DETROIT – General Motors Corp. is planning a flexible portfolio of cars and trucks that will change with market demand and the price of gasoline, GM Chairman and CEO Rick Wagoner said yesterday.
Speaking to reporters at the company's downtown Detroit headquarters, Wagoner said GM plans to change the mix of vehicles it offers based on gas prices ranging from $2 to $5 per gallon.
“I think the hard part is not the $2 scenario. I think the hard part is the $5 scenario or the $4.50 scenario,” Wagoner said.
GM and other domestic manufacturers were caught with too many trucks and sport utility vehicles this year as the market shifted toward more fuel-efficient vehicles. Wagoner said the $5-per-gallon lineup would cost more because the company would have to invest more in its plants to make the change.
The company's current level of flexibility is “not as good as it needs to be,” Wagoner said, adding that it will get better during the next several years and as GM reduces its production capacity.
GM announced last week that it would cut production by 12 percent in the fourth quarter, mainly because it is reducing fleet sales and shifting to a new generation of full-size pickups.
The company is studying how many hybrid vehicles would be needed for each gasoline price range as well as the number of four-cylinder engines, the number of six-speed automatic transmissions and the number of diesels, Wagoner said.
“We're trying to set up a scenario that is robust against what we think is a reasonable range,” he said.
GM also is developing single platforms that will be built globally, making it easier for a North American plant to switch to more fuel-efficient models, Wagoner said.
For example, the company is working on a midsize car that shares the same basic architecture worldwide, Wagoner said. In Europe, it probably would be built with a four-cylinder engine, but the company would have a choice of a four-or six-cylinder engine in the United States, he said.
Wagoner said he did not think plant flexibility would be a part of contract talks with the United Auto Workers in 2007.
“I don't think this is a union issue” but rather a product development and manufacturing issue, he said.
Such a move to flexible manufacturing is essential to compete in today's marketplace, said Mike Jackson, chairman and chief executive of AutoNation Inc., which owns multiple GM dealerships and is the largest U.S. auto retailer.
“I think Rick is absolutely correct, and the sooner they do it, the better,” Jackson said.
GM's Asian competitors already can make several cars on the same assembly line, said Kevin Reale, research director for AMR Research, an industry consulting company.
Gas prices, he said, won't be the only driver of the need for flexibility because the market for cars is moving more toward niche products.
Domestic manufacturers traditionally set up their plants to produce large numbers of one vehicle, a business model that won't work as the market becomes more fragmented, Reale said.
“The days of producing 200,000 vehicles of the same model are going to be behind us,” he said. “We need to have plants that are capable of producing multiple models and multiple variants of that same model.”
GM shares gained 73 cents, or 2.4 percent, to close yesterday at $31.17 on the New York Stock Exchange.
