December 12, 2008 / 6:33 PM / in 9 years

GM slashes production in North America

DETROIT (Reuters) - General Motors Corp is slashing its first-quarter North American production by 60 percent compared with the same period this year, in response to a collapse in U.S. vehicle demand.

<p>Employees of German car manufacturer Opel work on their company's latest model "Insignia" inside the assembly hangar of General Motors German unit Opel's headquarters in Ruesselsheim, in this December 3, 2008 file photo. REUTERS/Kai Pfaffenbach</p>

GM said on Friday it will cut production by an additional 250,000 units during the first quarter due to “ongoing and severe drop in industry sales.”

GM had announced on December 2 that it would produce 600,000 units in North America in the coming quarter, compared with 885,000 in the 2008 first quarter.

“The impact of these and recently announced actions to adjust production with market demand, will result in the temporary idling of approximately 30 percent of GM’s North American assembly plant volume during the first quarter of 2009,” the company said in a statement.

GM, which is seeking $18 billion in federal aid, said the speed and severity of the U.S. auto market’s decline has been “unprecedented in recent weeks” as consumers reel from the collapse of the financial markets and tight credit.

This would put the production schedule of GM, the No.1 U.S. automaker, below that of Ford, which ranks third in U.S. sales behind Toyota Motor Corp.

GM’s market share is 22 percent compared with about 15 percent for Ford.

Ford said earlier in December it would produce 430,000 vehicles in North America in the first quarter, down from 692,000 a year earlier. It has not announced any new changes to production at this point, spokeswoman Angie Kozleski said.

The latest production cut from GM came as the White House said it would consider using the $700 billion financial market rescue package to help U.S. automakers following the failure of the auto bailout bill in the Senate.

GM’s U.S. sales fell 41 percent in November while the overall industry sales fell 36 percent. The company also said it will also continue to review its powertrain and stamping capacity needs and make adjustments as needed.

Honda Motor Co Ltd also announced on Friday it was cutting production in North America.

Reporting by Poornima Gupta and David Bailey; editing by Richard Chang

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