GM's Wagoner Defends SUV Reliance

By Michelle Krebs June 6, 2008

GM Rick Wagoner mug - 105.JPG General Motors CEO Rick Wagoner defended Detroit automakers' dependence on sport-utility vehicles and pickup trucks, dismissing criticism that the companies were to blame as demand for those vehicles has collapsed.

"Is it the U.S. manufacturers who are stupid? I don't think so," Wagoner said in an interview with London's Financial Times. The criticism was "not fair," said Wagoner. "It's not just the 'Big Three.'"

Earlier in the week, Wagoner announced at the company's annual shareholder meeting that GM would close truck and SUV production at four North American plants. Those plants make such vehicles as the Chevrolet Silverado and GMC Sierra pickup trucks. Wagoner also announced this week that Hummer was under "strategic review" with all options, including its sale, being considered.

He noted that Japanese carmakers had made similar mistakes in catering to U.S. car buyers' appetite for big vehicles over many years. Detroit's Japanese rivals had spent more than a decade trying to match its leadership in SUVs and pickup trucks, he noted.

Referring to Toyota not by name, Wagoner said that foreign companies had spent billions of dollars on pickup plants that came on stream "five minutes before" the oil price began to soar. Toyota opened such a plant in San Antonio, Texas, in late 2006, to build the Toyota Tundra. Since then, Toyota has announced a scaleback in the number of Tundras it intends to build in light of the deteriorating economy and high gas prices.

Light trucks made up 52 percent of GM's US vehicle sales last month, compared with 34 percent for Toyota.

In response to analysts' concerns about GM's dwindling liquidity in light of the latest slide in demand for its most profitable vehicles and the jump in raw material costs, Wagoner responded that "under any scenario we see, we're good until the end of the year."



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cvanlane says: 11:49 PM, 06.06.08

Lesson learned: General Motors and the other Detroit automakers must diversify more. One can hardly blame GM and others for wanting to satisfy demand for light trucks, but now that the current fuel crisis has sapped demand for those, automakers have to figure out fast how to make money from passenger cars. GM is already setting to work on this, if belatedly, and, having started, it is moving with impressive speed.
The first order of business should be to slash production costs to the bone, and a key component of that consists of labour costs. The United Auto Workers and Canadian Auto Workers simply must accept that they can no longer expect wages and benefits on the same scale as when Detroit's Big Three dominated the North American market. The result, unfortunately, will be less money for workers as well as union leaders, but it's better than having no automotive jobs at all. Time will tell whether the unions are ready to face up to the new realities.


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