Volt in, Hummer out for GM

THE downsizing of the US automotive industry and the vehicles its produces shifted into a higher gear last week when General Motors announced it will close four more SUV and pick-up truck manufacturing plants in the US, said it was considering selling its iconic Hummer brand and confirmed the production in late 2010 of its Chevrolet Volt electric car.

The news came from GM chairman and CEO Rick Wagoner at the US auto giant’s annual general meeting in Wilmington, Delaware on June 3, when high oil prices and falling SUV sales were cited as reasons behind the decision to shut its factories in Mexico (Toluca) and Canada (Oshawa) by the end of this year, and in Ohio (Moraine) and Wisconsin (Janesville) in 2010 – “or sooner if market demand dictates”.

“These moves are all in response to the rapid rise in oil prices and the resulting changes in the US - changes that we believe are more structural than cyclical,” said Mr Wagoner at a press conference immediately prior to the AGM.

“Our greatest concern is the unprecedented rise in oil prices. We at GM don't think this is a spike or temporary shift we believe that it is, by and large, permanent.” GM has forecast the cutbacks will save the company US$1 billion a year, as part of a plan announced earlier this year to reduce annual costs by $US5 billion per annum by 2011.

US media speculation estimates thousands of job losses as a result, but GM says the size of its overall workforce will remain unchanged and that staff may be relocated to fill new positions within small-car plants, as part of its plan to increase production of small and mid-sized cars and SUVs in the US.

The Ohio and Michigan plants that produce the sub-large Chevrolet Cobalt, Chev Malibu and Pontiac G6 are expected to expand to a third shift by 2010 in response to increased US demand for smaller vehicles.

As part of GM’s desire to delete trucks and add cars to its product portfolio in an effort to increase the latter’s share from 50 to 60 per cent, Mr Wagoner said that 18 of the next 19 new products from GM will be cars or car-based crossovers.

Mr Wagoner also said the future of Hummer was now under the microscope, in line with pressure to reduce the number of vehicle brands GM markets in the US. He announced a full review into its once booming military0style SUV brand, which appears to have become expendable in GM’s efforts to downsize its model range.

GM will explore all options for the Hummer brand, from a complete renewal of its model line-up to selling it off completely, with more specific details expected to be announced by the end of next month.

“GM is undertaking a strategic review of the Hummer brand to determine its fit within the GM portfolio,” said Mr Wagoner. “At this point, the company is considering all options, from a complete revamp of the product line-up to a partial or complete sale of the brand.” That leaves up in the air Hummer’s internal strategy to introduce a smaller SUV model to be positioned below the H3, which itself was produced as a global model to sell below the hulking H2, as evidenced by the H4-previewing Hummer HX concept revealed at this year’s Detroit motor show in January.

While Holden’s GM Premium Line subsidiary is this month expected to surpass the 1000 sales mark for the Hummer H3, total Hummer sales in the US peaked at 71,524 vehicles in 2006, before dropping 22 per cent last year.

Hummer’s US sales have fallen 36 per cent in the first five months of this year and were down 60 per cent in May alone.

Mr Wagoner also confirmed that the replacement for the Chevrolet Aveo (sold as the Holden Barina here) would be sold in the US, and announced fast-tracked plans to introduce a new family of small four-cylinder engines, which will displace between 1.1 and 1.4 litres – the latter to include a turbocharged version.

Even more significantly, Mr Wagoner also officially confirmed a production future for the Chevrolet Volt plug-in electric car, pending development work on its batteries and tax incentives from the US government.

GM will retool its Detroit-Hamtramck plant ahead of an anticipated Volt launch in the US in November 2010, and has promised to soon debut a production version of the Volt, which has been earmarked for sale in Australia.

With the exception of the production of a small electric vehicle, GM’s latest downsizing moves are a virtual mirror image of moves recently made in the US by Ford, which said it would cut full-size truck and SUV production in order to return to profitability.

Ford said in May that it would cut the total number of vehicles it makes in North America in the second quarter of 2008 to 690,000 – 20,000 less than forecast and 15 per cent fewer than in 2007.

That number will drop even further in the third quarter to a maximum of 540,000, before production lifts slightly in the final quarter to at least 590,000.

At the same time, Ford will introduce the light-sized Fiesta sedan and hatch to the US market in 2010.

SUV sales in the US increased 3.7 per cent in 2007, but are down 10 per cent so far this year.

GM’s latest plant closure announcement sees its North American vehicle production capacity reduce by 700,000 units to 3.7 million vehicles per year.

The largest US vehicle producer has reportedly cut 71,000 jobs in the US since 2000 and lost more than $US54 billion since 2005.