GM closing 4 pickup, SUV factories

June 3, 2008 3:08:53 PM PDT
General Motors is closing four truck and SUV plants in the U.S., Canada and Mexico as surging fuel prices hasten a dramatic shift to smaller vehicles.The Hummer could become a thing of the past, as GM considers halting production of the gas guzzler for good and because fuel hungry SUV's have been sitting on sales lots, they're in trouble too, along with the future of gm pick up trucks.

CEO Rick Wagoner said Tuesday before the automaker's annual meeting in Delaware the plants to be closed are in Oshawa, Ontario; Moraine, Ohio; Janesville, Wis.; and Toluca, Mexico. He also said the iconic Hummer brand may be discontinued.

Wagoner said the GM board has approved production of a new small Chevrolet car at a plant in Lordstown, Ohio, in mid-2010 and the Chevy Volt electric vehicle in Detroit.

Wagoner announced the moves in response to slumping sales of pickups and SUVs brought on by high oil prices. He said a market shift to smaller vehicles is permanent.

Wagoner then he faced some angry stockholders at the automakers annual meeting in Wilmington.

Jim Dollinger, a dealer from Flint, Michigan, was one such stockholder.

"All they understand is how to cut, close, spin and pay lawyers; they don't know how to grow the business," Dollinger said.

Dollinger is among those not convinced rising prices at the pumps are behind the slump in sales.

"This is the worst run company when it comes to marketing and until we change the marketing, we're going to continue on this downward spiral," Dollinger said.

GM shares rose 36 cents, or 2.1 percent, to $17.80 in premarket trading.

The cuts will affect about 2,500 workers at each of the four facilities, although Wagoner did not know exact numbers. Many will be able to take openings created when 19,000 more U.S. hourly workers leave later this year through early retirement and buyout offers.

He said the company has no plans to allocate products to the four plants in the future.

"We really would not foresee the likely prospect of new products in the plants that we're announcing today that we'll cease production in," he told a Moraine, Ohio, city official who asked a question in a telephone conference call.

The moves will save the company $1 billion per year starting in 2010. Combined with previous efforts, GM will have cut costs by $15 billion a year, Wagoner said.

Wagoner said GM's board approved the production schedule of the Chevrolet Volt, and the company plans to bring the plug-in electric car to showrooms by the end of 2010. The Volt runs on an electric motor and has a small engine to recharge its batteries.

He said the change in the U.S. market to smaller vehicles likely is permanent. "We at GM don't think this is a spike or a temporary shift," Wagoner said.

The news doesn't surprise the head of Delaware's Chamber of Commerce, Jim Wolfe.

Wolfe, a former plant manager for Chrysler, predicts American made energy efficient cars will do well and that companies like GM will bounce back.

"The auto business is very cyclical and you'll run well for 2 or 3 years and then the auto market will be in a ditch for a couple of years. We just happen to be in that cycle that it's down," Wolfe said. The Detroit-based automaker also has just emerged from a spate of labor problems, with two local union strikes at key factories and a nearly three-month strike at key parts maker American Axle and Manufacturing Holdings Inc.

GM said in a recent regulatory filing the strikes will cost it a total of $2 billion before taxes in the second quarter.

Detroit's automakers have been making the shift to more fuel-efficient vehicles, but not at the pace that matches consumers' drive to hybrids and high mileage models made overseas. Gas prices have accelerated the retreat from trucks and sport utility vehicles, leaving the Big Three at the most critical crossroads in 30 years.

The U.S. market is difficult for every automaker, with consumer confidence weak and 2008 sales expected to be the lowest in more than a decade. But it is most difficult for the Detroit Three, who have relied more heavily on sales of trucks and SUVs than their foreign counterparts. Trucks make up 70 percent of Chrysler LLC's U.S. sales, for example, compared to 41 percent at Toyota Motor Corp.

The news from today's stockholders meeting does not affect the Wilmington plant where work has already been reduced two shifts, but many of the assembly line workers do have stock in the company.