GM to Close Four Truck Plants, Shift Output to Cars

[Cygnus]

What..no GM sc00ters? Good just GM is finally adjusting to the market...

http://www.bloomberg.com/apps/news?p...efer=worldwide
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 vehicles.

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 the 1990s.

New Models

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 since 2004.

GM fell 3 cents to $17.41 at 2:47 p.m. in New York Stock Exchange composite trading. The shares have declined 58 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 was unchanged at 67.5 cents on the dollar, yielding 12.7 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Plant Closings

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 said.

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 Silverado pickup.

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.''

Fuel Efficiency

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 Management LP.

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.

[junehhan]

The thing with GM is that they waited too long to start making the adjustment. They even got into a horsepower war with Chrysler that Ford mostly stayed out of. Ford started their restructuring much earlier, but even that wasn't early enough. I have a feeling Chrysler could be in trouble though, especially if you look at their model lineup now, and their model lineup in the near future.

[scootski]

They should convert those plants to builiding

100-MPG scooters ! YEAH !

[mshulman]

Can't resist thread crapping can you?

Originally Posted by scootski

They should convert those plants to builiding

100-MPG scooters ! YEAH !

[Loves2Watch]

It's about time they changed again. Those truck plants were originally auto plants that were converted several years ago for the opposite reasons.

[DSNY FN]

One of our friends works in the truck plant in Oshawa and got her pinkslip today.

[Cygnus]

You'd think that they would have predicted this years ago... Its too little too late now. Supposedly japan automakers have about 10 year advantage on hybrid tech.

Originally Posted by Loves2Watch

It's about time they changed again. Those truck plants were originally auto plants that were converted several years ago for the opposite reasons.

[junehhan]

Originally Posted by mshulman

Can't resist thread crapping can you?

Of course he couldn't. He would have had to act his age to resist crapping on yet another thread.

Originally Posted by DSNY FN

One of our friends works in the truck plant in Oshawa and got her pinkslip today.

Your friend has my condolences. However, I believe GM will have a bunch of job openings very soon at other plants if you friend doesn't mind relocating here in the states. My understanding is that these laid off workers will have first dibs when these new positions open up within the next 2 years as GM shifts to higher car and greenie car output.

Originally Posted by Cygnus

You'd think that they would have predicted this years ago... Its too little too late now. Supposedly japan automakers have about 10 year advantage on hybrid tech.

Not necessarily. There have been a LOT of partnerships in technology as of late, and I expect that to continue among the rivals as the cost of developing new technology continue to increase. For instance, Ford and Toyota made a technology swap agreement a while back consisting of Toyota Hybrid technology for Ford's emmissions technology, and something else I believe that involved Ford's further development of the Atkinson cycle engine. Ford and GM have worked together to develop an entire series of incredible top knotch 6 speed automatic transmissions. Ford and Toyota also have some agreement in that Ford supplies some 6 speed automatics to Toyota, although Toyota proudly claims that all of the calibrations are their own. Nissan and Chrysler obviously had a huge agreement lately as well.

[mshulman]

Maybe they can add a Volt plant when they get ready for production. I have a feeling they will be in high demand and there will not be nearly enough supply. Just like it is with the Prius and other hybrids right now.

Especially in CA. Prius prices are crazy there! I could probably sell my 2005 used there for close to wait I paid for it If you could get a Volt and sell it in CA, you might be able to make a hefty profit

[junehhan]

Originally Posted by mshulman

Maybe they can add a Volt plant when they get ready for production. I have a feeling they will be in high demand and there will not be nearly enough supply. Just like it is with the Prius and other hybrids right now.

Especially in CA. Prius prices are crazy there! I could probably sell my 2005 used there for close to wait I paid for it If you could get a Volt and sell it in CA, you might be able to make a hefty profit

I posted a detroitnews article a while back, but the Volt will definately be in incredible short supply for a long time. This is partially because output will likely be limited to 100k a year, partially because GM is going to heavily subsidize this car. GM expected to get hit with incredible losses for several years on this car, but they believe it is necessary in order to restore their image. With crazy demand anticipated, I would bet that we could see stealerships(hehehe, joke) selling them on the market for almost double for at least the first half year or so. However, i'm not exactly sure how well this vehicle will do in the long run. This is because it isn't exactly a practical car for a family man.

I'm honestly more excited about the Ford Escape plug-in which will have a driving range of 30-40 miles before firing up the ICE, along with the Prius plug-in which is ugly, but more practical than a 2 seater.

[mshulman]

I wonder what GM's target price is and what their break even price would be? I think they underestimate what people would be willing to spend.

I wasn't aware they were coming out with an escape hybrid.

Our next purchase will either be the Prius Plug-in - I'll have to see what they change and how it will work or possibly the GM Volt (assuming we could find one). I guess I'll have to check the Focus too.

[Cygnus]

I was basing this from an article I read in Business Week about a year ago. If one maker has a competitive advantage, it is doubtful they will share it in this day and age

Originally Posted by junehhan

Not necessarily. There have been a LOT of partnerships in technology as of late, and I expect that to continue among the rivals as the cost of developing new technology continue to increase. l.

[junehhan]

Originally Posted by mshulman

I wonder what GM's target price is and what their break even price would be? I think they underestimate what people would be willing to spend.

I wasn't aware they were coming out with an escape hybrid.

Our next purchase will either be the Prius Plug-in - I'll have to see what they change and how it will work or possibly the GM Volt (assuming we could find one). I guess I'll have to check the Focus too.

I believe the detnews article stated that GM is willing to lose upto $250 million for the first several years at about 100k sold per year. They are definately planning on making a huge loss as I assume Sony and Microsoft were taking huge losses for a while.

I have the new Ford owner magazine that my dealer subscribed me to, and Ford is definately working on an Escape plug-in. The article states that it will use Li-ion batteries and will have 30-40 miles driving range before firing up the ICE. My only concern is how much cargo space this SUV will have considering the Chevy Volt battery weighs 400lbs!!!! The current Escape Hybrid on the market is also a pretty good deal because it is the world's most fuel efficient SUV. I believe it is also the cleanest SUV on the market thanks to Ford's Atkinson cycle engine. It is a full hybrid that is capable of driving upto 25mph on electricity alone, and has acceleration comparable to the V6 Escape.

Years down the road when it becomes time to replace my old Focus, i'll definately have to consider any new Ford Escapes that come out because this is like having your cake, and eating it too. It looks like a normal vehicle, performs well, and has the fuel economy of a smaller car. I'll probably never replace my TBSS since this is likely one of the last vehicles of it's kind and will continue to be my toy. If I had $10k right now, i'd love to do a 427 engine conversion based on the LS3 block.

[DSNY FN]

Originally Posted by junehhan

Of course he couldn't. He would have had to act his age to resist crapping on yet another thread.



Your friend has my condolences. However, I believe GM will have a bunch of job openings very soon at other plants if you friend doesn't mind relocating here in the states. My understanding is that these laid off workers will have first dibs when these new positions open up within the next 2 years as GM shifts to higher car and greenie car output.



Not necessarily. There have been a LOT of partnerships in technology as of late, and I expect that to continue among the rivals as the cost of developing new technology continue to increase. For instance, Ford and Toyota made a technology swap agreement a while back consisting of Toyota Hybrid technology for Ford's emmissions technology, and something else I believe that involved Ford's further development of the Atkinson cycle engine. Ford and GM have worked together to develop an entire series of incredible top knotch 6 speed automatic transmissions. Ford and Toyota also have some agreement in that Ford supplies some 6 speed automatics to Toyota, although Toyota proudly claims that all of the calibrations are their own. Nissan and Chrysler obviously had a huge agreement lately as well.

Ya they were basically told once they ramp up the lines at the auto plant they would be calling many of them back.

[DSNY FN]

Originally Posted by junehhan

I believe the detnews article stated that GM is willing to lose upto $250 million for the first several years at about 100k sold per year. They are definately planning on making a huge loss as I assume Sony and Microsoft were taking huge losses for a while.

I have the new Ford owner magazine that my dealer subscribed me to, and Ford is definately working on an Escape plug-in. The article states that it will use Li-ion batteries and will have 30-40 miles driving range before firing up the ICE. My only concern is how much cargo space this SUV will have considering the Chevy Volt battery weighs 400lbs!!!! The current Escape Hybrid on the market is also a pretty good deal because it is the world's most fuel efficient SUV. I believe it is also the cleanest SUV on the market thanks to Ford's Atkinson cycle engine. It is a full hybrid that is capable of driving upto 25mph on electricity alone, and has acceleration comparable to the V6 Escape.

Years down the road when it becomes time to replace my old Focus, i'll definately have to consider any new Ford Escapes that come out because this is like having your cake, and eating it too. It looks like a normal vehicle, performs well, and has the fuel economy of a smaller car. I'll probably never replace my TBSS since this is likely one of the last vehicles of it's kind and will continue to be my toy. If I had $10k right now, i'd love to do a 427 engine conversion based on the LS3 block.

Actually the Vue hybrid outdoes the Escape in highway mileage but in teh city the Escape edges it by about 2MPG.