(AFP) – Jun 3, 2008
CHICAGO (AFP) — General Motors predicted Tuesday that the era of the gasoline guzzlers is ending as it announced plans to close four North American truck and sports 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 press conference ahead of GM's annual shareholder meeting in Wilmington, Delaware.
The Big Three US automakers managed to sustain their profitability in the 1980's and 1990's in the face of a steady loss of market share to Asian competitors because of their dominance in the truck and sports utility 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.
"And they'll make these changes, and hopefully be able to pull themselves up out of what has been a rough several years," she said.
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.
A representative for the Canadian Auto Workers union, which had recently ratified a new three year contract with GM, called the move a betrayal.
"General Motors is going to produce our truck in Mexico and the United States," plant representative Chris Buckley told the Canadian Broadcasting Corporation.
"That's disgusting and I'm absolutely feeling betrayed today."
GM shares were up 2.18 percent to 17.82 dollars in midday trade.
Merrill Lynch analysts applauded the moves in a research note: "Further winding up GM's operating leverage that will drive earnings beyond investors' current expectations as the US market stabilizes and ultimately recovers in late 2009."
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