GM slashes big-car production

WILMINGTON, Del. — General Motors officially blew up its old business model Tuesday, closing four pickup and SUV factories, announcing a new small car that could get 45 miles per gallon and shedding 10,000 jobs in the process.

But it remains to be seen whether the world's largest automaker by sales can sell enough cars to make money in a shrinking U.S. market and stay ahead of the bill collectors.

The automaker said it would idle pickup and SUV factories in Janesville, Wis.; Oshawa, Ontario; Moraine, Ohio; and Toluca, Mexico, as it tries to deal with a shift to smaller vehicles brought on by $4-per-gallon gasoline.

GM said the truck plant cuts, which will reduce production capacity for pickups and large SUVs by about 35 percent, will save $1 billion per year. When combined with earlier measures, they will save by 2011 $15 billion over 2005 costs.

GM's moves, which come after a series of restructuring measures since 2005, result from a huge shift in U.S. consumer preferences for small cars and crossovers during the past two months.

"We at GM don't think this is a spike or temporary shift," Chief Executive Rick Wagoner said. "We believe that it is, by and large, permanent."

The automaker will have to parlay its strong overseas sales and the lower North American costs into a profit by selling cars in the $15,000 to $20,000 range, half the price of its high-profit SUVs and pickup trucks.

"The new cars, they tend to price those accordingly," said Pete Hastings, senior analyst with Morgan Keegan. "They tend to make money, just not as much money compared to the nice margins on the SUVs and large trucks."

Just before the company's annual shareholders' meeting in Wilmington, Del., Wagoner also announced the automaker will build a new-generation small car starting in mid-2010 at a factory in Lordstown, Ohio, that now makes the Chevrolet Cobalt.

In the past, costs generally were too high for Detroit automakers to turn a profit on small U.S.-built cars. But Wagoner said GM has lowered costs enough with new labor contracts and other measures to turn a profit.

"The direct answer is, we need to," Wagoner told reporters. "We believe we can build a car there profitably."

The new car likely would be priced higher than the Cobalt, which runs in the midteens depending on how it's equipped. It would hit showrooms in the second half of 2010 and be powered by a 1-liter to 1.4-liter four-cylinder gasoline engine to be built in Flint, Mich.

GM said that with a manual transmission, the new car would get nine miles per gallon more than the Cobalt, which gets up to 36 mpg on the highway.

Wagoner also announced that the board of directors has approved production of the Chevrolet Volt plug-in electric car, which GM plans to bring to showrooms by the end of 2010.

Fully charged, the Volt could drive about 40 miles without using gasoline. A small conventional engine would recharge the vehicle, extending its range and allowing it to get the equivalent of 150 miles per gallon.

Wagoner also said the iconic Hummer brand will be reviewed and potentially sold or revamped due to high fuel prices.

News of the job cuts was devastating to communities that house the factories, but hourly workers likely will move to other plants to replace 19,000 leaving this year under early-retirement and buyout offers.

The actions add to a string of plant closures by the Big Three in the last several years.

GM, Ford and Chrysler have announced the shutdown of 35 plants since 2005, according to Sean McAlinden, chief economist with the Center for Automotive Research in Ann Arbor, Mich.

Along with 35 more closures at GM and Ford's chief suppliers, Delphi and Automotive Components, McAlinden said the total hourly and salaried jobs eliminated comes to 149,000.

In that same period, foreign automakers have built or announced plans to build five U.S. assembly plants, he said. In 2007, foreign auto companies employed 113,000 people in the U.S., a number McAlinden projects will rise to 152,000 by 2011.

The plant closure in Moraine, a suburb of Dayton, nearly marks the end of GM's dominance in a town that once housed five of the automaker's presidents in the late 1960s, said John Heitmann, a history professor at University of Dayton.

"Next to Detroit and Flint, this was No. 3," Heitmann said of the Dayton area. "That's a lot of power. This was a great GM town."

The loss of the SUV plant will leave behind a bleak landscape for the surrounding community, an area scarred by a dwindling population, high poverty rates and one of the nation's hardest-hit pockets of the housing slump.

"It's going to be a ghost town," said Debbie Miller, 52, who owns The Upper Deck, a restaurant and bar next to the plant. "There are no jobs here. I don't know what they're going to do."

Associated Press reporter James Hannah contributed to this story.