GM Making Bigger Bets On Fuel Efficient Vehicles

Even with gas prices going lower, consumer demand for thriftier cars is driving new job creation.

Gas prices are expected to go lower to $3.50 per gallon by summer, down from the nearly $4.00 national average now hamstringing consumers' purses. But demand for more fuel efficient vehicles is expected to remain, thus moving General Motors to invest more in fuel thrifty cars.

This is the "new normal," as some industry executives and analysts are calling it, in which consumers are expecting frequent spikes in gas prices and are planning their car purchases around that reality. That's leading the automaker to invest in plants and a wave of hiring directly related to producing more fuel efficient vehicles.

Besides hourly blue collar workers, GM is also adding hundreds of white collar engineers and related staff at its Warren, Mich., technical center.

Those investments, totaling about $2 billion spread across 17 plants, include hiring at the Detroit plant that is producing the extended-range electric Chevy Volt, a five-passenger sedan that goes up to 40 miles on an electric charge before a gas engine kicks in when the battery runs down.

GM CEO Dan Akerson is in Toledo, Ohio today, an area about 45 miles south of GM's Detroit headquarters which can use all the jobs it can get, to announce the investments. The plan includes adding 250 to 400 jobs at a Toledo transmission plant. Another 2,000 jobs will be added in metro Detroit, which has one of the highest unemployment rates in the country.

"It's not only good for GM, it's good for the United States of America," Chief Executive Officer Akerson said. "We're committed to investing in the manufacturing infrastructure of this country."

GM has been investing in factories since its re-emergence from its 2009 bankruptcy. GM announced a $131 million investment last week in its Corvette sports-car plant in Bowling Green, Kentucky. Including that project, GM said it had committed $3.4 billion to U.S. factories since emerging from court protection, creating or preserving 9,000 jobs.

The Chevy Volt, which will be a primary beneficiary of the new investment has been on sale for a few months, and so far has seen 1,703 vehicles sold this year through April. That may not sound like much, but the company has been slowly ramping up production and has a backlog of orders for the car.

GM planned to produce 10,000 Volts this year, but demand is prompting the company to increase that up to 25,000. GM also is considering building up to 120,000 extended age electric vehicles next year, as well as a vehicle less expensive than the Volt. The Volt retails for $40,280, but Federal tax incentives bring the real cost $7,500 lower. And the lease rate on the vehicle is $350 a month with $2,500 down.

GM is also seeing brisk sales of the Chevy Cruze, which has one version that gets 40 mpg. And later this year, it is launching the Chevy Sonic, a replacement for the sub-compact Chevy Aveo, which is also expected to get 40 mpg or better in highway mileage.

Other automakers have been seeing a surge in demand for their most fuel efficient vehicles. Sales of Honda Fit were up more than 70% in April. And Ford saw a surge in demand for the Ford Fiesta, which tops 40 mpg in highway fuel economy. Hyundai, too, is on a sales run, with the Sonata Hybrid and Elantra, both of which top 40 mpg.

Bottom line: Demand for Small Cars Not Going Away

Even with gas prices trending downward in the next few months, industry executives are not letting up on developing more fuel efficient vehicles because they have to meet rising government standards for fuel economy. Even without the government mandates, though, consumers are expected to keep up demand for fuel efficient vehicles because its good for their wallets first, and the environment second.

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