Coming from GM: Cars That Can

The struggling auto maker is finally listening to its designers rather than the bean counters -- and the result is a hot new lineup

By David Welch

The top execs at General Motors are dealing with a multitude of problems these days, from out-of-control health-care costs to too many factories. New models such as the Pontiac G6 and Buick LaCrosse sedans haven't exactly lit up the market with excitement. Market share is down three points, to 25.5%, since 2001.

Many pundits have questioned whether GM's (GM ) new-car czar, Vice-Chairman Robert Lutz, who is 73, still has the magic he worked at Chrysler in the 1990s. They needn't worry too much. GM has been shepherding analysts and the automotive press through its design works for the past two weeks to give them a sneak preview of some of the new cars that are coming between now and 2008. I've seen these future cars -- and Lutz still has the touch.

From the next generation of the Cadillac CTS sports sedan to the latest hulking Chevrolet Tahoe and Cadillac Escalade SUVs, GM has unveiled 18 new models for a look-see that are vastly better than anything it's selling now. GM won't allow viewers like me to give out many details, but suffice to say that the newcomers look strong.


  The new Cadillacs are especially stunning. The CTS still has the brash, edgy look of today's model, but with some cues from the Cadillac Sixteen concept car that was the rage of the auto-show circuit last year.

The new full-size SUVs, due out in early 2006, aren't very boldly styled, but GM promises a smoother ride and big V-8 engines that get 20 miles per gallon. GM also has a family of crossover SUVs coming starting in 2007. The Buick crossover looks sharp and bears a family resemblance to the Centieme concept from a year ago.

Lutz has been pushing GM to raise the interiors of its cars to the levels of craftsmanship and artistry that Toyota (TM ) and Volkswagen's Audi division have mastered. Most of the concept cars were decked out with finely stitched seats, richer materials on the dashboards, and high-tech gauges on the instrument panel. I'm betting the confines of GM's future cars should be competitive with, and in many cases better than, the current competition.


  Does this mean GM's current woes will be short-lived (see BW Online, 6/9/05, "The Long, Hard Road Facing GM")? Nope. The company is spending upwards of $5,000 a vehicle on incentives, says CNW Marketing Research. Take away the rebates, and GM has an industry-low average transaction price of $20,659 a vehicle -- almost $6,000 a car less than Toyota, according to Harbour & Associates, a Detroit research firm. So the new cars will have to catch enough attention to sell in greater numbers, and at fatter prices.

GM's latest offerings will likely have to leapfrog their competitors when they hit showrooms for the carmaker to post major gains -- and that won't be easy. "GM has some impressive product coming," says Art Spinella, president of CNW. "But I've seen some future products at Toyota and other companies, and I'm equally impressed."

Plus, with 89 models in its lineup, GM still has scores of vehicles that need a makeover that's as thorough as the 18 cars and trucks the company showed off this week. Says one GM designer: "There isn't enough money or people to develop enough vehicles for every brand."


  One GM senior product-development executive says the company is spending much more money on better materials and styling for the new cars than ever before -- so much so that GM is having a hard time meeting the profit targets that management wants from new-vehicle programs.

That's actually a good thing. Product is everything in the car business. For a long time, GM's bean counters and manufacturing bosses have restricted the stylists and engineers in what they can do. But if these cars come to market as shown, I think GM will take a big step on the long road to recovery.

Welch is BusinessWeek's Detroit bureau chief

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