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Chevrolet Traverse Production Begins in Tennessee

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SPRING HILL, Tenn. October 4, 2008; Erik Schelzig writing forr the AP reported that General Motors Corp. on Friday officially launched full-scale production of the new Chevrolet Traverse at its overhauled former Saturn plant on the outskirts of Nashville.

Troy A. Clarke, president of GM North America, said the eight-seat crossover will appeal to drivers of large SUVs and trucks seeking better fuel economy.

"This is a vehicle that's got the interior space or utility of a Chevrolet Tahoe, but a much better fuel economy and a much tighter exterior package," Clarke told reporters after a launch ceremony at the plant.

Clarke said the Traverse is poised to take advantage of a downsizing trend among consumers. Drivers tend to want to move down to smaller vehicles in increments, so most are not likely to want to skip from a larger SUV to a small car, he said.

"There's an industry shift, where people are going from large sport utility or truck vehicles to the next size down," Clarke said. "The phenomena of fuel prices and affordability really shift the market down just a little bit."

But the crossover market as a whole peaked this year in March, with all automakers selling 222,055, according to Autodata Corp. That number was down 29 percent in September, when sales totaled 157,163.

Crossover sales through the end of September have dropped 7 percent compared with the first nine months of 2007, according to Autodata. But that's not as bad as truck and SUV sales as a whole, which are down 21 percent.

U.S. auto sales overall are down 13 percent through September.

GM says the two-wheel-drive Traverse's fuel economy rating of 17 miles per gallon in city driving and 24 mpg on the highway -- the all-wheel-drive version gets 1 mile less -- is the best in its segment. Generally, truck-based SUVs get in the low teens in city gas mileage and in the upper teens on the highway.

The Spring Hill plant produced more than 3.7 million Saturns between 1990 and 2007. Most of the facility's workers were then furloughed while the plant was retooled and upgraded to build the new vehicle. That included changes needed to build vehicles made of sheet metal panels, as most Saturns built at the plant were plastic body cars. The facility now employs about 3,500 workers.

The overhaul, which cost more than $600 million, took about a year to complete. Clarke noted that gas prices have nearly doubled since the new plans for the plant were announced.

"While we were retooling this very plant for this fuel-efficient crossover, (competitors) were putting the finishing touches on new full-sized truck plants -- plants that sit idle today," he said.

Tennessee Gov. Phil Bredesen, a Democrat, last year got state lawmakers to approve new tax breaks to cover upgrades to the Spring Hill plant when it wasn't clear that GM would keep the facility open.

"GM has overcapacity and they're going to be deciding which plants they're going to put their shoulder behind for the future," Bredesen said. "So we worked very hard to make sure the Spring Hill was one of those."

The expanded incentives included reinvestments in existing plants rather than just for new ones coming to Tennessee. Under that measure, businesses can qualify for a 7 percent tax credit on industrial machinery upgrades of at least $500 million. Department of Revenue officials declined to release the specific amount of GM's one-time tax break.

The Bredesen administration has landed other high profile automotive deals through its aggressive corporate tax incentives, including a new Volkswagen AG plant in Chattanooga and the relocation of Nissan Motor Corp.'s North American headquarters from California to suburban Nashville in 2006.

Clarke acknowledged that tax breaks were a key element before overhauling the plant.

"Tax incentives are always important," he said. "This is the kind of a thing that's part of modern business."