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, the largest U.S. automaker's chief executive officer, told reporters today before its annual shareholders' meeting in Wilmington, Delaware.
The four plant closings will save $1 billion a year 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. GM today reported a 37 percent plunge in May U.S. sales of pickups, SUVs and vans. Cars will account for 60 percent of Detroit-based GM's North American production in three years, up from about 50 percent now, Wagoner 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.''
GM's total U.S. sales in May slid 28 percent from a year earlier, as it also sold 14 percent fewer cars.
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 14 cents to $17.58 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have declined 59 percent since Oct. 12, 2007, when they reached their highest point in the past two years after the automaker's U.S. union workers approved a cost-cutting four-year contract.
The company's 8.375 percent note due July 2033 rose 0.25 cent to 67.75 cents on the dollar, yielding 12.65 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Plant Closings
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 and 676 salaried employees, the company said.
Buzz Hargrove, president of the Toronto-based Canadian Auto Workers union, said closing Oshawa would violate the three-year contract reached with GM last month.
````We are not going to allow this to happen,'' he said at a news conference, declining to specify how the union will respond.
GM 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.
`Adapt and Evolve'
``It's a sign that Detroit continues to adapt and evolve,'' White House spokeswoman Dana Perino told reporters in Washington.
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.
GM, which got 57 percent of its U.S. sales this year 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.
``The biggest issue we're dealing with now in profitability is how weak the truck market is,'' GM sales chief Mark LaNeve said last week in an interview in Los Angeles. ``We have better profits in trucks; everybody has better profits in trucks.''
Fuel Efficiency
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.
Chief Operating Officer Fritz Henderson also reiterated today that the automaker has no more funding obligations for GMAC LLC, the finance company GM owns 49 percent of, or GMAC's Residential Capital home-mortgage unit. GM paid GMAC $1 billion to compensate for subprime losses that occurred at ResCap in 2006, before the automaker completed the sale of a majority stake in the finance company Cerberus Capital Management LP.
GM in April recorded a $1.45 billion first-quarter impairment charge for its GMAC investment.
``I can't say all the charges are behind us, I can't say that today,'' Henderson said on a conference call.
Slowing U.S. sales may mean GM will cut its quarterly dividend of 25 cents a share to preserve cash and also add debt, Himanshu Patel, a JPMorgan Chase & Co. analyst in New York, wrote in a May 5 report.
Credit-default swaps on GM debt climbed 9 basis points today to 1,200 basis points, according to CMA Datavision in London. 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.
To contact the reporters on this story: Jeff Green in Wilmington, Delaware, at jgreen16@bloomberg.net; Bill Koenig in Southfield, Michigan at wkoenig@bloomberg.net.
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