Projo Cars Blog

General Motors has finally seen the light.

After years of printing money on the back of trucks posing as cars, the staggering run up in gas prices over the last few months has caused the behemoth to adjust course.

In addition to announcing the closure of four plants that make SUVs and large trucks, G.M. Chairman Rick Wagoner said today the company was mulling the sale of its iconic Hummer brand, according to The New York Times.

“These prices are changing consumer behavior and changing it rapidly,” Mr. Wagoner said at a briefing before G.M.’s annual meeting in Wilmington, Del. “We don’t believe it’s a spike or a temporary shift. We believe it is, by and large, permanent.”

He said G.M. would close plants in Janesville, Wisc.; Moraine, Ohio; Oshawa, Ontario; and Toluca, Mexico by or before 2010. The company has already cut shifts at two truck plants in Michigan.

Two thoughts here.

It is common knowledge that we seldom do things we don't want to do. For years, environmentalists have rued the era of the SUV, arguing that the fuel inefficient monsters were wasteful and polluting. But with gas in the U.S. so cheap compared to most nations, who can blame consumers for wanting to drive SUVs and companies for making them given the high profit margins?

Sure the auto companies paid lip service to global warming - although G.M.'s vice chairman Bob Lutz famously once said he thought it was rubbish - but at the end of the day, corporations are in business to make money, not save the world.

But now that gas prices have moved north of $4 a gallon, SUV sales have stalled and the gas guzzling monsters are lining the lots like cordwood.

That does not make business sense.

And so G.M., like Ford before it, has cut bait and made a dramatic shift away from large vehicles. Which brings up the second point which is that the great strength of market economies is that they are able to adjust and move on, with change a constant theme.

Of course, some companies change too slowly and G.M. may indeed have ridden the SUV and small truck gravy train too long. Certainly it is a much slimmed down version of its former self.

But the moves will cut "North American production to 3.7 million vehicles from 4.2 million," according to the Times, and "add $1 billion in cost savings to an existing target of reducing costs by $5 billion by 2011."

And with increased investment in smaller vehicles, and alternative fuel vehicles like the electric Chevrolet Volt, G.M. may at last be able to turn itself around and become a leader in a field it once ruled. Certainly the financial publication Barrons thinks so, with its cover story this week simply called "Buy GM."

When it comes to the dynamism of the American market place, there is always room for redemption and rebirth.

- Peter C. T. Elsworth

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