WILMINGTON, Del. — General Motors 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.
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 capacity to produce pickups and large SUVs by about 35 percent, will save the company $1 billion per year and, when combined with earlier measures, by 2011 will save $15 billion over 2005 costs.
GM’s moves, which come after a series of restructuring measures since 2005, are the result of 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 now 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 pickups.
“The new cars, they tend to price those accordingly,” said Pete Hastings, senior analyst with Memphis, Tenn.-based Morgan Keegan & Co. “They tend to make money, just not as much money compared to the nice margins on the SUVs and large trucks.”
Hastings is confident GM can pay bills and make money, but that will be difficult unless the U.S. economy recovers.
“I don’t think they can get to profitability quickly if the economy stays where it is,” he said.
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 actions add to a string of plant closures by the Big Three in the last several years. GM, Ford and Chrysler have announced the shutdowns of 35 plants since 2005, according to Sean McAlinden, chief economist with the Center for Automotive Research in Ann Arbor.
Along with 35 additional closures at GM and Ford’s chief suppliers, Delphi and Automotive Components Holdings, he said the total hourly and salaried jobs eliminated comes to 149,000.
