Cruze to roll on time, GM says

Photo

Chevrolet unveiled its new Cruze to the press Wednesday, September 24, 2008 at the Paris Auto Show. Expected to get close to 40 miles-per-gallon, the Cruze hits the European market next March. Production for U.S. sales will begin in 2010.

By Don Shilling

A magazine and analyst speculate production will be delayed one year.

Questions have surfaced about whether General Motors has the cash to launch the Chevrolet Cruze from Lordstown on schedule.

An industry analyst and a business publication said it appears likely that the new small car will debut in 2011, not the summer of 2010 as planned.

General Motors dismissed reports of a delay for the Cruze.

“The timing is still mid-2010 as we announced,” said Chris Lee, a company spokesman.

John Wolkonowicz. an analyst with IHS Global Insight in Massachusetts, said he is highly certain about the accuracy of information he has received on the Cruze. He expects GM to delay the launch in Lordstown for six months, with the potential of another delay.

Business Week reported Thursday that its sources indicated the Cruze will be delayed for almost a year.

No one is questioning the need for the Cruze, which the industry views as a key product in turning GM into a profitable company.

But if GM pushes too fast on its new products, it may run out of cash and have to file for bankruptcy or sell the company, Wolkonowicz said.

His company’s forecast says the auto industry isn’t going to rebound until the second half of 2010.

“It’s like jumping over a puddle,” Wolkonowicz said. “Once you get to the other side, you’re fine. But you don’t want to fall in.”

He said GM has about $20 billion in cash but is losing $1 billion a month. It needs reserves of about $13 billion or $14 billion to fund its daily operations, so it has only about six months to either raise more money or cut costs, he said.

GM proposes to take over Chrysler’s operations so it could obtain Chrysler’s cash reserves, he said.

GM also is working on cutting costs. The automaker said Thursday that it was temporarily suspending contributions to 401(k) contributions, tuition reimbursement and adoption assistance for salaried workers. Newspapers also reported that GM plans to cut its salaried work force.

Business Week said GM is scrutinizing its electric bills, looking for energy savings. Also, some Saturday production in Lordstown has been eliminated, as has unscheduled overtime at the plant.

“Right now, GM is doing everything that it possibly can do to avoid spending money,” Wolkonowicz said.

Delaying the Cruze launch would allow GM to postpone investments in the Lordstown complex and work on a new engine for the car, he said. A new turbocharged engine for the Cruze is to be built in Michigan.

Wolkonowicz said he thinks the European launch of the Cruze could continue next spring as planned. The European version will use an engine that already has been developed, he said.

GM could argue that the Chevrolet Cobalt, which is now made in Lordstown, is selling well in the U.S. so it can move more slowly on the Cruze, he said. The Cruze is to be made at several locations around the world.

Business Week reported that GM may also push back the launch of the next-generation Chevrolet Malibu by six months into 2013.

Wolkonowicz said he thinks GM will do what’s necessary to avoid a bankruptcy filing. He added, however, that bankruptcy could make GM a stronger company by allowing it to shed some brands, dealers and union contracts.

In the end, the future of GM and other automakers depends on the length of the current economic crisis, he said.

Dealer showrooms are now quiet because consumers are worried about their jobs and declining retirement accounts, he said.

“Consumer sentiment is pretty low. Unless a consumer really needs a car, he isn’t shopping,” Wolkonowicz said.

shilling@vindy.com