GM's next tests may be toughest yet

These challenges coincide with a push by Detroit's Big Three to obtain $25 billion in government-backed loans to help embrace new, cleaner technologies and to meet new federal fuel economy requirements. Meanwhile, GM and its domestic rivals are reeling from high gas prices and a consumer shift away from once-profitable trucks and sport utility vehicles to cars and crossovers. 'The biggest worry is the tendency for politicians to want to come up with quote 'solutions,' which are ill-advised and show a poor understanding of the problem,' said Bob Lutz, the automaker's vice chairman. 'And ultimately risk -- if not killing -- then seriously wounding' the golden goose. The golden goose has been rocked by challenges before. In the 1930s, GM endured an infamous sit-down strike in Flint, which led to the automaker signing its first contract with the United Auto Workers. A decade ago, a 54-day walkout at two Flint plants cost the automaker $2.83 billion in lost profits. GM's vehicles also have withstood challenges, including a campaign against the Chevrolet Corvair by safety advocate Ralph Nader in the 1960s. Today's challenges come amid the worst sales market since 1993. GM's sales fell 20.3 percent in August and are down 18.3 percent for the year. Coping with a $15.5 billion second-quarter loss, GM is looking to cut expenses by $10 billion by 2009 and raise another $5 billion through asset sales and borrowing. The company has hired an investment bank to gauge interest in the sale of its Hummer brand. In July, GM cut white-collar jobs, suspended its dividend and cut health care coverage for Medicare-eligible salaried retirees. Moving into the second century, the automaker must speed production of more fuel-efficient models, make profits on small cars and rein incentive spending, analysts said. GM is counting on the Chevrolet Volt, an extended-range electric vehicle, to meet consumer demand for higher fuel economy. The Volt, which is expected to be unveiled today during GM's centennial celebration, could be available in 2010. But the automaker needs to start producing these vehicles, said Jessica Caldwell, an industry analyst for Edmunds.com. GM, for instance, doesn't plan to start production of the Volt -- photos of a production version showed up on the Web last week -- until late 2010. 'They needed (the Volt) last week or two months ago,' she said. 'There's a lot of talk and hasn't been a lot of action.' But GM noted its 2009 lineup includes 18 models that get 30 miles per gallon on the highway. The company also recently announced plans for the Chevrolet Cruze, a compact that will get about 45 mpg and will go into production in April 2010. But smaller, fuel-efficient vehicles alone are not enough. GM must find a way to reap profits from small cars like the Cruze, said Aaron Bragman, an auto analyst at Global Insight Inc. 'You will see that segment start to feel more expensive, more substantial, as more and more people migrate to that segment,' Bragman said. During last month's unveiling of GM's 2009 lineup, Lutz said there are signs that there won't be a ceiling on making profits on smaller cars and crossovers. He pointed to the BMW Mini Cooper as an example. 'That is an example of a small car that does not carry a small and cheap stigma,' he said.

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