General Motors
GM will stop making the GMC Envoy XL in February when it closes its Oklahoma City facility.
By Roland Jones Business news editor
updated 12/16/2005 10:17:34 AM ET 2005-12-16T15:17:34

Some of General Motors’ large sport utility vehicles will reach the end of the road next year when the ailing automotive giant shutters the facility where they are made, raising questions about the future of the key market segment.

The world’s largest automaker said this week it will stop building its seven-passenger, midsized TrailBlazer EXT and GMC Envoy XL SUVs in February when it closes the Oklahoma plant. The shutdown will leave about 2,000 GM workers jobless and will be the first of 12 scheduled to cease production in North America.

The Oklahoma closure comes as part of a broader restructuring at GM. In November GM said it plans to cut 30,000 workers, or about 9 percent of its global work force of about 325,000 people, as part of an effort to slash $7 billion in expenses.

Loved for their size and power, yet reviled as a symbol of America’s gas-guzzling car culture, SUVs have become almost as much an icon of American excess as McMansions or bulging waistlines. Sales surged in the late 1990s, but the explosive growth drew a raft of criticism over the risk they bring to other motorists and their extremely low fuel-efficiency and therefore potential damage to the environment.

As gas prices surged, SUVs have slipped from their pedestal over the past few years and many consumers crave smaller, more fuel-efficient cars — such as the hybrid-engined Toyota Prius — that go quite a bit further between $50 fill-ups.

SUV sales have fallen by 2 or 3 percent in each of the last few years, hurt by changing tastes and a rise in smaller car-based crossover vehicles, or CUVs. GM and Ford were hit especially hard this year by the downturn in sales of SUVs, their longtime cash cows, as surging gasoline prices accelerated the trend.

Despite a recent pullback in fuel prices from record highs, America’s big automakers reported significant sales slides in November. Light-truck sales at Ford fell nearly 18 percent last month, with some of its largest SUVs such as the Expedition falling nearly 44 percent in November from year-earlier levels. Sales of Ford’s popular Explorer SUV plunged 52 percent.

At GM, the company is hoping to halt the sales slide with a new lineup of full-size SUVs, due for release in 2006. GM says its 2007 Chevrolet Tahoe, Cadillac Escalade and other models that will be released next year get 20 miles to the gallon in highway driving, making them the most fuel efficient in their class.

Some analysts think GM’s outlook is optimistic, and many don’t think demand for large SUVs is likely to return to the peak levels of 2004, when 4.5 million SUVs were sold, representing about 26 percent of overall vehicle sales, according to market information firm J.D. Power and Associates.

But there may still be hope for a reinvigoration of SUV sales.

Ford, for example, plans to launch two new CUV models at the Detroit Auto Show in January, notes research firm Global Insight in a recent report. Ford needs the new CUV models, which will go on sale in September as 2007 models, to expand its share in the fast-growing CUV category, and also to offset its overall U.S. market share decline, especially in the SUV segment, the study said.

“Even with rising petrol prices, U.S. consumers, who have grown accustomed to the styling, seating height and performance of SUVs, are not willing to sacrifice these characteristics to return to passenger cars, and CUVs provide an attractive alternative to people seeking an SUV-like vehicle with better fuel economy,” the report from Global Insight said.

The Associated Press and Reuters contributed to this report.


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