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Hummer announces layoffs

AM General, which produces the H2 model for GM, says it will let go 160 workers from Indiana facility, blames GM sales.

NEW YORK (CNN) -- AM General, which has a contract with General Motors to produce the Hummer H2, announced it would lay off 160 of 500 employees from its Mishawaka, Ind., plant due to a leveling off in the vehicle's popularity, according to General Motors spokeswoman, Dayna Hart.

The layoffs are scheduled to go into effect on Jan. 2, said AM General spokesman Craig MacNab.

"This isn't something we decided on our own," he said. "This is a direct reflection of GM's sales."

Hart told CNN that sales of the H2 peaked in 2003 when GM sold 34,000 models and have since dropped, selling 17,000 in 2006.

Originally released in the summer of 2002, the H2 was designed as a slightly less expensive version of the popular H1. But with high gas prices and an approximate ticket price of $50,000, sales of the SUV have leveled off, causing GM to reduce its production of high end vehicle.

AM General's primary business contract is the production of Humvees for the military. MacNab said that some of the 160 employees may be able to move from the H2 plant to the military Humvee plant.

Since hitting a 52-week high in late October, GM (down $0.40 to $29.96, Charts) shares have pulled back almost 15 percent. Despite a recent decline, GM stock still has outpaced rivals Ford (up $0.01 to $8.17, Charts) and DaimlerChrysler (down $0.03 to $57.88, Charts) this year, but it has continued to lose ground to overseas competitors such as Toyota Motor (down $0.03 to $117.41, Charts).

--from CNN's David Miller

GM plans new Hummer model  Top of page

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