How General Motors Plans to Muddle Through

A top executive discusses plunging sales, $4 gas, and talk of bankruptcy.

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It's been one lousy year for General Motors—and it still might get worse. For the first half of the year, the biggest U.S. automaker lost a whopping $15.5 billion. Sales are down more than 15 percent, with buyers fleeing the big trucks and SUVs that have been GM's mainstay. Analysts are even warning that GM could run short of cash in 2009 and are floating the dreaded B word—bankruptcy. I sat down recently with GM marketing chief Mark LaNeve and asked about the company's prospects. Excerpts: 

There's been a lot of bad news lately: plunging car sales, more restructurings, the huge dropoff in trucks and SUVs. Do you feel like GM has a handle on where it's going?

What we don't have a handle on is the industry, especially at the retail level. We're doing better than Ford or Chrysler in some segments, but the only manufacturer doing well year-over-year is Honda. So the whole question is where is the industry going? I'd like to think it's somewhere near the bottom. GM's market share in the United States has drifted down to about 21 percent. Do you think it will stay there? Are you prepared for it to go lower?

That's a good question. This big change we've seen in trucks has been a 120-day decline. It began after Hurricane Katrina [in 2005] but was very mild, then it took this big dip over the last 120 days. So we're working on lowering our costs and our manufacturing footprint at our current market share. We've got to get costs down so they're equivalent to a lower level of truck sales. What's your answer to all the armchair analysts who say GM has too many brands, that it needs to get rid of some of the weaker brands like Pontiac, Buick, and Saturn?

If we were to cut three or four brands, what would the benefit be? What would we really save? We actually run our business now like it's four brands, with Pontiac, GMC, and Buick as one brand. And we've filled the portfolio for all of our brands. So if we killed one of the brands, we'd lose a business. We'd save a little short-term marketing money, but not much. Plus, we know from Oldsmobile how much it costs to kill a brand. We look at the brands as assets, with four channels globally. Saturn is our way of distributing Opels from Europe in the United States. And in the last year, Saturn has had one of the best increases in sales in the industry, if you compare year-over-year sales for the same products. In China, Buick is our major brand.

All the talk lately of bankruptcy, and GM possibly running out of cash in 2009: Do you think the talk itself is harming GM?

It's never helpful. The dealers tend to get very anxious when they hear it, and I've heard very little from dealers. It tends to be a very incendiary issue, but I don't think it's a big issue out there right now. By the way, it's not just us. Look at the airlines, look at Starbucks closing hundreds of stores. Our industry has certainly been in a recession, but we're not the only ones.

When gas hit $3, consumers didn't really change their behavior that much. The threshold for change seemed to be about $3.50, and now with $4 gas, people are fleeing big vehicles for smaller ones. Do you think consumers are being rational?

The reaction to $4 gas has been more severe than I would have thought. We ran some numbers the other day, and the difference between driving a Silverado pickup with a V-8 engine and a Malibu or Camry with a 4-cylinder comes out to about $17 per week in extra fuel. That's not that much. What has scared people, I think, is that prices have gone higher as we're also having layoffs and the economy is getting worse. And you've got oil analysts saying oil is going to get to $200 per barrel. So suddenly fuel economy is top of mind. There have been a lot of "restructurings" at GM over the last several years. Are you done yet? Or should we expect more restructurings?

We've made a number of significant moves to take out cost, and I don't think we're going to be done for a long time. We've been doing this for four years, and we're going to keep doing it. We're trying to defend our great truck position, but we have to grow our car position, and the top line. Saturn is one of the brands you need to fix. Can you say whether the Saturn division is profitable?

What I can say is, it's a lot better than it's ever been. The Outlook, the Vue, the Aura have all been profitable. But, yeah, the brand has been profit-challenged. There have been a lot of low-end cars, and no trucks, which is where we've earned our money. Now, we're trying to make it more like VW, and let Chevy cover the low end of the market. How much strength is left in the SUV and truck segment?

We've got four really good truck brands: Chevrolet, GMC, Escalade, and Hummer. Hummer has the lowest share and the greatest chance to maximize its value outside of GM, which is why we've put it on the block. Other brands lack the brand image and the market position that we've got. Toyota introduced a much-improved Tundra last year, and we didn't lose one point of share on the Silverado. Now we have to do that with cars. Malibu sales are up 100 percent, but we still don't have the market position of Honda or Toyota. A customer can see every ad they want, but that's not as powerful as selling a car to their neighbors. We think the big pickup market is close to a floor. Pickups sales should grow along with a housing recovery and economic improvement. But we're not counting on truck-based SUVs coming back.

What kinds of things is GM thinking about to help improve fuel economy?

All kinds of things. We're looking at the possibility of a hybrid for every single model. They might not all happen, but we're looking at it. We're considering putting four-cylinder engines in cars we never would have thought of before. Like which ones?

I better not say. It's hard to predict where gas prices will go, but you still need to make assumptions for planning purposes. What assumptions is GM making about gas prices?

We need to get our mix conservative. So we've said, "Let's just plan on $4-per-gallon gas being here for good." There's no upside to planning for an optimistic viewpoint that gas prices are going to come down.