GM Will Spend $2 Billion to Spruce Up Small Cars

DETROIT February 11, 2003; Dow Joness reports that Tuesday's Wall Street Journal reported that GM is counting on smaller cars to help its bottom line.

After years of raking in fat profits on big pickups and sport-utility vehicles, General Motors Corp. is spending nearly $2 billion to overhaul the other end of its lineup, bringing out a string of new or reconfigured compact cars and trucks over the next few years. GM believes that the smartly designed new models will boost its market share among cash-strapped younger buyers.

Outclassed by European and Japanese competitors and underpriced by South Korean rivals, GM's current "entry level" lineup in the U.S. has generated losses of as much as $1 billion a year in recent years.

GM also needs the small vehicles because they usually get good gas mileage, offsetting in government fuel-economy calculations the more-profitable but thirstier large cars and trucks GM sells. These calculations set standards for the average mileage of a company's entire fleet.

Much of GM's investment is going to upgrade its dated lineup of small cars and pickups with more-stylish vehicles offering zippier engines, better rides and classier interiors that GM hopes will command higher prices. To help take some of the pricing pressure off its core models, GM plans to sell low-price cars from its South Korean venture, which bought much of the bankrupt Daewoo Motor Co., in the U.S. GM will sell one car, a subcompact, under its Chevrolet brand, while two other Daewoo-built cars will turn up in North American showrooms of Suzuki Motor Corp., GM's Japanese affiliate.