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Lutz outlines GM’s positive growth and profit problems


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Lutz outlines GM’s positive growth and profit problems

02/15/2010, 2:14 PMBY MARK KLEIS

While speaking at the NADA conference in Florida, GM’s vice chairman Bob Lutz explained details of the company’s growth plans, including GM’s confident stance that they would grow their market share this year regardless of Toyota’s troubles. But despite GM’s confidence in market share expansion, Lutz did say that the automaker will still fail to turn a profit on its hybrid models.

Many analysts have revised their annual projections for the North American market due to the recent onslaught of Toyota recalls and negative publicity. Previous annual forecasts kept the automaker on top of Ford, but not now those roles have been swapped – putting Toyota behind GM and Ford as the number three U.S. automaker in volume.

Lutz, told Reuters that he was confident in the automaker’s new models gaining market share in the U.S., regardless of whatever may be plaguing Toyota. Lutz said that he anticipates breaking 20 percent market share for the U.S. market share for 2010, and with January sales coming in at 20.9 percent, GM is at least off to a good start.

“If the competitor’s weakness at some point results in lower sales for them and better sales for everybody else, that’s something that obviously we’ll accept. But as far as we are concerned, it is not a factor. We’re not planning on that. We were going to gain share anyway,” said Lutz.

But despite Lutz’ confidence in GM’s ability to gain market share for 2010, Lutz did explain that it will still fail to turn a profit on hybrid vehicle sales. This news may raise a red flag to GM’s ability to make cost effective hybrid vehicles, especially given its recent announcement to utilize several sources of non-UAW labor in building hybrid components. Typically the higher cost of union labor can be attributed to low profit margins, but in the case of hybrid technology – at least for GM – it appears as if the design itself, or low volume may be the limiting factors.

The good news for GM in light of this realization is that these vehicles will help the automaker reach stringent new CAFE fleet-wide fuel efficiency numbers. Lutz says GM can make up the cost of selling hybrids through profit on its other models, and with its monthly sales of hybrids in January not breaking 500 units according to Edmunds, the losses may not be great enough to pose a risk to the automaker.

“GM will lose money on hybrids,” Lutz said. According to DOW Jones, Lutz was speaking at an industry event in Orlando, “We will continue to build them – they are required by (Corporate Average Fuel Economy regulations) – and the cost will be spread across other cars.”



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