GM to Close Four Plants, Reevaluate Hummer Brand

by Jerome Vaughn

June 3, 2008

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June 3, 2008

General Motors is closing four plants in North America, a move prompted by soaring gas prices and slumping sales of sport utility vehicles and pickup trucks. At the same time, GM plans a new emphasis on compact cars and is reviewing the future of the Hummer.

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If you're looking for an illustration of the impact of high gas prices on business, look no further than today's announcement from General Motors. The automaker says it's closing four plants that assemble trucks. Demand is down sharply for SUVs and pickups.

And as Detroit Public Radio's Jerome Vaughn reports, GM is betting that the time has come for more fuel-efficient vehicles.

JEROME VAUGHN: General Motors released some dismal sales figures this afternoon. For the month of May, sales were down 27 percent from May a year ago. Earlier in the day, GM chairman and CEO, Rick Wagoner, announced a new round of plant closures.

Mr. RICK WAGONER (CEO, General Motors): Today's high energy prices, along with the rapid change in auto industry sales mix, require further actions to position us for sustainable profitability and growth.

VAUGHN: The plan calls for truck assembly plants in Janesville, Wisconsin; Oshawa, Ontario; Moraine, Ohio; and Toluca, Mexico, to be shut down. Some production lines will stop as soon as this year. Some won't be shut down until 2010. Roughly 10,000 workers will be affected by the plant closures. The sales numbers released today show the depth of changes in consumer demand. The company says truck sales dropped nearly 37 percent. Center for Automotive Research chairman David Cole says he's not really surprised by the sales numbers or the automaker's decision to close plants. He says gas prices hovering around $4 per gallon have changed consumer habits and, by default, the auto industry.

Mr. DAVID COLE (Chairman, Center for Automotive Research): Many people, at $3 a gallon, it didn't really hit them too hard. It was reasonably stable down there for a while. But when it bumped up into the region of $4 a gallon, that really changed the game. And there was so much talk about even $5 and $6 a gallon that the market psychology had really shifted quite dramatically.

VAUGHN: Cole says automakers have to believe what their customers believe and make appropriate changes. He says the industry is likely to make more announcements like the one GM made today in the days ahead. GM says it's working to follow consumer demand. The company will begin production of a new compact car at its Lordstown, Ohio, plant in the coming months, and will start building the Chevy Volt Electric car in 2010. Both moves, officials hope, will cater to a more fuel-conscious public.

For NPR News, I'm Jerome Vaughn in Detroit.

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