GM truck, SUV plant closures reflect big changes in GM auto strategy
WILMINGTON, Del. — Automotive giant General Motors (NYSE:GM) is shifting its focus away from the vehicles that have fattened its bottom line in the last decade, announcing the closure Tuesday of four truck and SUV plants in the U.S., Canada and Mexico as surging fuel prices hasten a dramatic shift to smaller vehicles.
At the annual meeting Tuesday in Delaware, the company also said its iconic Hummer brand will be reviewed and potentially sold or revamped while the company's board has approved production of a new small Chevrolet car and expansion of its Chevrolet Volt electric vehicle in Detroit.
The cuts will affect 10,000 hourly and salaried workers. 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.
GM CEO Rick Wagoner said Tuesday at the automaker's annual meeting in Delaware that the plants to be idled are in Oshawa, Ont.; Moraine, Ohio; Janesville, Wis.; and Toluca, Mexico.
"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.
More cuts will be announced later. Wagoner said GM will consolidate engine, transmission and other parts operations to go with the assembly plant actions.
The actions add to a string of plant closures by the Detroit Three in the last several years. GM, Ford Motor Co. (NYSE:F) and Chrysler LLC have announced the shutdown of 35 plants since 2005, according to Sean McAlinden, chief economist with the Center for Automotive Research in Ann Arbor, Mich.
Along with 35 additional closures at GM and Ford's chief suppliers, Delphi Corp. and Automotive Components Holdings LLC, he said the total hourly and salaried jobs eliminated comes to 149,000.
In the same period, foreign automakers such as Toyoto and Honda have built or announced plans to build five U.S. assembly plants, he said. In 2007, foreign auto companies employed 113,000 people in the U.S., a number McAlinden projects will rise to 152,000 by 2011.
In Canada, Honda and Toyota have expanded output at their plants in Ontario and hired thousands of workers as GM, Ford and Chrysler have cut jobs at their operations.
The Oshawa truck plant, which builds the Chevrolet Silverado and GMC Sierra pickups, likely will be shuttered next year. The Moraine plant near Dayton, will stop making Chevy TrailBlazer and other mid-size SUVs in 2010 "or sooner, if demand dictates," Wagoner said. In Janesville, the plant that builds medium-duty trucks and big SUVs like the Chevrolet Tahoe, will cease production starting at the end of 2009, finishing in 2010 or sooner if demand stays weak. In Toluca, production of medium-duty trucks will end by the end of 2008, Wagoner said.
The moves will save the company US$1 billion per year starting in 2010. Combined with previous efforts, GM by 2011 will have cut costs by $15 billion a year, Wagoner said.
In another development, Wagoner said GM's board approved the production schedule of the Volt, and the company plans to bring the plug-in electric car to showrooms by the end of 2010.
Fully charged, the Volt could drive about 66 kilometres without using any gasoline, and a small conventional engine would recharge the vehicle, extending its range and allowing it to get the equivalent of 240 kilometres per gallon. GM plans to sell about 100,000 Volts a year by 2012.
Wagoner 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.
On the Hummer, Wagoner said GM is "undertaking a strategic review of the Hummer brand, to determine its fit with GM's evolving product portfolio" in light of changing market conditions.
"At this point, we are considering all options for the Hummer brand... everything from a complete revamp of the product lineup to partial or complete sale of the brand," he said.
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 Detroit 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 per cent of Chrysler LLC's U.S. sales, for example, compared to 41 per cent at Toyota Motor Corp.
GM president and chief operating officer Fritz Henderson said the new small car to be built in Lordstown would get nine miles per gallon better fuel economy than the company's current small cars, the Chevrolet Cobalt and Pontiac G5 when equipped with a manual transmission. The most efficient Cobalt now gets 36 miles per gallon on the highway, although Henderson would not give a total mileage number.
Henderson said the plant closure measures would reduce the company's capacity to produce pickups and large SUVs by 700,000 per year, about 35 per cent.
He also said GM is planning for gasoline prices to stay around $4 per gallon for the foreseeable future, "with a bias upwards."
When asked if GM should have moved more quickly to smaller vehicles, Henderson said he doesn't spend time looking in the rearview mirror.
"There's not much I can do about what I didn't do in the past," he said.
Pete Hastings, senior analyst with Memphis, Tenn.-based Morgan Keegan & Co., said GM's moves are painful yet prudent.
"It's a permanent shift, and they're right to recognize it," he said. "But is it enough? It's a bit early to tell.... That's the hard part of gauging where we are in the economy - and how deep or strong the shift in demand is for more fuel-efficient vehicles."
Analyst Kevin Tynan of New York-based Argus Research Corp. said the Detroit Three automakers have been "caught with the market running away from them." While he recognizes GM's plight and efforts to overcome it, he still questions the aggressive push to market with the Volt, which is demanding heavy investment at a time when money is tight.
"It's very bad timing, very late in the game to be making big bets," he said. "At the same time, you don't have a choice."
At the annual meeting Tuesday in Delaware, the company also said its iconic Hummer brand will be reviewed and potentially sold or revamped while the company's board has approved production of a new small Chevrolet car and expansion of its Chevrolet Volt electric vehicle in Detroit.
The cuts will affect 10,000 hourly and salaried workers. 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.
GM CEO Rick Wagoner said Tuesday at the automaker's annual meeting in Delaware that the plants to be idled are in Oshawa, Ont.; Moraine, Ohio; Janesville, Wis.; and Toluca, Mexico.
"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.
More cuts will be announced later. Wagoner said GM will consolidate engine, transmission and other parts operations to go with the assembly plant actions.
The actions add to a string of plant closures by the Detroit Three in the last several years. GM, Ford Motor Co. (NYSE:F) and Chrysler LLC have announced the shutdown of 35 plants since 2005, according to Sean McAlinden, chief economist with the Center for Automotive Research in Ann Arbor, Mich.
Along with 35 additional closures at GM and Ford's chief suppliers, Delphi Corp. and Automotive Components Holdings LLC, he said the total hourly and salaried jobs eliminated comes to 149,000.
In the same period, foreign automakers such as Toyoto and Honda have built or announced plans to build five U.S. assembly plants, he said. In 2007, foreign auto companies employed 113,000 people in the U.S., a number McAlinden projects will rise to 152,000 by 2011.
In Canada, Honda and Toyota have expanded output at their plants in Ontario and hired thousands of workers as GM, Ford and Chrysler have cut jobs at their operations.
The Oshawa truck plant, which builds the Chevrolet Silverado and GMC Sierra pickups, likely will be shuttered next year. The Moraine plant near Dayton, will stop making Chevy TrailBlazer and other mid-size SUVs in 2010 "or sooner, if demand dictates," Wagoner said. In Janesville, the plant that builds medium-duty trucks and big SUVs like the Chevrolet Tahoe, will cease production starting at the end of 2009, finishing in 2010 or sooner if demand stays weak. In Toluca, production of medium-duty trucks will end by the end of 2008, Wagoner said.
The moves will save the company US$1 billion per year starting in 2010. Combined with previous efforts, GM by 2011 will have cut costs by $15 billion a year, Wagoner said.
In another development, Wagoner said GM's board approved the production schedule of the Volt, and the company plans to bring the plug-in electric car to showrooms by the end of 2010.
Fully charged, the Volt could drive about 66 kilometres without using any gasoline, and a small conventional engine would recharge the vehicle, extending its range and allowing it to get the equivalent of 240 kilometres per gallon. GM plans to sell about 100,000 Volts a year by 2012.
Wagoner 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.
On the Hummer, Wagoner said GM is "undertaking a strategic review of the Hummer brand, to determine its fit with GM's evolving product portfolio" in light of changing market conditions.
"At this point, we are considering all options for the Hummer brand... everything from a complete revamp of the product lineup to partial or complete sale of the brand," he said.
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 Detroit 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 per cent of Chrysler LLC's U.S. sales, for example, compared to 41 per cent at Toyota Motor Corp.
GM president and chief operating officer Fritz Henderson said the new small car to be built in Lordstown would get nine miles per gallon better fuel economy than the company's current small cars, the Chevrolet Cobalt and Pontiac G5 when equipped with a manual transmission. The most efficient Cobalt now gets 36 miles per gallon on the highway, although Henderson would not give a total mileage number.
Henderson said the plant closure measures would reduce the company's capacity to produce pickups and large SUVs by 700,000 per year, about 35 per cent.
He also said GM is planning for gasoline prices to stay around $4 per gallon for the foreseeable future, "with a bias upwards."
When asked if GM should have moved more quickly to smaller vehicles, Henderson said he doesn't spend time looking in the rearview mirror.
"There's not much I can do about what I didn't do in the past," he said.
Pete Hastings, senior analyst with Memphis, Tenn.-based Morgan Keegan & Co., said GM's moves are painful yet prudent.
"It's a permanent shift, and they're right to recognize it," he said. "But is it enough? It's a bit early to tell.... That's the hard part of gauging where we are in the economy - and how deep or strong the shift in demand is for more fuel-efficient vehicles."
Analyst Kevin Tynan of New York-based Argus Research Corp. said the Detroit Three automakers have been "caught with the market running away from them." While he recognizes GM's plight and efforts to overcome it, he still questions the aggressive push to market with the Volt, which is demanding heavy investment at a time when money is tight.
"It's very bad timing, very late in the game to be making big bets," he said. "At the same time, you don't have a choice."
Source : http://canadianpress.google.com
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