GM to Come Out of Restructuring 'Smaller, Smarter'

Company predits that European automotive industry could see "forced" consolidation should the current recession deepen

General Motors will build "smaller, smarter and more fuel efficient" cars and trucks, chief executive Rick Wagoner said at the North American International Auto Show on Jan. 11.

His announcement came via a massive video screen with the unveiling of GM's new lineup for 2009 and future offerings, including the Chevrolet Volt, its first all-electric vehicle. Dozens of GM employees brandished placards that read "40 MPG" (miles per gallon), "Here to stay," and "We're electric."

"GM is not the same company that it used to be," Wagoner said, recognizing the calamity in U.S. auto sector caused by the financial crisis and a global recession. "We are committed to the development of alternative energy" and better fuel efficiency," he said. "We will ... get through this," he added. GM "has the products to enter into the next decades."

GM said said that the European automotive industry could see "forced" consolidation should the current recession deepen and drag on. "Whenever we talk about consolidation we have the feeling that something has to happen," Carl-Peter Foster said .

GM expects European auto sales to fall to 18 to 19 million vehicles in 2009 from 23 to 24 million in 2008, Foster said. "We believe we may have reached a bottom (but) we don't know," he said.

GM plans to cut its European production by a few tens of thousands of vehicles less than its current demand forecast and expects to reach a deal with its German union next week.

Suppliers have already begun to feel the pinch after automakers slashed production in the wake of a sharp drop off in sales in the second half of last year. "It's definitely not business as usual because most suppliers have been or will come into a difficult situation and very soon we will need a debate generally in Europe on how we support industry," Foster said.

The auto industry will likely be targeted in a 100 billion euro stimulus plan currently being discussed in Germany, Foster said, but automakers will also have to step in. Each supplier will be dealt with in a case-by-case basis and typically, the manufacturer with the highest share in the business "takes the lead and negotiates a solution."

It is possible that GM's Saab brand could be part of the industry-wide consolidation, Foster said, adding that GM has been approached by one automaker interested in buying the Swedish mark.

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