Sun, Aug 20, 2006 - Page 11 News List

GM scales back operations amid sharp drop in sales

AFP , DETROIT, MICHIGAN

General Motors Corp has also trimmed production, the automaker's chief said hours after Ford Motor Co announced a 21 percent cut in fourth-quarter production because of a sharp drop in sales of fuel-guzzling trucks and sports utility vehicles.

"I'm not sure that's bad news," GM chairman and CEO Richard Wagoner said of his company's cuts on Friday. "The fact is, you've got to build from market demand back. That's what it seems to be these actions are all about."

GM trimmed production 7 percent to 8 percent during the summer and has scaled back production of new full-size sports utility vehicles by suspending overtime, said Wagoner, who declined to detail his fourth-quarter production targets.

The Chrysler Group also has limited the use of overtime in recent weeks, according to the company's production reports.

"I think the fuel price situation has been a little surprising to everyone," Wagoner said during an appearance in suburban Detroit.

"It would have been hard to predict, for example, the current issues we have in the Middle East. These things hang out there. We have to react to that," he said.

Wagoner noted GM will be launching a number of new cars and crossovers that offer better fuel economy later in the year.

He said he is growing more optimistic about GM's future although he warned that sales will be weak in the coming months.

Sales last year were driven up by big incentives and GM made a deliberate decision to hold down sales to rental fleets this year, Wagoner said.

"I think what we've [been] doing is beginning to paying some dividends as far as some of the cutbacks early in the year," Wagoner told reporters.

"We've been able to get a little more steady pace of retail sales without the kind of incentives and the costliness of the incentives we were running a year ago," he said.

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