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Reuters
GM to close four plants, may unload Hummer line
Tuesday June 3, 1:10 pm ET
By Soyoung Kim

WILMINGTON, Delaware (Reuters) - General Motors Corp (NYSE:GM - News) on Tuesday said it was closing four truck plants and could sell its Hummer brand to cut slow-selling trucks and SUVs from its lineup in response to higher gasoline prices the automaker now sees as a permanent threat to its business.

Chief Executive Rick Wagoner, speaking after a revised restructuring plan was approved by the automaker's board, said GM would close the four North American truck plants and add shifts at two U.S. plants making more popular car models.

In addition, Wagoner said GM was reviewing the Hummer brand and could sell the military-derived SUV line, which has become synonymous with gas-guzzling excess.

"U.S. economic and market conditions have become significantly more difficult," Wagoner said, adding higher gasoline prices have caused consumers to swap out of higher-margin trucks and SUVs faster than GM had expected.

In a related shift, Wagoner said GM's board approved funding for a next-generation compact to replace the Cobalt and a new subcompact to replace the Aveo. Both Chevrolet-branded small cars, which have been under development at GM's Korean unit, are set to go on sale in 2010.

GM's board also allocated production funding to the Chevy Volt, a heavily touted, all-electric vehicle that GM expects to have in showrooms by 2010 and to assemble in Detroit.

GM said the latest steps would cut $1 billion from its structural costs by 2010, but analysts questioned whether the steps would improve the automaker's turnaround prospects in the face of a U.S. market now seen slumping well into 2009.

GM shares, which have lost almost 60 percent since peaking in October last year, were up 3.7 percent at $18.10 on the New York Stock Exchange.

Wagoner said GM, which has lost a combined $51 billion over the past three years, was not ready to detail a timeline for returning to profitability.

Some analysts questioned whether the embattled automaker had moved too slowly, particularly with regard to Hummer.

"Unfortunately, it's just a sign that once again they're behind the curve," said Peter Jankovskis, a chief investment officer with OakBrook Investments, which owns GM shares in some of its portfolios.

"If they were looking to sell the Hummer brand, the more sensible thing would have been to do it three years ago. They're not going to get anything for it. Just in terms of timing, it's a very poor example," he said.

Pete Hastings, a corporate bond analyst at Morgan Keegan, agreed that GM had missed a chance to shop Hummer with potential buyers earlier.

"I wish they had done it awhile ago when it was really hot," he said. "I don't know what price they will get for it as now everyone is conscious of the permanent shift away from less fuel-efficient vehicles."

GM said it would stop making light trucks at plants in Oshawa, Ontario; Toluca, Mexico; and two U.S. plants covered by its contract with the United Auto Workers: Moraine, Ohio, and Janesville, Wisconsin. The Mexican plant will close this year with the other three facilities shutting down in 2009 and 2010.

Canadian Auto Workers President Buzz Hargrove, who last month negotiated a three-year cost-saving contract with GM, called the automaker's decision to close its Oshawa plant making the Silverado pickup truck a "betrayal." He said the union would press for a reversal of the planned move.

"We are not going to let GM walk away from the bargaining table," Hargrove told reporters in Toronto. "I want to state as clearly as I can: We are not going to allow this to happen."

'TOTAL CAPITULATION'

Tim Ghriskey, chief investment officer with Solaris Asset Management in New York, said GM would eventually see cost savings from its decision to close the truck plants.

"This is total capitulation by GM management to the price of oil," said Ghriskey, who does not currently own GM shares but has in the past and follows the stock closely. "GM believes that the high price of oil is permanent and therefore they are making dramatic cuts in their low-mileage vehicles."

GM said it took the latest steps in a 3-year-old program of cost-cutting in response to a U.S. sales decline and a shift out of higher-margin trucks and SUVs that have both shot past expectations.

Major automakers, including GM, are expected to post steep declines in U.S. sales for May later on Tuesday, as the spike in gas prices batters an industry that has been reeling this year from weak consumer confidence and tighter credit.

GM's rival Ford Motor Co (NYSE:F - News) warned last month it no longer expected to turn a profit in 2009 because of the impact of runaway gas prices.

President and Chief Operating Officer Fritz Henderson said GM was no longer confident the U.S. auto market would recover in the second half of this year as it had earlier predicted.

But Henderson, who was speaking to reporters before GM's annual meeting with shareholders, said GM has adequate cash to fund operations in 2008 and could raise more liquidity if the downturn in the auto market persists.

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Killing hummer would be a mistake. What is the difference between a H3 and a stripdown G Waggen


GM needs to think outside the box. Make Hummers Smaller, and load them with efficient powertrains and lots of electronics and technology, also, Bring back the H1, give it Diesel only, Kill the H2 and lift the price of H3 to over $50.00 with content to justify pricing.
Go for a global sales and Branding​
 

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Sell it. I won't lose any sleep over it. GM needs to slim down to survive.

I think Hummer could survive under GM, but it would require massive investments...which GM just cannot do at the moment.
 

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What Hummer needs is not death, but more content, and more advanced powertrains.
Hummer is really (with Cadillac, Lincoln and Dussie) the only brands that can move global and fetch well over $100,000.00 if they are executed well. The problem with Hummer is not that its a bad brand, but GM focussed it on North America and gave it GMC like content.

Killing it or selling would be down right stupid. the Concept that you can sell your business units to profitability does not make sense to me.
 

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Will all due respect King Tut. The Hummer would be snubbed globally, it is a brand that responded to a fad and just stopped making sense here, there is very little sense it would make sense anywhere else.

What is interesting for me is the fast reactions of both Ford and GM. Despite all the seriousness of the current situation these companies are not seating in the asses in denial.
 

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Will all due respect King Tut. The Hummer would be snubbed globally, it is a brand that responded to a fad and just stopped making sense here, there is very little sense it would make sense anywhere else.
Don't faint or fall off of your chair, but I agree. One of the dumber things GM ever did was buy this highly specific and therefore limited brand. Its products can look only a certain way and appeal to only a few people. It should have been painfully obvious that its continued existence was completely dependent on the price of fuel.

What is interesting for me is the fast reactions of both Ford and GM. Despite all the seriousness of the current situation these companies are not seating in the asses in denial.
I'm with you here, too. And I am actually rather proud of both Ford and GM for this.
 

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Killing hummer would be a mistake. What is the difference between a H3 and a stripdown G Waggen
Between the vehicles, not too much. The Mercedes brand is the biggest difference. It can sell at a profit successfully all over the world. It has a full line of very profitable vehicles that are also sold all over the globe. Hummer is a one trick pony.

There may have been a future, but GM cannot afford to keep it and spend the money necessary; any more than Ford could keep Land Rover or Jaguar.
 

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In my honest opinion...if GM has a hope in **** of meeting the forthcoming CAFE standards of 35mpg, then the quickest solution would be to sell off Hummer.

Hummer's only average at best 12mpg to 15mpg in the H3...the H2 is lucky to break into double digits. Plus, SobeSVT is right, Hummer answered a fad and a trend that has passed and now is no longer relevant to the market conditions.

Plus, of those that own a Hummer H2 or H3...how many can actually afford to fill the 50 plus gallon tank at a national average of $4.00 a gallon? I don't think many can actually afford this...unless they follow the LA principle of "Controlled Debt".

As much as I hate to see brands sold off...this is one that I wouldn't lose any sleep over.

And MeGeeBee...you are absolutely right, Hummer is a "One Trick Pony"...it only has the Hummer look and style and the Hummer brand doesn't have the benefit of other profitable models in its portfolio to offset the loses that Hummers are about to suffer. Even if they consolidate all Hummer & Saab Dealers with Cadillac...the Hummers and Saab's would still post loses that even Cadillac couldn't offset.

So in summation, GM...Sell Hummer!

And that is my "Two Cents"

As always...Stay Fabulous!
RG59061
 
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