GM to halve vehicle platforms, build Cadillacs 'in volume' in China
Christina Rogers/ The Detroit News
General Motors Co.'s restructuring continues.
Two years out of bankruptcy, the Detroit-based automaker wants to further streamline how it designs and builds vehicles around the world. The effort, GM's top executives told some 200 Wall Street investors and financial analysts at GM's Warren Tech Center on Tuesday, will lead to industry-leading profit margins in the long run.
While it has shed jobs, brands and debt during bankruptcy, GM's executives admit the automaker continues to have an inefficient manufacturing network, weak supplier relations and too many variations in the types of engines and vehicle underpinnings it uses to build cars and trucks globally. .
In attempts to boost profitability, GM wants to cut the number of vehicle platforms by half over the next decade and consolidate the number of engines.
That will help get products to the market faster, and reduce duplicate engineering and design for cars sold across the globe, said Mary Barra, GM's product chief.
By 2018, she told the Wall Street analysts at the annual briefing, GM hopes to build 90 percent of its vehicles on 14 platforms — half the number now — and boost manufacturing efficiency by 40 percent. About one-third of its globally sold vehicles now share the same underpinnings.
Within the same timeframe, GM wants to cut the number of engine varieties by half.
"It's the course a lot of manufacturers are taking," said Michelle Krebs, a senior editor of Santa Monica-based Edmunds.com, an online automotive research and analysis site.
"Everyone is trying to get to greater economies of scale."
GM wants greater flexibility in its plants worldwide, so each factory can build more types of vehicles.
The automaker's profit margin still lags its rivals, company execs say.
J.P. Morgan analysts project GM will earn about 5 percent on its operations this year, versus the 10 percent that competitors Hyundai Motor Co. and BMW AG will make.
"We're doing OK, but not great," said GM's Chief Financial Officer Dan Ammann.
Ammann described GM's profit margins as only "middle of the pack" and said the company in the past wasted up to $1 billion a year by delaying or abandoning vehicle development programs when times got bad.
GM has since stabilized its development budgets for new cars and trucks.
The automaker is on better footing now. It exceeded Wall Street expectations last week when it reported a $2.5 billion second-quarter profit — its sixth consecutive quarter in the black since emerging from bankruptcy in 2009 — and turned a pre-tax and interest profit in all four global markets. But financial market turmoil is beginning to tamp down the industry's outlook for 2011; some analysts are trimming their sales forecasts.
GM CEO Dan Akerson reiterated company projections that the industry would sell 13 million to 13.5 million vehicles this year, although he added they could come in at the lower end of that range.
"There's a lot of turmoil in the business and turmoil means uncertainty, so we're a little unsure of these numbers," Akerson said.
Krebs, of Edmunds.com, agrees GM still has work to do.
"I got the distinct impression that this was a report card, and they're nowhere near to scoring an A+," she said.
The carmaker has big hopes for its high-volume Chevrolet brand and expects Chevy will account for 65 percent of GM's global sales by 2018. That's up from 61 percent last year.
Chevy soon will finish updates to its entire lineup.
The 2013 Malibu goes on sale early next year. A new full-size Impala is expected soon thereafter. And Chevrolet's new micro car, the Spark, goes on sale in the first-quarter 2011 in Europe, with launches in the United States and other markets to follow, Barra said.
Cadillac, which GM is pumping up as its second global brand, accounts for only 3 percent of its global sales — a figure the automaker expects to remain flat until 2016.
In the third quarter of 2012, GM plans to start manufacturing Cadillacs in China, where buyers are giving the brand a strong look. Almost as many people are willing to consider buying a Cadillac as a Mercedes, Audi or BMW in China, said GM marketing chief Joel Ewanick.
In Europe, historically a trouble spot for GM, the company hopes to take its German Adam Opel GmbB brand slightly upscale, to compete with Volkswagen AG, and differentiate it from Chevrolet in this regional market, Ewanick said.
After years of losing money, GM earned a $100 million pre-tax profit in Europe in the second-quarter 2011.
Akerson also added that building Chevrolets in Europe is on the company's strategic to-do list.
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