General Motors Corp. is reviewing its product range following radical shifts in demand in the U.S. auto market and may even bring a minicar to the United States that was originally designed for customers in Asia and Latin America.
GM showed a concept version of the Chevrolet Beat, an 11 1/2 -foot, two-door hatchback, at the New York auto show last year. Designed at GM's South Korean facilities, the Beat is smaller than the Chevrolet Aveo subcompact, which was also designed in South Korea and is the smallest car in GM's U.S. lineup.
“Everything is under review,” said GM spokesman Dee Allen. While the automaker's executives continually review their lineup, this examination might lead to bigger changes, he said. “Obviously, the market has been changing rather rapidly.”
GM's sales have tumbled 16.3 percent this year, more than the market's overall 10.1 percent decline, as soaring gas prices have put customers off from buying large vehicles.
The automaker has already taken major steps to adjust: It has announced big cuts in truck production and permanent plant closures; it has said it may sell its Hummer brand; and it plans to bring more fuel-efficient vehicles to the market.
Mark LaNeve, GM's vice president for sales in North America, said earlier this week that the automaker would launch 13 midsize or smaller cars and crossovers in the next 18 months. The automaker is producing fuel-efficient gas-electric hybrids, too, and it is working on ultra-clean hydrogen-powered cars for the future.
GM already was reviewing its lineup and seeking ways to produce more fuel-efficient cars “because of legislation with a 35-mile-per-gallon requirement,” Allen said. “That's certainly something that impacts our portfolio planning.”
But GM also is under pressure to conserve cash, with Wall Street analysts expressing concerns that the U.S. automaker might face a liquidity crisis next year.
GM's shares fell below $10 Wednesday, to their lowest level in more than 50 years, after brokerage firm Merrill Lynch voiced the possibility of bankruptcy. They rebounded slightly Thursday, closing up 1.4 percent at $10.12.
In a research note Thursday, J.P. Morgan analyst Himanshu Patel said GM was burning through cash and may need to raise capital later this year. But he described several possible sources of financing for the company, as it struggles through a difficult stretch.
“GM has large, profitable, unencumbered foreign operations that could be pledged for potentially $8 billion to $11 billion in secured loans,” he said.
It also could seek to push back the timing for its 2010 contribution to the Voluntary Employees' Beneficiary Association, said Patel, who has an “overweight” rating on GM stock although he considers it “high risk.” The VEBA is a trust being funded by GM that will be managed by the United Auto Workers to cover retiree health care.
While GM inevitably needs to adapt its model range to shifting demand, the adjustment is a painful one. The automaker has traditionally made money selling big trucks and SUVs — vehicles that are falling out of favor now that gas prices are above $4 a gallon.
In its effort to offer small cars in the United States and Europe without losing money on the business, GM has tapped the resources of its GM Daewoo Auto & Technology operations in South Korea.
GM Daewoo, acquired in 2001, developed the Aveo and designed the smaller Beat, with mileage estimated at 40 miles per gallon. If GM brought the Beat to the U.S. market, it would be one of the smallest cars on the road, though larger than Daimler AG's 9-foot, boxy Smart two-seater.
Models classified as subcompacts or smaller account for 6 percent of total U.S. auto sales — compared with 27 percent of the European market.
But auto analysts say that segment could grow if more models were available.
GM's considerations about bringing the Beat to the U.S. market don't “mean that it's coming tomorrow,” Allen said. “There'd have to be work done on it” to fulfill U.S. safety and other standards.
“The issue of offset crash and rear bumpers is really the problem with this vehicle,” said Jim Hall, principal of 2953 Analytics, an automotive consulting firm in Birmingham.
“That's one of the projects that they've got the former truck engineers working on right now.”
