GM: Closing Truck Plants; Introducing New Small Cars; Considering Sale of HummerBy Michelle Krebs June 3, 2008
By Michelle Krebs
General Motors CEO Rick Wagoner announced a series of moves the automaker will make to address the rapid shift by consumers away from gas-guzzling trucks and SUVs toward fuel-efficient cars and crossovers . The moves include the closure of four North American truck and SUV assembly plants and a review, with the possible sale of, Hummer.
Other highlights of GM's latest restructuring plan include: new small cars for Chevrolet; a new high-efficiency engine for the U.S.; funding for the Chevrolet Volt extended-range vehicle; and the addition of third shifts at two U.S. plants to boost production of popular Chevrolet Malibu and Cobalt as well as the Pontiac G6.
Wagoner said GM's moves were prompted by soaring gasoline prices that are rapidly changing consumer behavior and significantly affecting the U.S. auto industry's sales mix. The shift, he noted, is a structural shift, not a cyclical blip.
"From the start of our North American turnaround plan in 2005, I've said that our goal is not just to return GM to profitability, but to structure GM globally for sustained profitability and growth," Wagoner told the media in a conference call Tuesday morning preceeding the automaker's 100th annual meeting, held this year in Wilmington, Del.
"Since the first of this year, however, U.S. economic and market conditions have become significantly more difficult," he added. "Higher gasoline prices are changing consumer behavior, and they are significantly affecting the U.S. auto industry sales mix."
Wagoner outlined the four North American assembly plants that will close and gave a general timetable for their closure.
* Oshawa Truck Assembly in Canada, which builds the Chevrolet Silverado and GMC Sierra, will likely cease production in 2009.
* Moraine, Ohio, which builds the Chevy TrailBlazer, GMC Envoy, Saab 9-7x and did build the Isuzu Ascender before the Japanese automaker announced it would get out of the U.S. retail business, will end production at the end of the 2010 model run, "or sooner, if demand dictates."
* Janesville, Wisconsin, will cease production of medium-duty trucks by the end of 2009, and of the Chevrolet Tahoe, Chevrolet Suburban and GMC Yukon in 2010, "or sooner, if market demand dictates".
* Toluca, Mexico, will end production of the Chevrolet Kodiak medium-duty truck by the end of this year.
GM said the four plants would mean 700,000 units of annual capacity will be gone, putting GM's U.S. assembly capacity at 3.7 million vehicles a year in 2010. GM did not say how many jobs would be lost in these plant closings but estimates are as many as 10,000 jobs will be gone. In recent weeks, GM announced 19,000 hourly workers took its buyout offer, established in the last negotiations with the UAW.
GM said the closure of the four plants and recent production cutbacks at truck plants in Pontiac and Flint, Mich., will result in a structural cost savings of more than $1 billion by 2010. That is in addition to the approximately $5 billion reduction by 2011 that GM announced earlier this year, and also in addition to the $9 billion reduction accomplished over the 2006-07 period in North America, GM said.
And that may not be the end of plant closings. GM President Fritz Henderson told a conference call of media and analysts that GM's stamping, body and parts plants that supply the to-be-closed assembly plants are under review.
Wagoner told shareholders legacy costs for UAW retiree' pensions and health care , which were averaging $7 billion a year before the automaker negotiated a new contract last fall with the union, will drop to $1 billion a year in 2010.
Reviewing Hummer; Considering Sale or Revamp
While plant closings had been expected, a review and possible sale of Hummer had not been hinted at, even though Hummer sales have been in decline.
GM said it is undertaking "a strategic review" of the Hummer brand "to determine its fit within the GM portfolio. At this point, GM is considering all options, from a complete revamp of the product lineup to a partial or complete sale of the brand."
GM will add third shifts at its assembly plants in Orion Township, Mich., and Lordstown, Ohio, in September. The Michigan plant builds the popular Pontiac G6 and Chevrolet Malibu. The Ohio plant currently builds the Chevrolet Cobalt and Pontiac G5 and has been assigned to build GM's future compacts that replace them.
New Fuel-Efficient Cars
GM noted 11 of its last 13 new or major U.S. launches have been of cars and crossovers, vehicles more popular with consumers in this era of high gas prices. In the future, 18 of the next 19 new models for the U.S. will be cars and crossovers.
Wagoner announced a new global compact car for Chevrolet, a next-generation Chevrolet Aveo and a high-efficiency engine for the U.S.
The new global Chevrolet compact car will replace the Cobalt but likely will not share its name, GM sources told Edmunds' Green Car Advisor, a sister site to AutoObserver. The car will be unveiled at an auto show this fall, sources told Green Car Advisor. GM confirmed it will go into production in 2010 and will be built at GM's Lordstown, Ohio, plant.
The new compact will use the new fuel-efficient engine Wagoner mentioned. GM will introduce a family of small displacement engines in the U.S. that are 1.0 to 1.4 liter ones. GM said it will be a mainstream engine for the next-generation Chevrolet small car and is tentatively planned for production in Flint. The compact will be powered by a direct-injected, 1.4-liter, four-cylinder engine capable of developing 140 horsepower with assistance from a pair of small turbochargers.
Based on GM's global Delta platform, the Cobalt replacement will have mileage topping 40 miles per gallon; GM Vice Chairman Bob Lutz told AutoObserver in a recent interview that it would be best in its class.
"The car will represent the first U.S. application of our global architecture strategy," said Wagoner.
Henderson said the new compact will not be at the low end of the segment as the Cobalt is. He used the analogy of the old Malibu vs. the new one. The new Malibu is seen as a higher-end midsize than its predecessor, and therefore, has a transaction price that is $4,000 better than the old one.
GM also confirmed board approval of the next-generation Aveo. Also based on a global architecture and sold around the world, the new Aveo is expected to have segment-leading fuel economy when it goes on sale in the U.S. in the second half of 2010, GM announced.
What GM didn't mention, but is expected to join the Chevy line is a B-segment car even smaller than the Aveo and based on the Chevrolet Beat concept, one of three tiny car concepts shown at last year's New York auto show and the overwhelming favorite in online voting by show-goers and others. It has also rumored that Pontiac will get a smaller vehicle than it currently has, possible called the G3.
The next Aveo, the global compact car, which will replace a current Chevy sold in overseas markets, and the Beat concept are being designed and engineered by GM Daewoo in Korea, which has become GM's center of expertise for small cars.
Other Fuel-Saving Technologies
GM also plans 10 new variants of 6-speed transmission in the U.S. by 2010 and GM will have 20 hybrid models by 2012 compared with eight by year-end 2008.
Chevy Volt Funded
Wagoner further confirmed that GM's board of directors approved production funding for the Chevrolet Volt, which is on schedule for a year-end introduction. Wagoner said a production version would be shown to the public "in the very near future." GM plans to build it at its Detroit-Hamtramck Assembly Center, "subject to successful discussion with state and local governments," the automaker said in a statement.
Henderson, when asked, would not say how much funding was approved for the Volt. "We'll have a relatively slow ramp-up so we get into the market by the end of 2010," he told media and analysts. "Then we'll continue to ramp up further in 2011 and 2012, bringing our suppliers with us."
Henderson said the focus at the moment is on getting into the production the Volt and its E-Flex technology, which allows the vehicle to run on electricity but has another fuel source -- gasoline in the Volt -- to generate electricity to be stored in the battery. "But as we speak, we're learning about how to lower the cost of the technology," he said. "We can't get those cost cuts in by 2010 but plan them for subsequent generations in 2011 and 2012."
Wagoner added: "We believe this is the biggest step yet in our industry's move away from our historic, virtually complete reliance on petroleum to power vehicles."