GM’s future now depends on small cars

GENERAL Motors Corp. is known for making top- notch trucks and sport utility vehicles. The company’s survival now hinges on the difficult task of convincing buyers that its upgraded cars are just as good as its trucks and worth some extra cash. That’s essentially the business plan for the reconstituted GM, the one that is trying to make it in a US market where people no longer want $ 42,000 Chevrolet Tahoes that get only 14 miles per gallon ( 5.95 kilometers per litre) in the city. Instead, the revenue to sustain the nearly century- old industrial giant will have to come from cars, which have typically made only hundreds of dollars in profits.

Better cars, and lots of them. The change has come quickly. Faced with high gas prices and a weak economy, GM's sales fell 16 per cent for the first half of the year, with trucks off 21 percent and cars down nearly 9 per cent. GM has lost billions of dollars during the last three years. The company on Tuesday announced a combination of cuts, borrowing and asset sales that would raise $ 15 billion to weather the recent slump in US auto sales and the rapid shift from trucks to cars. Henderson, who concedes that GM has some repair work to do on its car brand image, says the change will have to come one or two models at a time.

It will follow the path of the new Chevrolet Malibu, which saw sales jump 46 percent in the first half of the year and average sale prices rise $ 4,000 over previous Malibu models due to improved quality. “ One product launch does not a success make,” Henderson said. “ It’s how do you build on that? But I think it gave us some confidence that if we get the car right and we get the promotion right, we can make progress and we can actually bring people back to the car.” GM has big plans for cars and car- based crossover vehicles. Nearly every brand, including Cadillac, will be getting a small car soon. Eighteen of the 19 vehicles GM is launching between now and 2010 are cars or crossovers.

One model, the sleek new Chevrolet Cruze due out in 2010, is the replacement for the clunky Chevrolet Cobalt small car. GM plans to power the Cruze with a 1.4- liter turbocharged four- cylinder engine, allowing it to get around 45 miles per gallon ( 19.13 kilometers per liter). Clark said in a statement, “ GM will likely face a sizable cash burn until it gets this part of the equation right.” GM Vice Chairman Bob Lutz said car prices also will rise because of demand, while truck and SUV prices will likely fall.