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GM stands by fuel-efficient small cars
From the Financial Times of Sun, 21 Dec 2014 18:39:15 GMT

General Motors remains committed to improving its small, fuel-efficient vehicle line-up even though the recent oil price slump has pushed US consumers towards bigger vehicles, the company’s chief financial officer has said.

It also remained a “very, very important” part of the strategy for GM — the US’s biggest carmaker by sales — to pursue “electrification” of vehicles, the term for everything from hybrid vehicles to pure electric, according to Chuck Stevens.

Mr Stevens was speaking after car sales figures for recent months showed the big drop in fuel prices had revived sales of many big sports utility vehicles and pick-up trucks, including some of the largest, in the US.

The trend is good for GM, which makes higher profit margins on SUVs and pick-ups.

But Mr Stevens insisted that the company was determined to remain competitive in small and medium-sized cars, both because they were important to its sales outside the US and because oil prices could rebound again.

Mr Stevens said that, while oil prices could be volatile, the “long-term dynamic” was for them to be about $100 or more a barrel so the company was not changing its long-term plans.

Because US gasoline is more lightly taxed than in other industrialised countries, consumers see changes in the underlying oil price more clearly and starkly in retail fuel prices.

“If anything, we’re looking to improve and enhance our full portfolio of products, from the small vehicles all the way through to luxury vehicles.”

The company had suffered in the past through relying excessively on sales of full-size SUVs and pick-up trucks in the US, Mr Stevens said.

Many observers believe that that reliance helped to push GM into its government-managed bankruptcy in 2009 because rising fuel prices pushed consumers away from big vehicles towards non-US manufacturers’ smaller cars.

“Our goal is to improve quality of earnings, increase our footprint and have less reliance on full-size pick-ups and SUVs,” Mr Stevens said.

Large pick-ups and SUVs were not a significant part of the car market in many parts of the world outside the US, he added.

“You must make money on small and mid-sized vehicles to make money in South America, to make money in Europe, to make money in Asia,” Mr Stevens said. “That will continue to be one of our primary strategic focus areas.”

On electrification, Mr Stevens said electric and hybrid vehicles continued to be a priority.

“This is a very, very important part of our strategy to meet better fuel economy and greenhouse gas regulations,” he said. “I think we will even be being more aggressive on many fronts from an electrification standpoint.”

Such advanced vehicles were important partly, Mr Stevens said, because of US government demands that carmakers nearly double their vehicles’ average fuel efficiency — from 27.5 miles per gallon in 2012 to 54.5mpg in 2025.

“It will be really good if a portion of the portfolio is well ahead of that,” Mr Stevens said of the company’s strategy to meet the target.

However, GM had no immediate plans to make the same kind of signature statement about its efforts to improve fuel efficiency that Ford has by launching a new, aluminium-bodied version of its F150 pick-up truck, the US’s best-selling vehicle.

The change has cut the vehicle’s weight by 13 per cent compared with the previous model and reduced fuel consumption by between 5 and 29 per cent, depending on the version involved.

“Our approach is to use a number of different strategies — mixed materials, some premium, some continuing with traditional steel — in order to accomplish the improvements that we have to make in order to meet the regulations,” Mr Stevens said.

While GM’s approach would use some aluminium, the company had patented processes to weld the material, so that it could continue using traditional bodyshop approaches.

GM’s Dearborn Truck Plant, which is building the F150, has had to convert to riveting and screwing together most body parts.

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