WILMINGTON, Del. --- General Motors Corp. officially blew up its old business model Tuesday, closing four pickup and sport utility vehicle factories, announcing a new small car that could get 45 miles per gallon, and shedding 10,000 jobs in the process.
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 cuts will save the company $1 billion per year, and when combined with earlier measures, by 2011 will save $15 billion over 2005 costs.
GM lost $3.3 billion in the first quarter and burned through $3.4 billion in cash from January through March. Its May sales were down 28 percent compared with last May.
The pace of the cash burn might force GM back to the capital markets for more borrowing, said Pete Hastings, senior analyst with Memphis, Tenn.-based Morgan Keegan & Co. The company has said it has sufficient cash to withstand a downturn.
Chief Executive Rick Wagoner also announced the automaker will build a new small car starting in mid-2010 at a factory in Lordstown, Ohio, which 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 Mr. Wagoner said GM has lowered costs enough with new labor contracts and other measures to turn a profit. In addition to costs, GM will have to make sure it has a car that consumers will buy.
The new car likely would be priced higher than the Cobalt, which runs in the mid-teens. It would hit showrooms in 2010 and be powered by a 1-liter to 1.4-liter four-cylinder gasoline engine. GM said that with a manual transmission it would get nine miles per gallon more than the current Cobalt, which gets up to 36 mpg on the highway.
Mr. Wagoner also announced 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 any gasoline, and a small conventional engine would recharge the vehicle, extending its range and allowing it to get the equivalent of 150 miles per gallon.
Mr. Wagoner said GM is working on consolidating parts operations to go with the assembly plant cuts.
The actions add to a string of closures by the Big Three. GM, Ford Motor Co. and Chrysler LLC 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 additional closures at GM and Ford's suppliers, Delphi Corp. and Automotive Components Holdings LLC, he said the total hourly and salaried jobs eliminated is 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 Mr. McAlinden projects will rise to 152,000 by 2011.
GM INVESTORS CRITICIZE EXECUTIVES' HIGH SALARIES
WILMINGTON, Del. --- General Motors shareholders blasted the company's chief executive for raking in huge salaries and bonuses while the automaker has struggled financially, but a proposal to give investors a say on executive pay was defeated Tuesday.
Shareholders also defeated a proposal under which future stock options for senior executives would be tied to the company's performance.
John Lauve of Holly, Mich., who sponsored one proposal, said GM's market share, stock price and credit rating have decreased, but management is not held accountable.
"We either need to change this company or have the Japanese come in and run the whole place," he said.
-- Associated Press
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