Plagued by plummeting U.S. sales and $4-a-gallon gasoline, General Motors
Corp. (GM) may
sell its four-foot-tall Chevrolet Beat in U.S. markets, sources told
Bloomberg News.
The subcompact three-door hatchback was unveiled at last year’s New York
International Car Show, though GM said it would be produced overseas and
wouldn’t immediately be sold in the United States.
However, both U.S. production and sales are possible, the sources said.
U.S. government fuel efficiency mandates are also playing a role. By 2020,
automakers are required to reduce fuel use by 40%.
GM at least knows drivers around the world are excited about the Beat
compared to two other prototypes it unveiled. Votes of an online poll on GM’s
Web site overwhelmingly preferred the Beat, which received 1.8 million votes
worldwide.
"The people have spoken. The vote count tripled all previous GM online
consumer surveys, telling us the Beat resonated with customers all around the
world," said Ed Peper, Chevrolet general manager. "Chevrolet was
overwhelmed by the positive reaction to each of the ‘triplets,’ but the Beat was
the clear winner."
Though not a hybrid, the Beat can get as much as 40 miles a gallon. GM -
whose autoline is heavy on trucks, SUVs, and the Hummer - hopes that number will
sing to U.S. drivers, who are hampered by record gasoline costs.
"This is a very big change for GM," John Wolkonowicz, an analyst at Global Insight
Inc. in Lexington, Mass., told Bloomberg. "They
have no choice. There’s never been as rapid a shift in consumer demand in the
history of the auto industry."
Demand isn’t just shifting away from gas-guzzlers, but U.S. carmakers in
general.
For the past 76 years, GM has been the world’s biggest automaker. But Toyota
Motor Corp. (ADR: TM) almost stole that title, selling only about 3,000 cars
(9.366 million total) less than GM’s 9.369 million.
Though the Beat would be a pioneer in the U.S. market, it’s up against an
army of established subcompacts overseas. On top of that, Tata Motor Ltd.’s
(ADR: TTM) forthcoming $2,500 Nano is generating huge buzz.
The trend is playing out tragically for GM, as Chairman and Chief Executive
Rick Wagoner announced in June that the company will close four truck and SUV plants. The maneuver will
cut its North American truck capacity by 700,000 vehicles and is expected to
save the company $1 billion.
"From the start of our North American turnaround plan in 2005, I’ve said that
our goal is not just to return GM to profitability, but to structure GM globally
for sustained profitability and growth," Wagoner said in a statement. "Since the
first of this year, however, U.S. economic and market conditions have become
significantly more difficult. Higher gasoline prices are changing consumer
behavior, and they are significantly affecting the U.S. auto industry sales
mix."
As far as the company’s Hummer brand is concerned, Wagoner said GM is
"considering all options from a complete revamp to a partial or complete sale of
the brand."
GM Stock: Bargain or Junk?
Bloomberg cleverly pointed out that GM’s current
market value is smaller than that of Mattel, Inc. (MAT),
maker of Matchbox cars.
Specifically (and fittingly to such comparison), GM is only one-tenth the
size of what it was in 2000.
Worse for investors, GM’s stock price is trading at its lowest price since 1954,
Reuters reported.
Year-to-date, GM has been the worst performing stock on the Dow Jones
Industrial Average Index, falling nearly 60%.
The damage has actually lifted the value of its 25-cent quarterly dividend,
but that’s about the extent of the good news.
Citigroup Inc. (C) analyst Itay Michaeli said last week in an investor’s note
that he doesn’t think GM or rival Ford Motor Co.’s (F) stocks
are standing on solid enough ground to pivot for a rebound.
"We remain cautious on the shares of Ford and General Motors in spite of
recent share price declines," Michaeli said, Reuters
reported.
