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updated 10/24/2005 8:12:34 AM ET 2005-10-24T12:12:34

General Motors is drawing up stand-by plans to boost production of smaller vehicles in case the recent increase in US demand for fuel-efficient cars and light trucks continues into next year, the head of the world's biggest carmaker said.

Rick Wagoner, chairman and chief executive, said it remained unclear whether this autumn's spike in petrol prices had caused a permanent shift in US drivers' preferences, but the company had to be prepared.

"If we look at the sales trends of the past 45 days and extrapolate those for next year, it results in a significantly different production plan from what one would have thought 45 days ago," he said in an interview with the Financial Times at GM's Detroit headquarters.

The tabular content relating to this article is not available to view. Apologies in advance for the inconvenience caused. "We're asking ourselves about the robustness of the production forecast next year."

The shift in demand has hit GM badly, as it has only recently begun to focus on passenger cars and "crossover" sport utility vehicles after a decade of concentrating on big sports utility vehicles and pick-up trucks. GM lost $4.1 billion in north America in the first nine months.

Its preparations come as rival manufacturers accelerate plans to put more fuel-efficient vehicles on the roads. Ford this month announced it would increase production tenfold by 2010 of hybrid petrol-electric cars, which reduce fuel consumption by about 20 per cent, while Nissan, Honda and Toyota all plan to introduce small hatchbacks next year.

However, Mr. Wagoner said GM still predicted enough demand for the new "T900" versions of its biggest - and least efficient - SUVs to fill two factories and part of a third, which will also be able to build pick-up trucks, for at least a couple of years.

The US market for big SUVs is expected to shrink to about 750,000-775,000 units a year, from more than 900,000 at its peak. But with a fresh line-up of models, GM is banking on winning a bigger share of the smaller pie. It also plans to offer 14 fuel-efficient "crossover" car-based SUVs by 2009, double the current number.

The company is in the process of picking which factories it will shut in a restructuring designed to eliminate 25,000 jobs in the U.S. and leave its plants fully utilized. But Mr. Wagoner said the aim of filling the capacity was based on "conservative" assumptions, and he hoped to have more than 100 per cent utilization - suggesting night shifts and Saturday working would be the norm.

"In the high cost of manufacturing markets like the U.S. and Germany, if you don't run at full capacity or more, it is really hard to make money," he said.

Mr. Wagoner said it was "highly uncertain" how much demand there would be for hybrids, which offer better fuel consumption but cost more. But he said GM was building more production capacity for hybrids than he expected to use.

Copyright The Financial Times Ltd. All rights reserved.

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