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BigPontiac

GM to Use Cost Savings to Fight Toyota Green Cars

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BigPontiac    28

GM to Use Cost Savings to Fight Toyota `Green' Cars, People Say

By Jeff Green

Oct. 27 (Bloomberg) -- 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.''

To contact the reporter on this story: Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net

Last Updated: October 27, 2006 00:12 EDT

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aaaantoine    4

If your power grid gets its energy from sources other than fossil fuels, you can very well take great pride in buying a plug-in hybrid.

Whether it will actually save you money depends on additional factors, however.

But the point is to move the dependance on foreign oil away from the automotive industry.

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Polish_Kris    0

If your power grid gets its energy from sources other than fossil fuels, you can very well take great pride in buying a plug-in hybrid.

Whether it will actually save you money depends on additional factors, however.

But the point is to move the dependance on foreign oil away from the automotive industry.

209354[/snapback]

Hehe, we in Canada are not worried about foreign oil, since we get allot from Fort Mcmurray, Alberta. But this makes no sense, the Hybrids which came from Japan were intended to reduce emissions, however, by plugging a hybrid into a socket is not reducing the emissions, because the power, and there will be lots of it drained from the grid, will be coming from a coal-fired power plant (ironic)

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Polish_Kris    0

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.

Full Article

209352[/snapback]

Bull$h!.

GM made it as difficult as possible for anyone to purchase the EV-1, because of the pressure from oil companies, and from management from within.

Don't believe me, go watch "who killed the electric car"

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aldw    4

Bull$h!.

GM made it as difficult as possible for anyone to purchase the EV-1, because of the pressure from oil companies, and from management from within.

Don't believe me, go watch "who killed the electric car"

209514[/snapback]

That isn't the most objective of pieces, by any means though.

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Northstar    11

Hehe, we in Canada are not worried about foreign oil, since we get allot from Fort Mcmurray, Alberta.  But this makes no sense, the Hybrids which came from Japan were intended to reduce emissions, however, by plugging a hybrid into a socket is not reducing the emissions, because the power, and there will be lots of it drained from the grid, will be coming from a coal-fired power plant (ironic)

209512[/snapback]

I believe that's why he said "if your power grid gets its energy from sources other than fossil fuels."

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thegriffon    5

That isn't the most objective of pieces, by any means though.

209517[/snapback]

You could not purchase the EV-1 at all, only lease it. Like Honda's FCX the main reason was the initial cost. Those who used them and wanted to keep them had no idea how much GM was subsidizing them. With not enough buyers to make it feasible takers it was no longer worth GM's effort to keep supporting them. This is like the story that the oil companies and GM shut down light rail in LA and other cities. Not true. What killed light rail was fixed capital and maintenance costs v. declining ridership. GM killed light rail by building cheap and economical buses which allowed more flexible operation—equipment and routes could easily be switched to other routes to match demand—just as the electric utilites which had previously owned and subsidized trolleys were forced to divest operations after an Enron-like stock scandal. The conspiracy was to keep other bus manufacturers out of the business, not to shut down rail and force people to buy cars and petrol. GM got out of the bus business long before they stopped supplying commuter rail equipment. Even today GM's former EMD business is the only supplier of powertrains for diesel-electric commuter service in the US (most also built on EMD frames and trucks as well), and a major supplier in Europe. Rail equipment is still far more expensive than buses, but is expanding due to increased traffic and population densities, and the lower cost of rail v expanded freeways, despite the much heavier federal subsidy of highway construction from fuel taxes.

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Cadillacfan    0

Bull$h!.

GM made it as difficult as possible for anyone to purchase the EV-1, because of the pressure from oil companies, and from management from within.

Don't believe me, go watch "who killed the electric car"

209514[/snapback]

Don't believe everything you see. That's just one movie. There's plenty of other sources out there that can contest the views from the film. I'm not saying I believe them, in fact, I do believe the oil companies had something to do with it. Though, I'm not going to base what I believe on one documentary. You shouldn't either.

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Dragon    0

If your power grid gets its energy from sources other than fossil fuels, you can very well take great pride in buying a plug-in hybrid.

Whether it will actually save you money depends on additional factors, however.

But the point is to move the dependance on foreign oil away from the automotive industry.

209354[/snapback]

unfortunately, like a lot of our resources, we have to sell it to other people to refine it, then they sell it back.

here in ontario, it makes sense since we have a bunch of nuclear plants

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CARBIZ    1

How would the oil companies be able to bring pressure to bare on GM? At the time of the EV-1, GM was bigger than the oil companies. Don't forget: for many, many years GM was the largest company in the world by sales and revenue. Only recently have the oil companies become bigger by those markers.

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