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What will the teeney weeney crowd do????

GM to Close Four Truck Plants, Shift Output to Cars

By Jeff Green and Bill Koenig

June 3 (Bloomberg) -- General Motors Corp., struggling to return to profit amid record gasoline prices, said it will close four truck plants, make more small cars, and may drop its Hummer brand of large sport-utility vehicles.

Gasoline exceeding $4 a gallon represents ``a structural change, not just a cyclical change,'' Rick Wagoner, chief executive officer of the largest U.S. automaker, told reporters today before its annual shareholders' meeting in Wilmington, Delaware.

The four plant closings will save $1 billion annually and cut North American capacity by 700,000 for trucks and, with added shifts at car factories, by 500,000 overall, he said. At Hummer, ``we're considering all options from a complete revamp to a partial or complete sale of the brand,'' Wagoner said.

A doubling of U.S. gasoline prices since 2004, including a 31 percent surge this year, is forcing Wagoner to accelerate production of more fuel-efficient vehicles as he tries to end three years of losses. Cars will account for 60 percent of Detroit-based GM's North American production in three years, up from about 50 percent now, he said.

``It is significant, but this is a late reaction to changing market dynamics,'' said Dennis Virag, president of Automotive Consulting Group in Ann Arbor, Michigan. ``The plans really should have been in place a number of years ago.''

Ford Motor Co. last month said it was slashing truck production while trying to boost output of small cars. Ford also abandoned a target of returning to profit in 2009. The company relied on large pickups and sport-utility vehicles for the bulk of its earnings in the 1990s.

New Models

GM also approved the production version of the Chevrolet Volt electric car. Wagoner said at the meeting that 18 of GM's next 19 vehicle introductions will be cars or crossover wagons.

The automaker lost $38.7 billion last year, its largest deficit ever after writing down $39 billion of future tax benefits. GM hasn't had an annual profit since 2004.

GM rose 34 cents to $17.78 at 10:46 a.m. in New York Stock Exchange composite trading. The shares declined 30 percent this year through yesterday.

Truck output will end at plants in Oshawa, Ontario; Moraine, Ohio; Janesville, Wisconsin; and Toluca, Mexico. The factories produce models such as the Chevrolet Silverado and GMC Sierra large pickups, TrailBlazer and Envoy SUVs and medium-duty trucks.

The plants will close in 2009 and 2010 and probably won't reopen, Wagoner said. They employ a total of 7,590 hourly workers and 676 salaried employees, the company said.

Adding Shifts

The automaker said that starting in September it will add a third shift at a factory in Orion Township, Michigan, that makes Chevrolet Malibu mid-size cars and a Lordstown, Ohio, plant that builds Chevrolet Cobalt small cars.

Wagoner also said GM's board approved a new Chevrolet compact car for U.S. and international markets and a successor to the current Chevrolet Aveo small car. The new Aveo will be produced in Lordstown starting in 2010, subject to talks with local and Ohio officials about incentives, GM said.

GM reports later today on its May U.S. sales, which analysts expect will extend a 12 percent decline through April. GM said April 28 that it would eliminate shifts at three truck plants and a factory that makes SUVs because of slack demand for models such as the Silverado pickup.

`Adapt and Evolve'

``It's a sign that Detroit continues to adapt and evolve,'' White House spokeswoman Dana Perino told reporters in Washington. The U.S. automakers are ``adapting well'' and will ``hopefully be able to pull themselves up out'' of a rough period, she said.

GM, which got 57 percent of its U.S. sales through April from light trucks, is scrambling to adjust to consumers turning away from such models. Trucks have outsold cars annually since 2001, reaching 56 percent of the U.S. market in 2004, when gasoline prices averaged $1.85 a gallon.

GM now is emphasizing fuel efficiency, with the Volt as its centerpiece. The car can be charged from a home electrical outlet and uses an onboard engine to recharge the batteries once the initial charge is used up. GM has said the Volt will be able to travel 40 miles before having to the use the engine.

The company said today that its board approved funding for Volt production and tooling.

GM's 8.375 percent note due July 2033 rose a half-cent to 68 cents on the dollar, yielding 12.6 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Credit-default swaps on GM debt climbed 33 basis points yesterday to 1,187 basis points, according to CMA Datavision in New York. The contracts are designed to protect bondholders against default. A rise in the price indicates a decline in the perception of a company's credit quality.

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