GM may stop making Hummers
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GM to Close Four Truck Plants, Shift Output to Cars
By Jeff Green and Bill Koenig
June 3 (Bloomberg) -- General Motors Corp., struggling
to return to profit amid record gasoline prices, said
it will close four truck plants, make more small cars,
and may drop its Hummer brand of large sport-utility
Gasoline exceeding $4 a gallon represents ``a
structural change, not just a cyclical change,'' Rick
Wagoner, the largest U.S. automaker's chief executive
officer, told reporters today before its annual
shareholders' meeting in Wilmington, Delaware.
The four plant closings will save $1 billion a year
and cut North American capacity by 700,000 for trucks
and, with added shifts at car factories, by 500,000
overall, he said. At Hummer, ``we're considering all
options from a complete revamp to a partial or
complete sale of the brand,'' Wagoner said.
A doubling of U.S. gasoline prices since 2004,
including a 31 percent surge this year, is forcing
Wagoner to accelerate production of more
fuel-efficient vehicles as he tries to end three years
of losses. GM today reported a 37 percent plunge in
May U.S. sales of pickups, SUVs and vans. Cars will
account for 60 percent of Detroit-based GM's North
American production in three years, up from about 50
percent now, Wagoner said.
``It is significant, but this is a late reaction to
changing market dynamics,'' said Dennis Virag,
president of Automotive Consulting Group in Ann Arbor,
Michigan. ``The plans really should have been in place
a number of years ago.''
GM's total U.S. sales in May slid 28 percent from a
year earlier, as it also sold 14 percent fewer cars.
Ford Motor Co. last month said it was slashing truck
production while trying to boost output of small cars.
Ford also abandoned a target of returning to profit in
2009. The company relied on large pickups and
sport-utility vehicles for the bulk of its earnings in
GM also approved the production version of the
Chevrolet Volt electric car. Wagoner said at the
meeting that 18 of GM's next 19 vehicle introductions
will be cars or crossover wagons.
The automaker lost $38.7 billion last year, its
largest deficit ever, after writing down $39 billion
of future tax benefits. GM hasn't had an annual profit
GM rose 14 cents to $17.58 at 4:15 p.m. in New York
Stock Exchange composite trading. The shares have
declined 59 percent since Oct. 12, 2007, when they
reached their highest point in the past two years
after the automaker's U.S. union workers approved a
cost-cutting four-year contract.
The company's 8.375 percent note due July 2033 rose
0.25 cent to 67.75 cents on the dollar, yielding 12.65
percent, according to Trace, the bond-price reporting
system of the Financial Industry Regulatory Authority.
Truck output will end at plants in Oshawa, Ontario;
Moraine, Ohio; Janesville, Wisconsin; and Toluca,
Mexico. The factories produce models such as the
Chevrolet Silverado and GMC Sierra large pickups,
TrailBlazer and Envoy SUVs and medium-duty trucks.
The plants will close in 2009 and 2010 and probably
won't reopen, Wagoner said. They employ a total of
7,590 hourly and 676 salaried employees, the company
Buzz Hargrove, president of the Toronto-based Canadian
Auto Workers union, said closing Oshawa would violate
the three-year contract reached with GM last month.
````We are not going to allow this to happen,'' he
said at a news conference, declining to specify how
the union will respond.
GM said that starting in September it will add a third
shift at a factory in Orion Township, Michigan, that
makes Chevrolet Malibu mid-size cars and a Lordstown,
Ohio, plant that builds Chevrolet Cobalt small cars.
Wagoner also said GM's board approved a new Chevrolet
compact car for U.S. and international markets and a
successor to the current Chevrolet Aveo small car. The
new Aveo will be produced in Lordstown starting in
2010, subject to talks with local and Ohio officials
about incentives, GM said.
`Adapt and Evolve'
``It's a sign that Detroit continues to adapt and
evolve,'' White House spokeswoman Dana Perino told
reporters in Washington.
GM said April 28 that it would eliminate shifts at
three truck plants and a factory that makes SUVs
because of slack demand for models such as the
GM, which got 57 percent of its U.S. sales this year
from light trucks, is scrambling to adjust to
consumers turning away from such models. Trucks have
outsold cars annually since 2001, reaching 56 percent
of the U.S. market in 2004, when gasoline prices
averaged $1.85 a gallon.
``The biggest issue we're dealing with now in
profitability is how weak the truck market is,'' GM
sales chief Mark LaNeve said last week in an interview
in Los Angeles. ``We have better profits in trucks;
everybody has better profits in trucks.''
GM now is emphasizing fuel efficiency, with the Volt
as its centerpiece. The car can be charged from a home
electrical outlet and uses an onboard engine to
recharge the batteries once the initial charge is used
up. GM has said the Volt will be able to travel 40
miles before having to the use the engine.
The company said today that its board approved funding
for Volt production and tooling.
Chief Operating Officer Fritz Henderson also
reiterated today that the automaker has no more
funding obligations for GMAC LLC, the finance company
GM owns 49 percent of, or GMAC's Residential Capital
home-mortgage unit. GM paid GMAC $1 billion to
compensate for subprime losses that occurred at ResCap
in 2006, before the automaker completed the sale of a
majority stake in the finance company Cerberus Capital
GM in April recorded a $1.45 billion first-quarter
impairment charge for its GMAC investment.
``I can't say all the charges are behind us, I can't
say that today,'' Henderson said on a conference call.
Slowing U.S. sales may mean GM will cut its quarterly
dividend of 25 cents a share to preserve cash and also
add debt, Himanshu Patel, a JPMorgan Chase & Co.
analyst in New York, wrote in a May 5 report.
Credit-default swaps on GM debt climbed 9 basis points
today to 1,200 basis points, according to CMA
Datavision in London. The contracts are designed to
protect bondholders against default. A rise in the
price indicates a decline in the perception of a
company's credit quality.
To contact the reporters on this story: Jeff Green in
Wilmington, Delaware, at jgreen16@...; Bill
Koenig in Southfield, Michigan at
Last Updated: June 3, 2008 16:18 EDT