General Motors (GM) on Tuesday predicted the end of the era of gasoline guzzlers as it announced plans to close four North American truck and sport utility vehicle (SUV) plants and ramp up production of new fuel-efficient vehicles.
The automaker said it was also considering revamping or even selling its hulking Hummer brand as high fuel prices have dramatically shifted consumer demand.
“These moves are all in response to the rapid rise in oil prices and the resulting changes in the US, changes that we believe are more structural than cyclical,” said Rick Wagoner, GM chairman and chief executive.
PHOTO: AP
“We at GM don’t think this is a spike or temporary shift; we believe that it is, by and large, permanent,” Wagoner said at a news conference at GM’s annual shareholder meeting in Wilmington, Delaware.
The Big Three US automakers — GM, Ford and Chrysler — managed to sustain their profitability in the 1980s and 1990s in the face of a steady loss of market share to Asian competitors because of their dominance in the truck and sport utility vehicle market.
But they were slow to match the more fuel-efficient car-based SUVs of their competitors and have been forced to implement massive restructuring plans in recent years in the face of multibillion dollar losses.
GM alone has eliminated 71,000 jobs in the US since 2000 and lost more than US$54 billion since 2005.
“While some of the actions, especially the capacity reductions, are very difficult, they are necessary to adjust to changing market and economic conditions and to keep GM’s US turnaround on track and moving forward,” Wagoner said.
Wagoner declined to say when GM expects to return to profitability but said the automaker remained committed to restructuring itself “for sustained profitability and growth.”
“While we remain reasonably constructive on the long-term prospects for the auto industry in the United States, we view the near-term US economic and auto market environment with considerable caution,” Wagoner told reporters.
The White House called the announcement a sign that the auto giant was “adapting well” to market shifts.
“It’s a sign that Detroit continues to adapt and evolve and address the change in consumer tastes and attitudes. And I think that they’re adapting well,” spokeswoman Dana Perino said.
The announcement came hours before GM reported an annual 28 percent drop in US sales last month to 272,363 vehicles as car sales fell 14 percent to 130,115 and light truck sales fell 37 percent to 138,777 vehicles.
GM plans to shutter production at its Toluca, Mexico, pickup truck plant at the end of the year and its Oshawa, Canada, plant will be closed next year.
Plants in Moraine, Ohio, and Janesville, Wisconsin, are slated for closure in 2010 “or sooner if market demand dictates,” GM said.
Chrysler on Tuesday reported a 25 percent drop in US sales for last month as high fuel prices slashed demand for gasoline guzzling trucks and sport utility vehicles.
Chrysler said record sales among its newest highly fuel-efficient vehicles helped boost the month’s total to 148,747 vehicles but its results were further undermined by a 40 percent cut in sales to lower-margin fleet customers.
“There is an unprecedented shift in the industry that is challenging, but we are determined to provide consumers what they need and want,” vice chairman and president Jim Press said in a press release.
Separately, Ford Motor Company’s US sales fell 16 percent last month to 217,998 vehicles amid a sharp drop in demand for gasoline-guzzling truck and sport utility vehicles, the automaker said on Tuesday.
Car sales, however, rose 3.8 percent from May last year to 85,542 amid strong demand for more fuel-efficient models but were still 5 percent lower in the year to date amid a general economic slowdown.
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