GM to close 4 factories, may drop Hummer

updated 2:15 p.m. ET June 3, 2008

WILMINGTON, Del. - General Motors is closing four truck and SUV plants in the U.S., Canada and Mexico, affecting 10,000 workers, as surging fuel prices hasten a dramatic shift to smaller vehicles.

CEO Rick Wagoner said Tuesday before the automaker’s annual meeting in Delaware the plants to be idled are in Oshawa, Ontario; Moraine, Ohio; Janesville, Wis.; and Toluca, Mexico. He also said the iconic Hummer brand will be reviewed and potentially sold or revamped.

Wagoner said the GM board has approved production of a new small Chevrolet car at a plant in Lordstown, Ohio, in mid-2010 and production of the Chevrolet Volt electric vehicle in Detroit.

Wagoner announced the moves in response to slumping sales of pickups and SUVs brought on by high oil prices. He said a market shift to smaller vehicles is permanent.

GM shares rose 43 cents, or 2.5 percent, to $17.87 in midday trading.

The cuts will affect 10,000 hourly and salaried workers. Many will be able to take openings created when 19,000 more U.S. hourly workers leave later this year through early retirement and buyout offers.

Wagoner said the company has no plans to allocate products to the four plants in the future.

“We really would not foresee the likely prospect of new products in the plants that we’re announcing today that we’ll cease production in,” he told a Moraine, Ohio, city official who asked a question in a telephone conference call.

More cuts will be announced later. Wagoner said GM will consolidate engine, transmission and other parts operations to go with the assembly plant actions.

The actions add to a string of plant closures by the Big Three in the last several years. GM, Ford Motor Co. and Chrysler LLC have announced the shutdown of 35 plants since 2005, according to Sean McAlinden, chief economist with the Center for Automotive Research in Ann Arbor. Along with 35 additional closures at GM and Ford’s chief suppliers, Delphi Corp. and Automotive Components Holdings LLC, he said the total hourly and salaried jobs eliminated comes to 149,000.

In that same time period, foreign automakers have built or announced plans to build five U.S. assembly plants, he said. In 2007, foreign auto companies employed 113,000 people in the U.S., a number McAlinden projects will rise to 152,000 by 2011.

The Oshawa truck plant, which builds the Chevrolet Silverado and GMC Sierra pickups, likely will be shuttered next year. The Moraine plant near Dayton, will stop making Chevy TrailBlazer and other mid-size SUVs in 2010 “or sooner if demand dictates,” Wagoner said. In Janesville, the plant that builds medium-duty trucks and big SUVs like the Chevrolet Tahoe, will cease production starting at the end of 2009, finishing in 2010 or sooner if demand stays weak. In Toluca, production of medium-duty trucks will end by the end of 2008, Wagoner said.

The moves will save the company $1 billion per year starting in 2010. Combined with previous efforts, GM by 2011 will have cut costs by $15 billion a year over in 2005, Wagoner said.

Canadian Auto Workers President Buzz Hargrove said GM’s decision to close its Oshawa truck plant betrays the labor agreement reached two weeks ago. He said the union will consider all options, including a strike.

Video   GM's response to gas prices June 3: In response to increasing gas prices, CNBC's Erin Burnett says that 18 of the next 19 vehicle models released by General Motors will be cars or crossovers, not SUVs. Morning Joe

GM committed to keep the plant of 2,600 people open throughout the three-year agreement, Hargrove said.

Wagoner said General Motors Corp.’s board approved the production schedule of the Chevrolet Volt, and the company plans to bring the plug-in electric car to showrooms by the end of 2010.

Fully charged, the Volt could drive about 40 miles without using any gasoline, and a small conventional engine would recharge the vehicle, extending its range and allowing it to get the equivalent of 150 miles per gallon. GM plans to sell about 100,000 Volts a year by 2012.

Wagoner said the change in the U.S. market to smaller vehicles likely is permanent. “We at GM don’t think this is a spike or a temporary shift,” Wagoner said.

On the Hummer, Wagoner said GM is “undertaking a strategic review of the Hummer brand, to determine its fit with GM’s evolving product portfolio” in light of changing market conditions.

“At this point, we are considering all options for the Hummer brand... everything from a complete revamp of the product lineup to partial or complete sale of the brand,” he said.

Detroit’s automakers have been making the shift to more fuel-efficient vehicles, but not at the pace that matches consumers’ drive to hybrids and high mileage models made overseas. Gas prices have accelerated the retreat from trucks and sport utility vehicles, leaving the Big Three at the most critical crossroads in 30 years.

The U.S. market is difficult for every automaker, with consumer confidence weak and 2008 sales expected to be the lowest in more than a decade. But it is most difficult for the Detroit Three, who have relied more heavily on sales of trucks and SUVs than their foreign counterparts. Trucks make up 70 percent of Chrysler LLC’s U.S. sales, for example, compared to 41 percent at Toyota Motor Corp.

MORE FROM AUTOS

Autos Section Front

CEO lays out ambitious Chrysler road map Cars are approaching ‘auto’ pilot mode Review: Toyota Venza falls short What automakers have in store for 2010 Ford to put air bags into back seat belts Clunker deals: old Ford pickups for new ones New Dodge models part of Chrysler’s plans U.S. rips Toyota statement on floor mats GM posts first sales gain in nearly two years General Motors board decides not to sell Opel Autos Section Front   Add Autos headlines to your news reader: