Wagoner and Lutz toured GM's hybrid development center for the first time to let researchers know the company is making such technologies a priority.
Jeff Green - Bloomberg - Oct. 27, 2006
Chevrolet Tahoe DualMode could become a PHEV in future years.
General Motors Corp., losing sales to Toyota Motor Corp., will use some of the $9 billion in savings from cost cuts this year to make vehicles that match the Japanese automaker in technology and fuel efficiency, according to people familiar with the strategy.
GM's plans include a hybrid-electric vehicle with a battery that recharges at any outlet, improved gasoline engines, hybrid versions of its Silverado pickup trucks and hydrogen-powered fuel-cell models that emit only water vapor, according to the people, who didn't want to be identified because the plan isn't public. Chief Executive Officer Rick Wagoner will outline the strategy in a speech before the end of the year, one of the people said.
``GM has to change the rules of the game through new technologies because they are simply fighting to not lose share now,'' said Pete Hastings, a fixed-income analyst at Morgan Keegan & Co. in Memphis, Tennessee. ``The first and best to market will be critical for future share dominance.''
Wagoner, 53, is under pressure to return the world's largest automaker to profitability after he shunned an alliance with Renault SA and Nissan Motor Co. GM's board rejected the partnership proposed by Kirk Kerkorian, GM's largest individual investor, in favor of Wagoner's plan to shut factories and increase sales with new models.
Plug-Ins
The company reported a third-quarter loss of $115 million two days ago and said it was spending more cash on its automobile business than it was generating through vehicle sales. GM lost $1.66 billion in the year-earlier quarter.
GM shares have risen 77 percent this year, the biggest gain in the Dow Jones industrial Average. They fell 35 cents to $34.65 yesterday after Merrill Lynch & Co. analyst John Murphy downgraded the stock to ``sell'' from ''buy,'' citing slower progress than he had anticipated.
The Detroit-based automaker has assigned a team of engineers to help develop plug-in hybrids, according to one of the people. The project - known internally as I-car, for Icon car - is meant to be the centerpiece of the new strategy, the people said. Plug-in hybrids recharge when the vehicle isn't in use and switch to the gasoline engine when the batteries are drained.
GM is playing catch-up in ``green car'' technology. Toyota sold 235,000 hybrids worldwide last year, and said in June it plans to double its hybrid models to 14 by early in the next decade and sell 1 million of them annually as early as 2010. GM's first true hybrid, the Saturn VUE Greenline, went on sale this month.
``Toyota has a head start, and it's always a challenge to catch the guy in front,'' said Eric Fedewa, director of powertrain forecasts for consulting firm CSM Worldwide in Farmington Hills, Michigan. ``Toyota dedicated themselves to hybrids much earlier.''
Prius Boost
Demand for the Toyota's hybrids, including the Prius, has helped the Toyota City, Japan-based company boost U.S. sales 11 percent in the year through September. GM sales have dropped 11 percent.
Sherrie Childers Arb, a GM spokeswoman, said the company is exploring a broad range of environmental technologies. She declined to comment on specific plans.
Hybrid vehicles combine electric motors and gasoline engines to use less fuel. Regular hybrids such as the Prius use friction from braking and engine power to recharge the battery for the electric motor, which is used at start-up and lower speeds. The gasoline engine powers the vehicle at higher speeds.
Toyota and Honda Motor Co.'s hybrid vehicles led the U.S. government's list of fuel-efficient 2007 models, released this month. GM didn't have a model in the top 10; Toyota and Honda had seven combined.
`Major Shift'
Wagoner and Vice Chairman Bob Lutz this month toured GM's hybrid development center in Troy, Michigan, for the first time to let researchers know the company is making such technologies a priority, according to people familiar with the visit. In meetings, Wagoner, 53, has stressed the automaker is now fully committed to hybrid and other technologies, they said.
``This is a major shift for GM because in the past it had gone out of its way to criticize the financial viability of hybrids,'' said John Casesa, managing partner at Casesa Strategic Advisors in New York.
The initiative doesn't have a price tag yet, said one of the people. GM has cut $9 billion from its annual spending this year by limiting health-care benefits, firing white-collar employees and getting union workers to retire early and accept buyouts.
In addition to the Saturn VUE, GM plans 11 other hybrid models over the next few years, including full-size SUVs such as the Chevrolet Tahoe and pickups such as the GMC Sierra, both redesigned this year.
Ethanol Blends
Toyota, which is on its way to passing GM in global vehicle sales, is spending a record 920 billion yen ($7.9 billion) on research and development this year. GM spent $6.7 billion last year and hasn't released a 2006 figure.
The U.S. automaker has also said it plans to build 400,000 vehicles next year that use both regular gasoline and a fuel that is 85 percent ethanol and 15 percent gasoline. So far, there are fewer than 1,000 ethanol pumps available at 170,000 U.S. fueling stations, limiting sales of the models.
A decade ago, GM was focused on the EV-1, the first modern electric car. It abandoned the technology because the cars were expensive and needed frequent recharging.
``The biggest risk is that historically GM changes its priorities often,'' said analyst Casesa. ``GM will have to make some tough choices about the things it really wants.''
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