"These higher gasoline prices are changing consumer behavior and rapidly, significantly affecting the U.S. auto industry sales mix. We at GM don't think this is a spike or a temporary shift. We believe it is by and large permanent," says GM Chairman and CEO Rick Wagoner.
10,000 jobs will be cut at plants in Wisconsin, Ohio, Canada and Mexico. The move will save GM $1 billion, but what will auto workers do?
"Find work, work somewhere. That's all you can do. Got bills to pay and mouths to feed," said one worker from the Janesville, WI auto plant.
GM will focus instead on smaller, fuel-efficient cars. It will also begin production of its first plug-in electric car, the Volt, for release in late 2010.
Silicon valley auto dealers already have noticed the trend toward fuel-efficient cars. The biggest growth has been in mid-size, sub-compacts and crossovers in the first quarter of the year, compared to a year ago.
The sharpest decline has been in SUV's and Minivans. Dealers will be waiting another two years for GM's new technology.
"The next couple of years are going to be a challenge, but we do have those good fuel-economy vehicles. We also already have a hybrid SUV," says Bret Moore of Moor Buick/Pontiac/GMC.
GM's urgent need to re-tool its vehicle lineup may cause it to turn to Silicon Valley in search of start-ups with new technology.
"There's no lack of companies in this valley that represent great acquisition candidates for General Motors, ranging from next-generation biofuel start-up's to even electrical vehicle infrastructure companies," says CleanTech Network managing director Dallas Kachan.
GM sales dropped 28 percent last month.