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GM to Close 9 Facilities and Eliminate 30,000 Jobs; Looks to Full-Size SUVs

21 November 2005

On Monday, GM Chairman and CEO Rick Wagoner announced the company’s next move to reduce its cost and stem its losses in North America: the closing of nine assembly, stamping and powertrain facilities and three Service and Parts Operations facilities, and the elimination of 30,000 jobs.

The plant closings and job reduction will reduce GM’s North American assembly capacity by about 1 million units by the end of 2008, to around 4.2 million units (two shift basis). That’s down 30% from 2002.

On Oct. 17, GM has announced an agreement with the UAW to lower its health-care costs, thereby saving about $1 billion per year.

Wagoner also said the company has further accelerated its cost-cutting efforts, raising the previously indicated $5 billion running rate cost reduction plan in North America to $6 billion by the end of 2006. In addition, GM continues to pursue its plans to target $1 billion in net material cost savings. In total, the plan is to achieve $7 billion of cost reductions on a running rate basis by the end of 2006—$1 billion above the previously indicated target.

On the revenue side, GM clearly needs to turnaround its foundering sales. As reflected in the latest November sales flash report from J. D. Power, Toyota has pushed up to within one percent of overtaking GM’s declining market share in the US.

As described by Wagoner, GM’s product plan includes a heavy emphasis on what it sees as “the products most important to the market and to us”: crossovers, compact and luxury SUVs, large pickups and SUVs and entry-level luxury cars.

GM has pulled ahead the introduction of its new line of full-size SUVs (earlier post), some of which will go on sale in January 2006.

We have a view that the next round of SUVs will be very strong for us.

GM is now targeting 15 all-new entries per year in the North American market. Details on new products will be forthcoming at the Detroit auto show in January.

According to the press release issued by GM on the plant closings, the company:

  • Remains committed to a diversified portfolio of hybrid cars and trucks, including hybrid versions of the Saturn VUE, Chevrolet Malibu, and the next generation of GM full-size pickups and SUVs.

  • Will continue to focus on the implementation of other fuel savings technologies, such as Displacement on Demand and six-speed transmissions. (Earlier post.)

  • Will expand its offerings of flex-fuel vehicles (E85).

However, the topic of hybrids, technologies for fuel efficiency, flex fuel, or changing market demands that might put a premium on fuel efficiency didn’t emerge once during the presentation to analysts and subsequent Q&A.

GM did note that demand for its mid-size SUVs was “soft”, but that it believed that segment would strengthen in 2006 and stabilize in 2007. Company executives reiterated the importance they place on the full-size SUV market, and their expectations that even given the weakening of that segment overall, the new GM models will help them increase their share, and provide revenue “protection”.

November 21, 2005 in Fuel Efficiency, Vehicle Manufacturers | Permalink | Comments (20) | TrackBack (2)

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Comments

Yeah, more SUV, we have not enuf! MORE!

I will laugh hard when their strategy for 'revenue protection' by making bigger faster more gas guzzling cars turns around and bites them in the ass. The people I feel sorry for are the employees getting the screwover cos the bosses can't smell the roses.

Next stop, bankruptcy. They have learned nothing from their mistakes. PR will save the day, so they think.

The choice is get their hot euroturbos gas and diesel and hybrid? into their stateside models ASAP or continue with the "toe-tag" sale!

The demand for large SUV's is NOT going to strengthen anytime soon. While us Americans are not the smartest lot, once burned at the pump the memory lives a long time. Yes, MPG is still not the 'new black' but cars have made gains. Compact cars on the other hand are NOT selling like hotcakes. Maybe next year.


Is there anyone here who doesn't think this is a stupid move on GM's part? This move will virtually assure bankruptcy.

I reckon it is great - Lose 1.6 billion and then release more and bigger SUVs.

This line is priceless:
"We have a view that the next round of SUVs will be very strong for us."

The financial press seem to agree that GM has one last bite of the apple. Who knows if oil prices fall and stabilize their strategy might just come off. If they go up they're surely doomed.

I just can imagine these biggest ever spectacular looking SUV's in the 'End of the oil age' room in a museum of the future.

Seems to me that they recruited their current CEO and other top management from the nearest looney bin.

Ford asked me to submit to them my ideas for sugnificent improvements in current automobiles. I gave a ton of info for free. In fact, I asked not to be paid.

They bounced it back on a very minor technicality. That's the kind of thinking we have to contend with and why GM and Ford will soon be no more.

Truly, truly sad. Part of the closings are the Saturn plant where the original Saturn was made. GM truly had the option of being in the small vehicle game and doing a good job of it, but their management turned its back on that route a long time ago.

Its sad to see that the executives (who'll get golden parachutes when this is all over) still don't get it and their employees will be the ones who actually pay for this...

Actauly no they never had the option to go small car. They tested it and found out very few who buy small cars will buy a gm even if its the exact same car made at the same plant if its sold by gm it wont sell.

As a result they sell small cars elsewhere where small car buyers arnt prejudiced against them.

Attract North American buyers with bigger, brighter, heavier SUVs. Will the old bait work again? GM should come up with newer ideas if they want to turn the tide.

I heard GM is sitting on a $20 billion cash reserve.

They're doomed. If they spent half the commitment to pushing small cars as they do with SUVs they might actually sell some. It's not like they have nothing to offer . With a PM trap and biodiesel (and a restyle), they could get serious technology leadership cred, get people excited about GM again. But they won't, and they're doomed.

GM has boatloads of cash, but they have even more liabilities, many times more. So they can loose $ for a few more quarters but loosing cash flow and sales is worse for them. Right now they are loosing both.

Like the Phoenix. You watch, they will pull something. Just because they dissapear from the US market does not mean they will not be faceless OEM producers of vehicles in another part of the world as pointed out.

The faux banckrupcy will make their big SUVs wholesale price. They will drop like hot popatoes. :)

The good thing is SUVs are comfortable and luxurious so they can be sold to homeless people for accomodation.

Yes, I am cruel. But only because these big things often driven by empowered mothers on more then one occasion have casually overtaken other smaller cars (including mine) without signallying, naturally assuming they would give way so as not to be crushed. So any advocator of SUVs iz evil in my books

This site provides so much great news value based on facts that I wish the posters would take more care to use a few.

GM dominates the U.S. market for the very smallest, highest mileage cars (Ward's lower small)with 48% share. And, gasp!, GM still sells more small cars in the U.S. than anyone, including Toyota.

Isn't it Toyota that is increasing its sales of the largest SUVs the fastest? Hasn't Bluewater nailed them on that and the muscle hybrids?

The problem is the overall make-up of vehicles demanded by the buying public, not which firm is successful in any particular market segment. Quit with the hatin' folks, and lets concentrate on solutions.

With GM & Ford closing xx unused plants and Toyota & Honda building xx new plants in North America wouldn't it be more economical to sell those plants to Toyota & Honda.

Alternatively, Toyota & Honda could buy GM & Ford and convert their plants, when and where required, for maximum economy. Imagine the savings in spare parts, garages, plants, gas, training, etc. and the reduction in pollution with hybrids from the new owners.

To Harvey D,
Also, retrain retrenched GM factory workers to work in Toyota or Honda plants. Much for muchness I say. The transition would be smooth because at the end of the day a door is a door and a window is a window.
But the question is would the big two hire GM workers under the same auto union obligations as GM? I think not.

Adrian: Retraining and rehiring ex-GM and ex-Ford employees would be a challenging task and the existing contract would certainly have to go to the recycle bin.

My idea was to selectively recycle the newest GM & Ford plants instead of demolition and reduce the excessive variety of spare parts around the country and get rid of the existing employees none productive contracts.

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