Thursday, July 3, 2008

GM Shifting focus to more ECO friendly cars including GM BEAT

General Motors Corp., the automaker that popularized the Hummer, may sell a mini-car four feet (1.2 meters) shorter than its biggest offering and more than a foot shorter than anything else it markets in the U.S. to win back buyers scared off by high fuel prices.

GM may bring the production version of the Chevrolet Beat to the U.S., people familiar with the plan said. The car, which would normally be reserved for markets such as Asia and Latin America, gets as much as 40 miles a gallon, a fuel efficiency topped in the U.S. only by hybrids.

The possible American introduction of the Beat would be one step in a fleet downsizing and shift away from fossil fuel-based vehicles that the people said is already under way at Detroit- based GM. Resigned to $4-a-gallon gasoline and stricter pollution rules, the largest U.S. automaker has recognized that its response must go beyond the mothballing of large truck plants, the people said.

``This is a very big change for GM,'' said John Wolkonowicz, an analyst at Global Insight Inc. in Lexington, Massachusetts. ``They have no choice. There's never been as rapid a shift in consumer demand in the history of the auto industry.''

GM, turning 100 this year, has few options to re-inventing itself. The company reported its largest annual loss in 2007, $38.7 billion, after a tax accounting change, and hasn't had a profitable year since 2004. The carmaker's U.S. market share hovers at the lowest level since 1925, and last year GM was 3,000 cars away from being dethroned by Toyota Motor Corp. as the world's largest automaker.

Smaller Than Mattel

The company's current market value is smaller than that of Mattel Inc., maker of Matchbox cars, and a 10th what it was in 2000. A Merrill Lynch analyst said yesterday that a GM ``bankruptcy is not impossible if the market continues to deteriorate.''

GM rose 15 cents, or 1.2 percent, to $10.13 at 8:56 a.m. before regular New York Stock Exchange trading. Yesterday, GM fell 15 percent after Merrill downgraded the stock to ``underperform'' from ``buy.'' The price was the lowest since 1954 adjusted for splits, according to Global Financial Data in Los Angeles.

Besides the Beat, GM is weighing a list of options for refocusing its auto lineup on fuel efficiency rather than performance. They include the U.S. introduction of a small pickup popular in Latin America and an expansion of the number of versions of the Volt plug-in electric car, the people said.

GM is also trying to increase production and speed up availability of the successor to the Chevy Cobalt sedan and develop a fuel-efficient alternative to the Cadillac Escalade sport-utility vehicle, they said.

Portfolio Review

``We are looking at and reviewing our entire portfolio, not just because gasoline is $4 but because of stricter government fuel economy regulations,'' GM spokesman Dee Allen said, referring to U.S. requirements that automakers reduce fuel use 40 percent by 2020. He declined to discuss specific projects.

Already, GM has reassigned engineers to many of the projects, according to the people familiar with the planning. The company is taking them from SUV and truck programs suspended while awaiting the return of customers. Now, these people said, GM sees no point in waiting.

``This is the biggest change that we have seen at GM in three decades in terms of engineering,'' said Jim Hall, principal of 2953 Analytics, an automotive consulting firm in Birmingham, Michigan.

Close to Smart

The automaker unveiled the Beat as a prototype at the New York auto show in April 2007, along with two other 40 mpg Chevy small-car concepts. Besides two hybrid models, the only car in the U.S. that comes close to the Beat's projected fuel efficiency is Daimler AG's Smart car, with 36 mpg, according to Yahoo! Autos.

At about 138 inches (3505 millimeters) long, the Beat would be among the smallest cars sold in the U.S. Only the 106-inch Smart car is shorter.

Sales of the smallest cars in the U.S. have risen 31 percent in the first half this year as the industry total fell 10 percent and the largest SUVs 31 percent. GM reported a 21 percent plunge in U.S. sales of pickups, SUVs and vans for the first six months.

In November, GM said it approved a model based on the Beat prototype for markets outside the U.S. and Canada starting next year. GM wouldn't disclose where the new vehicle would be built.

GM may also expand the Volt electric car program, the people said. GM Vice Chairman Bob Lutz, 76, said last month the company currently plans to build about 60,000 Volts a year after they go on sale in late 2010. The product is designed to drive 40 miles on a charge from a household outlet before an onboard engine recharges the battery.

Variation on the Volt

``The Volt is going to have far more variations than people imagine,'' said Hall, who studies GM's plans for future models.

The small pickup GM is considering for the U.S. would be similar to the Chevrolet Montana, according to the people with knowledge of the plans. The 174-inch Montana is sold in Brazil and in Mexico as the Tornado and in South Africa as the Opel Corsa Utility. The Chevrolet Colorado, GM's smallest U.S. pickup, is 192 inches.

Additionally, Cadillac is considering a smaller SUV, known internally as the MiniSlade, as a more fuel-efficient option to the large Escalade SUV.

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