GM to idle thousands at 4 plants

Shifts to be cut at Flint, Pontiac as demand falls.

Sharon Terlep / The Detroit News

General Motors Corp. will further slash production of fuel-thirsty trucks and SUVs — a move that will eliminate about 3,500 hourly jobs at four North American factories, including ones in Flint and Pontiac, the automaker announced on Monday.

GM will eliminate one shift at each of four factories in Flint, Pontiac, Oshawa, Ontario, and Janesville, Wis., starting July 14.

The move comes as a surprise as many expected GM would need to pump out more trucks to compensate for production lost during the ongoing strike at American Axle and Manufacturing Holdings Inc., which for months has stymied the automaker’s ability to build pickups and SUVs.

"You thought they’d be prepared to crank it back up again," said auto analyst Joe Phillippi of AutoTrends Consulting Inc. in New Jersey. "These are the most profitable things they make, and losing those profits is going to hurt for the next three quarters."

About 1,150 workers will be laid off at GM’s Pontiac Assembly plant, and another 750 will go at the Flint factory, GM spokesman Chris Lee said. Janesville and Oshawa will lose 750 and 900 workers, respectively. The layoff numbers are preliminary and details are still being worked out between the automaker and the United Auto Workers, he said.

The cuts call for eliminating 50,000 SUVs and 88,000 pickups. Already, the automaker produced 100,000 fewer vehicles in the first quarter as a result of the American Axle strike. GM built about 2.7 million trucks in 2007.

"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," Troy Clarke, president GM North America, said in the statement. "This is a difficult move, but we remain committed to retaining and growing our leadership position in the full-size truck market."

Sales of large trucks and SUVs, once a bastion of profits for Detroit’s Big Three, have plummeted amid soaring fuel prices and a decline in new home construction that has historically driven pickup sales. GM cut truck production — and hundreds of factory jobs — last year in Flint, Pontiac and Oshawa.

U.S. pickup sales are down 16 percent and large SUV sales are down 28 percent through this year’s first quarter, according to Autodata. Instead, consumers are turning to more fuel-friendly cars and crossover SUVs.

The shift has been especially painful for domestic automakers with their truck-heavy lineups.

GM’s U.S. sales were down 11 percent through March, led by a 17 percent decline in pickup sales and 29 percent drop in large SUVs. Ford Motor Co. took a similar hit. The Dearborn automaker’s sales were down 9 percent overall through March, with pickups down 14 percent and large SUVs down 25 percent.

Ford last week laid out plans to eliminate 40,000 units of truck production in North America and to build 20,000 additional cars. Ford sales analyst George Pipas estimates that U.S. pickup sales will fall below 2 million this year for the first time since 1998.

GM didn’t specify plans to increase production outside of trucks but in Monday’s statement said it is "exploring options" to increase car and crossover production. GM has done well with new entries in some growing segments, including its crossovers.

While that bodes well for GM, the lost truck sales are still likely hammering GM’s bottom line. Analyst Phillippi said a large truck or SUV can easily rake in profit margins higher than $10,000 per vehicle.

The precise extent of the damage will be known on Wednesday when the automaker releases its first quarter sales results.