GM Will Cut SUV, Pickup Output

Four Factories To Lay Off 3,500

With gas prices soaring and consumers increasingly pinched for cash, General Motors said yesterday that it is facing "market realities" and slashing production for full-size pickup trucks and sport-utility vehicles.

The move will force layoffs of about 3,500 GM workers at three plants in the United States and one in Canada. Michigan will be hit particularly hard, with 1,900 job losses in Flint and Pontiac. The other layoffs will be at factories in Janesville, Wis., and Oshowa, Ontario.

GM plans to cut North American production capacity for 2008 by about 88,000 pickups and 50,000 SUVs. GM executives acknowledged they were reacting to a shift in consumer tastes in two areas the company has long dominated and that were once the fastest-growing segments of the U.S. market.

Across the industry, first quarter sales of SUVs were down 26 percent, and full-size pickups were down 15 percent from a year earlier, according to GM figures.

"With rising fuel prices, a softening economy, and a downward trend on current and future market demand for full-size trucks, a significant adjustment was needed to align our production with market realities," said Troy Clarke, GM's president for North America. "This is a difficult move, but we remain committed to retaining and growing our leadership position in the full-size truck market."

Paul Taylor, chief economist for the National Automobile Dealers Association, said consumers are growing more interested in crossover vehicles instead of SUVs or trucks. Crossovers incorporate some design features of SUVs, but they are smaller and lighter and drive more like cars.

"They simply are more practical for the typical lifestyle of the buyer," Taylor said. "The truck-based products have capacity for real off-road uses, but very few people are jumping boulders in Sedona. They are typically facing nothing more than traveling on snow down a gravel road in a rural area."

Many crossovers, Taylor said, have four-wheel drive, giving drivers all the traction and power they would need for such conditions. Another advantage of crossovers over SUVs is that they are "easier to get into a standard [parking] spot at McDonald's or the mall," he said.

GM officials noted that sales of its Buick Enclave and GMC Acadia crossovers were strong. However, the automaker faces stiff competition in the category from Toyota's RAV-4, Honda's CR-V and Ford's Escape. GM's announcement said "the company is continuing to explore options to increase car and crossover production, but there are no changes to car production at this time."

Besides high gas prices and a shift toward smaller products, Taylor said full-size pickup sales have been hurt by a slowdown in the construction industry. Home building has slowed in many parts of the country due to a falloff in the real estate market following the subprime mortgage mess.

U.S. automakers have faced particularly tough times of late. GM has been especially hard-hit, with its first-quarter sales falling 11 percent in the United States.

The company will announce its first-quarter financial results tomorrow. Rival Ford surprised industry observers last week by reporting a $100 million first-quarter profit.

GM shares closed yesterday at $21.94, up 56 cents.