http://www.nytimes.com/2008/06/04/business/04motors.html?ex=1370232000&en=0ceb8d958bcc92f4&ei=5124&partner=permalink&exprod=permalink

G.M. Closing 4 Truck Plants in Shift Toward Cars
By BILL VLASIC
Published: June 4, 2008

DETROIT — Even General Motors, the steadfast champion of big sport utility vehicles and pickup trucks, is thinking small now.

With no end in sight for elevated gas prices, G.M. announced drastic cuts in production of sport utility vehicles and pickups on Tuesday and stepped up plans for smaller cars and engines.

G.M.’s chairman and chief executive, Rick Wagoner, said G.M. will cease production at four North American assembly plants that make S.U.V.’s and pickups by 2010.

And in a humbling admission that the S.U.V. era is all but over, G.M., Detroit’s leading automaker, said it was considering selling the gas-guzzling Hummer brand it once regarded as a pillar of future growth.

In announcing the changes, Mr. Wagoner said $4-a-gallon gas prices had forced a “structural shift” by American consumers away from large vehicles into more fuel-efficient cars.

“These prices are changing consumer behavior and changing it rapidly,” Mr. Wagoner said before G.M.’s annual meeting in Wilmington, Del. “We don’t believe it’s a spike or a temporary shift. We believe it is permanent.”

While Ford Motor Company already slashed its pickup and S.U.V. output last month, the deep cuts at G.M. seem to be closing a chapter in the domestic auto industry.

“I think G.M. is basically declaring the S.U.V. dead,” said John Casesa, managing partner of the auto consulting firm Casesa Shapiro Group in New York. “The trend away from these vehicles is irreversible.”

The moves by G.M. underscore the radical transformation of the automotive landscape in recent months.

Where large S.U.V.’s like the Chevrolet Tahoe and Ford Expedition ruled the road a few years ago, sales of those vehicles and others like them are plummeting under pressure from high fuel costs.

At the same time, small cars and crossovers — car-based all-wheel-drive vehicles that use less gas than S.U.V.’s — are flying out of dealerships, with the Honda Civic and Toyota Corolla ranking as the two top-selling vehicles in the United States in May.

G.M. unveiled its latest restructuring on the same day that it reported that its United States sales plunged 30 percent in May.

But the day of reckoning for the full-size S.U.V. and its 14-miles-per-gallon fuel consumption has been coming for some time.

“At the peak in 2002, G.M. sold 600,000 full-size S.U.V.’s, but they’re on pace this year to sell less than 250,000 of them,” said David Healy, an analyst with Burnham Securities. “And the nails in the coffin are getting screwed down a little tighter.”

The production cuts will idle an estimated 8,000 workers at the plants in Janesville, Wis.; Moraine, Ohio; Oshawa, Ontario; and Toluca, Mexico. G.M. declined to provide details about what would happen to the workers affected.

Mr. Wagoner called the shutdowns “difficult” decisions and said it was unlikely any of the plants would receive new products to stay open.

“These moves are all in response to the rapid rise in oil prices and the resulting changes in the U.S.,” he said.

G.M. hopes to counter the drop in S.U.V. and truck sales by increasing car production and accelerating the development of more fuel-efficient models.

The automaker will add third shifts in September at plants in Michigan and Ohio that make midsize sedans and compact models.

G.M.’s board also approved production of two new small cars and a new four-cylinder, 1.4-liter engine, and gave the green light for production of the Chevrolet Volt by 2010.

The Volt, which will be powered by batteries augmented by a small gasoline engine, is the centerpiece of G.M.’s push to develop alternative-fuel vehicles.

“The Chevy Volt is a go,” Mr. Wagoner said. “We believe this is the biggest step in our industry’s move away from our historic, virtually complete reliance on petroleum to power vehicles.”

Over all, G.M. is cutting 500,000 vehicles out of its North American production capacity.

By reducing capacity to 3.7 million vehicles a year from the current 4.2 million, the automaker expects to save $1 billion on top of a target of reducing costs by $5 billion by 2011.

But even with the cuts, Mr. Wagoner declined to predict when G.M., which lost $3.3 billion in the first quarter this year, will become profitable in North America.

On Wall Street, G.M.’s stock rose modestly, closing at $17.58, up 14 cents.

Full-size S.U.V.’s and pickups have long been a major source of profits for G.M. and its domestic rivals, Ford and Chrysler.

“These are our most profitable vehicles, particularly the full-sized utes,” said Frederick A. Henderson, G.M.’s president. “We need to be able to produce more profitability from our passenger cars because we’ll be under pressure in terms of revenue.”

The plant shutdowns were announced days after G.M. said 19,000 of its hourly workers — a quarter of a unionized work force that already has been drastically reduced — had accepted buyouts or early retirement packages.

There was no immediate comment from the United Automobile Workers union about the factory closures. But the president of the Canadian Auto Workers, Basil Hargrove, strongly criticized Mr. Wagoner and his management team for shutting the Ontario plant less than a month after G.M. and the C.A.W. agreed to a new contract.

“This is a panic decision that really raises a question in my mind for the first time about the leadership at the top of the house for G.M.,” Mr. Hargrove said at a news conference Tuesday in Toronto.

Panic or not, G.M. clearly is altering its strategy on the fly in the face of increasingly tough economic conditions.

Industry analysts expect overall vehicle sales in the United States to fall below 15 million this year, the lowest point in more than a decade and far below the peak of 17.4 million in 2000. As recently as 2005, sales hit 17 million.

“This is tough stuff,” Mr. Wagoner said. “This market has radically changed.”

The decision to conduct a “strategic review” of the Hummer brand underscored the painful reality G.M. is facing.

Once considered a brand with global potential, the monster-sized Hummer has become a symbol of the decline of the large, gas-guzzling S.U.V.

Mr. Wagoner said the review of the brand could result in “a partial or complete sale” of Hummer.

That is a far cry from the ambitious goals that G.M. had for Hummer when it acquired rights to the brand nearly a decade ago.

When he joined G.M. in 2001, Vice Chairman Robert A. Lutz gushed over the potential for the rugged, military-styled Hummers: “I don’t think the world realizes how big that can get.”

When the brand’s sales peaked at 71,000 vehicles in 2006, Mr. Lutz was calling for Hummer to double its two-S.U.V. lineup.

But so far this year, Hummer sales have fallen 36 percent to 14,000 vehicles.

Advertised heavily as the epitome of the “go anywhere, do anything” S.U.V., the Hummer has been a favorite target of environmentalist criticism of Detroit.

“It has come to represent all that is bad about gigantic S.U.V.’s,” said Daniel Becker, a consultant to environmental groups in Washington. “It’s a shame it’s taken G.M. so long to face the reality that people don’t want this thing anymore.”