GM to slow production of large SUVs

General Motors Corp. Chief Executive Rick Wagoner said the company will slow production of its new lineup of large sport-utility vehicles during the second half of the year to cope with rising inventory as average U.S. gasoline prices stay at more than $3 a gallon.

Any slowdown in production of large SUVs could put a dent in GM’s bottom line, as the vehicles are substantially more profitable than the small and midsize cars more Americans have been buying as gasoline prices have soared. The move highlights the risks in GM’s strategy of relying on its lineup of large SUVs to propel its North American turnaround in the near term.

The new SUV lineup has powered GM’s improved financial results this year since launching in January. However, sales of SUVs have sagged as U.S. consumers have adjusted to gas prices that, while low by world standards, are up 28 percent from a year ago and are close to the inflation-adjusted high reached in the early 1980s.

GM’s earnings have benefited from building and stocking the new line of SUVs, which it has said would do well despite high gasoline prices because the vehicles are more fuel-efficient than competing models. But sales of the large SUVs to consumers haven’t kept pace with production. Large-SUV sales overall fell 22 percent through the first half, according to Ward’s Automotive Reports.

According to Ward’s, GM built 106,334 Chevy Tahoes in January to June. According to Autodata Corp., 84,933 were sold in the same period, a 4.2 percent increase from a year earlier.

As of the end of July, GM and its dealers had 82 days’ supply of unsold Tahoes, 89 days of unsold GMC Yukons and 75 days of unsold Chevrolet Suburban ultralarge SUVs. Historically, auto makers have aimed for a 60- to 65-day supply, or less, to avoid resorting to profit-draining discounts to clear stock.

Wagoner said GM won’t shut down SUV production lines but will curtail “some” overtime and introduce other products into the production mix. He didn’t disclose further details. At least one of GM’s production plants is capable of building both full-size SUVs and pickup trucks, and GM is about to launch new versions of its full-size pickup trucks. “We’ve been basically running all-out,” Wagoner said.

Despite the overall slowdown in SUV sales, GM’s share of the full-size SUV market has boomed, Wagoner said. Depending on the type of model, GM owns 50 percent to 75 percent of various subsegments of the full-size SUV market.

On another matter, Wagoner said discussions with Nissan Motor Co. and Renault SA toward a possible alliance are continuing but added that “99.9 percent” of GM employees are working on things unrelated to a potential alliance. Wagoner said he isn’t currently actively involved in the effort.

Separately, Wagoner confirmed that GM will build a new Chevrolet Camaro coupe that mirrors the muscle car the company originally launched in the 1960s. A design for a reborn Camaro was a hit at the 2006 Detroit Auto Show, and the company’s decision to build a production version of the car was expected.

Wagoner said the new Camaro will be both fuel-efficient and competitively priced. Based on current GM models and engine technology, the new car’s mileage likely will range from the upper teens to the mid-20s per gallon.