Reflecting buyers' mood, it pulls back on pickups and SUVs, aims smaller

Wednesday, Jun 04, 2008 - 12:08 AM

By STAFF AND WIRE REPORTS

WILMINGTON, Del. -- General Motors Corp. officially blew up its old business model yesterday. It said it will close four pickup and SUV factories, announced plans for a new small car that could get 45 mpg and shed 10,000 jobs in the process.

But it remains unclear whether the world's largest automaker by sales can sell enough cars to make money in a shrinking U.S. market and stay ahead of the bill collectors.

The automaker said it will idle pickup-truck and sport-utility vehicle factories in Janesville, Wis.; Moraine, Ohio; Toluca, Mexico; and Oshawa, Ontario, in Canada as it tries to deal with consumers' shift to smaller vehicles brought on by $4-per-gallon gasoline.

GM said the plant cuts, which will reduce capacity to produce pickups and large SUVs by about 35 percent, will save the company $1 billion per year. When combined with earlier measures, the move will save $15 billion by 2011 compared with 2005 costs.

GM's moves, which come after a series of restructuring measures since 2005, are the result of a huge shift in U.S. consumer preferences toward small cars and crossovers during the past two months.

"We at GM don't think this is a spike or temporary shift," Chief Executive Rick Wagoner said. "We believe that it is, by and large, permanent."

The automaker now will have to parlay its strong overseas sales and the lower North American costs into a profit by selling cars in the $15,000 to $20,000 range, half the price of its high-profit SUVs and pickups.

GM lost $3.3 billion in the first quarter and burned through $3.4 billion in cash from January through March. Its May sales were down 28 percent compared with last May.

Just before the company's annual shareholders meeting in Wilmington, Del., Wagoner also announced that the automaker will build a new-generation small car starting in mid-2010 at a factory in Lordstown, Ohio, that now makes the Chevrolet Cobalt.

It would hit showrooms in the second half of 2010, and with a manual transmission, it would get 9 mpg more than the Cobalt, which gets up to 36 mpg on the highway.

In the past, costs generally were too high for Detroit automakers to turn a profit on small U.S.-built cars. But Wagoner said GM has lowered costs enough with new labor contracts and other measures to turn a profit.

"The direct answer is we need to," he told reporters. "We believe we can build a car there profitably."

Wagoner also said the iconic Hummer brand will be reviewed and potentially sold or revamped due to high fuel prices.

Jacques J. Moore Jr., owner of Moore Hummer of Richmond, said he is not worried about the future of the brand.

"This is not a rerun of Oldsmobile," in which GM did away with an entire brand, he said. "Hummer sales are slow, but the fact is it gets 20 mpg and it's a fine, capable vehicle" people will come back to.

While gas prices continue to climb, Moore said, it's a matter of time before people adjust and start buying SUVs again because people want the space they provide.

Wagoner also announced that GM's board of directors has approved production of the Chevrolet Volt plug-in electric car, which GM plans to bring to showrooms by the end of 2010.

Staff writer Louis Llovio and The Associated Press contributed to this report.