GM Phases Out Gas Guzzlers for Fuel Efficient Cars

GM Phases Out Gas Guzzlers for Fuel Efficient Cars

Reeling from a tough economic environment and a general public thirsty for more fuel-efficient cars, General Motors announced plans Tuesday to shift away from large trucks and SUVs toward a beefed up portfolio of gasoline-sipping and electric cars.

The world’s largest automaker plans to shutter four manufacturing plants throughout North America that build trucks and SUVs, as well as perform a strategic review of its Hummer brand, which could lead to a product overhaul or sale.

"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," said Rick Wagoner, GM’s chairman and CEO. "Since the first of this year, however, U.S. economic and market conditions have become significantly more difficult. Higher gasoline prices are changing consumer behavior, and they are significantly affecting the U.S. auto industry sales mix."

The move marks a remarkable shift for a company whose profits during the last decade were largely tied to trucks and SUVs. But high gas prices have sapped demand for this segment, pushing automakers toward less profitable passenger cars or incentives to reduce truck and SUV inventories. Ford, for instance, is offering consumers the chance to buy a pickup truck from its F-Series for the same rate as its employees. And consumers who buy or lease certain new Chrysler models can pay $2.99 per gallon of gasoline through a three-year gasoline subsidy program from the company.

Eighteen of 19 planned new GM products will be cars or crossovers, and extra shifts will be added at plants that build some of its best selling compact cars, such as the Chevy Malibu and Pontiac G6.

The hybrid and electric vehicle segment is heating up. Norwegian carmaker Think Global AS is busy raising capital to bring its line of short-range electric vehicles to the states, and various automakers, including GM, have been locked in a race to bring plug-in hybrid electric vehicles (PHEVs) to market,. GM’s board has approved production of its PHEV, the Chevy Volt, which means the cars could begin hitting showrooms in late 2010. The board also approved a next generation Chevy Aveo and a new fuel-efficient Chevy compact car that could go into production in mid-2010.

The truck and SUV plant closures in Canada, Ohio, Wisconsin and Mexico are expected to save the company more than $1 billion, on a running basis, by 2010. The company hasn’t turned a profit since 2004.