GM to Reduce Costs by $1 Billion
General Motors Corp. plans to cut costs by $1 billion on revamped cars such as the Chevrolet Malibu by streamlining engineering and production, and may build more vehicles outside the U.S., Vice Chairman Bob Lutz said Tuesday.
The reductions will be from investment, material and manufacturing expenses, Lutz said. Starting Jan. 1, GM, the world’s largest automaker, will use a single engineering budget to develop all vehicles worldwide instead of four regional budgets that sometimes led to inferior designs, he said.
Resolving challenges such as healthcare spending and the bankruptcy of its largest supplier, Delphi Corp., may help determine the percentage of manufacturing and engineering jobs that GM will be able to maintain in the U.S., Lutz said.
GM is trimming expenses after three straight quarters of losses as rivals such as Toyota Motor Corp. take away U.S. market share.
“If economic conditions are such that it becomes economically unfeasible to produce vehicles inside the United States as opposed to importing them from somewhere else, you’d be foolish to keep building,” Lutz said during a speech in Detroit. “We don’t make that decision. The overall economic environment makes that decision.”
In coming weeks, GM expects to add a fourth automaker to its alliance that’s developing fuel-saving gasoline-electric hybrid power systems to catch up with hybrid leader Toyota, Lutz said. The group now includes GM, BMW and DaimlerChrysler. The new member won’t be a Japanese automaker, he said.
The cost savings Lutz discussed would be from a group of nine mid-size vehicles that GM plans to introduce starting in 2007. Those include Malibu, Opel Vectra and Saab 9-3, and eventually may reach 1 million vehicles a year in sales, said Alan Baum, an analyst at the Planning Edge, a market research firm in Birmingham, Mich.
GM shares rose 94 cents, or 3.7%, to $26.42. The stock gained after billionaire investor Kirk Kerkorian won U.S. antitrust clearance to raise his ownership stake in General Motors to as much as 9.9% and to seek a board seat. Lutz on Tuesday declined to comment about Kerkorian.
