GM commits to being smaller company, maker of smaller cars
Written on May 31, 2009
DETROIT — General Motors Corp. is not only committed to becoming a smaller company, on Friday it committed to building its smallest vehicles ever in the U.S.
GM said it plans to reopen a shuttered U.S. factory to build subcompact cars. The retooled factory would be able to build 160,000 cars a year and create 1,200 jobs, offsetting a fraction of the 21,000 that will be lost when GM closes 14 factories by the end of next year.
It is just part of a myriad of changes the giant automaker plans to make. On Friday, GM’s board began two days of meetings to make a final decision on the company’s fate. GM also closed in on a disposal of its European Opel unit and a deal to sell its rugged but inefficient Hummer brand also appears to be on the horizon. (Late Friday Germany’s finance minister, Peer Steinbrueck, said officials in Berlin had approved Canadian auto parts maker Magna International Inc.’s plan to rescue Opel.)
The moves provided more clues about what a restructured GM might look like ahead of the expected Chapter 11 filing Monday. Taxpayers eventually will own nearly three-quarters of GM, with a government commitment of nearly $50 billion.
GM has yet to confirm it will seek bankruptcy protection but scheduled a news conference for Monday in New York.
With the government’s backing and nearly $20 billion in U.S. loans so far, the company has made more dramatic changes in just a few days than it has in decades payday loans no faxing.
"It’s been coming to a head for a very long time," said Aaron Bragman, an analyst for the consulting firm IHS Global Insight. "But in just the past few months we’ve really seen steps being taken to completely and dramatically change the face of American auto manufacturing."
GM is banking on more demand for smaller cars previously shunned by Americans. The government decided earlier this month to raise fuel economy standards for the entire U.S. fleet by 2016.
The new standards were one of the biggest factors in GM’s announcement to build subcompacts in the U.S. rather than in China, said a person familiar with GM’s plans who spoke on condition of anonymity because of the sensitive nature of the plans.
The strategy, however, is still a big gamble. Americans have opted for bigger cars and trucks, with the exception of last summer, when gas topped $4 per gallon. GM hopes people will spend more for better-equipped subcompacts with more luxurious interiors and with performance that rivals the best luxury sedans.
Smaller costs after bankruptcy should help the company make money.
Filed in: economics.