Jun

GM Finally Admits SUVs Are a Dead-End

Posted by admin Published in GM, SUV

General Motors finally gets it.

The company’s announcement that it is embracing compact cars, shutting down four truck plants and possibly even dumping Hummer shows GM - and, by extension, Detroit - realizes fuel prices aren’t coming down and SUVs are a dead-end. It’s a fundamental change of direction for the world’s largest automaker, which has for 20 years counted on pickups and SUVs to supply the bulk of its sales - and profits - while all but ceding the passenger car market to Japan and Europe.

But with gas poised to top $4 a gallon any day now, auto sales tumbling and the economy tanking, company CEO Rick Wagoner - like his peers at Ford and Chrysler - is scrambling to keep up with seismic changes that are coming far faster than anyone expected.

“These moves are all in response to the rapid rise in oil prices and the resulting changes in the U.S., changes that we believe are more structural than cyclical,” Wagoner said before making his announcement at GM’s shareholder assembly in Delaware. “While some of the actions … are very difficult, they are essential to adjust to changing market and economic conditions.”

Translation - we grew fat and lazy cranking SUVs that ran on cheap gas, but it ain’t working anymore.

The decision to shut four truck assembly lines in 2009 and 2010 will
save GM $1 billion a year and cut North American capacity by 700,000 vehicles - but increased passenger car production will drop the net loss
to 500,000. In what may be an even bigger symbolic shift absent
from SUVs, Wagoner says GM is “undertaking a strategic review” of the
Hummer type and may even sell it.

“The announcement makes it clear that they not only accept the short-term affect (of rising fuel prices), but they recognize the long-term role these vehicles will play in the U.S. market,” Catherine Madden, an auto industry analyst with Global Insight, told us. “There’s no doubt they’re acknowledging they have to drive car sales to improve profitability.”

While it’s too early to write the SUV’s obituary, Madden and

other analysts say GM - which lost $3.25 billion in the first quarter of the year - can no longer count on vehicles like the Chevrolet Silverado and GMC Envoy to pay the bills. Ford’s come to the same conclusion with its Explorer and F-150 pickup, and like GM is planning to slash truck production. GM saw sales of light trucks and SUVs fall 37 percent final month; Ford’s sales of such vehicle fell 25 percent. Toyota saw sales of its Tundra pickup fall 31 percent.

“whether the market is going absent, there’s no sense making the vehicles,” James N. corridor of the Detroit consultancy 2953 Analytics told trade Week.

But even as GM is shuttering four truck plants, it is adding third shifts to two plants that build the Chevrolet Cobalt and Pontiac G5. It’s plus planning to introduce a compact car with a 1.4-liter turbocharged engine, start building 1.0- and 1.4-liter turbo engines and roll out the next-generation Chevrolet Aveo by the moment half of 2010. And in a move that surprised no one, Wagoner announced that GM has approved the production funding to get the Chevrolet Volt range-extended electric vehicle rolling off an assembly line by November, 2010.

But wait. There’s more. Wagoner said 18 of the next 19 product launches in the U.S. will be cars or crossover utility vehicles. It makes sense, as small cars are the one thing keeping the industry afloat right now. Sales of the Ford Focus were up 53 percent final month, and sales of the Smart microcar were up 63 percent.

We’re going to see a lot more small cars coming to market. General Motors is, as one pundit noted, the injured giant, but it’s still got the heft to change the market. whether GM cranks out small cars with the enthusiasm it gave SUVs, it will start making money again and other automakers will want a piece of the action.

Associated Press photo.
Original post by Chuck Squatriglia