it cuts truck production capacity by 700,000 units to 3.7 million vehicles a year.
   
This follows an announcement earlier this year of plans to cut five billion dollars in annual costs by 2011.
   
GM shares closed sharply off earlier gains, up 0.8 percent at 17.58 dollars.
 

Date created : 2008-06-04

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