GM Gets Daring--Big Time :Forbes.com

Guest Editorial By Jerry Flint 10.07.02

General Motors has finally realized that its conservatism of the past few decades is not the way to sell cars or gain market share. The way to get rid of a dowdy image is with exciting cars and trucks, and that's what the General has planned.

For over a year I've been talking about the Chevy SSR, a half-pickup with a Corvette engine, but this is a low-volume job, about $40,000, and will finally be here this fall. Due next fall is the GMC Envoy XUV sport utility, in which the rear half of the roof rolls up in order to fit tall objects. If you want to move a potted palm tree, this is the vehicle.

Next summer Cadillac gets its XLR, a two-seat, $75,000 roadster built off the same platform as the next-generation Corvette. A few months later comes the Pontiac GTO rear-drive coupe, with a 350-horsepower V-8. I guess this Australian import will sticker for $35,000 to $40,000. The sales goal: 20,000 a year.

A year or so after the fall 2003 arrival of the next edition of the Chevy Malibu--which is not a specialty car but a volume vehicle--a metal-roofed Malibu convertible will come to market. I hear that the Malibu, which will have a European look, will also have a version with unique seating arrangements.

The next-generation Pontiac Grand Am arrives in the fall of 2004, as a 2005 model. The Pontiac Grand Am also gets a metal-roofed convertible. The Pontiac Solstice roadster, which created a sensation at the last Detroit auto show, has been given the green light but is still a couple of years off.

Specialty or "halo cars" can excite customers and lure them into showrooms. But GM also seems to be moving hard on its volume products. Pontiac has just released photos of its 2004 Grand Prix. Buick, Chevrolet and Cadillac also have one or more new sedans in the works.

GM hasn't forgotten trucks. The 2004 Chevy Colorado, arriving next fall, will replace the small S-10 pickup. The Colorado will have a five-cylinder version of GM's powerful new inline six-cylinder engine. The Cadillac SRX--a crossover SUV based on the Cadillac CTS automobile platform--comes next spring. I figure that the SRX will have a price of $50,000 and be another Cadillac success story.

In short, forget the 1980s and 1990s and GM's bungled halo cars like the Pontiac Fiero, Buick Reatta and Cadillac Allante.

Will the newer, better vehicles bring back the customers? It's no secret that car buyers have been drifting to Japanese, German and Korean models. But GM is pumping out so many new vehicles that at least a few of them are bound to be winners. At the very least, GM will make things interesting.

Now for something equally interesting: the magic of numbers. Yell "seven" at the dice table and people get excited. At the ballpark, "60" is a magic number even though hitters have gone past 60 home runs. And in cars, "50 miles per gallon" remains a lofty goal--one that has been reached in the U.S. by only a handful of hybrid cars.

Through August, Honda sold 8,000 of its new Civic Hybrid, which came out a few months ago; Toyota moved 13,000 of its older Prius hybrids. Does a car like the newest Civic make economic sense? Here's an update of an argument I've been making for a long time:

If you drive 12,000 miles a year and get an average 50 mpg with the hybrid Civic and 35 mpg with the conventional 1.7-liter Civic, you'll burn 240 gallons of gas with the hybrid and 343 with the traditional car.

So the hybrid will save 103 gallons of fuel a year. Figure on $1.50 a gallon for regular gas, and the annual savings comes to $155. The difference in sticker price between the two vehicles is $2,490. You probably can get a good discount on the regular Civic but not on the hybrid. And the $2,000 tax deduction on the hybrid, which might save you $500 on your income tax, does little to close the price gap between the two vehicles.

I don't know if the hybrid will have troubles once it is out of warranty, but let's give Honda the benefit of the doubt. The replacement of the super battery on the hybrid will be expensive, but then ordinary cars have problems, too.

Of course, some people have reasons for buying hybrid cars other than saving $155 a year on gas.

Drew Winter, the editor of Ward's Auto World, an influential car magazine, tells me, "There is a growing subculture of people that are really into getting high mileage. Problem is, you and I both know there will never be that many of these folks unless gas goes over $3 a gallon."

Even at $3 a gallon, the math does not favor hybrids. But 50 is a magic number, and some people want it.

That's what counts in a free market.