The Cruze, a compact sedan set to go on sale in Europe next March and in the U.S. in 2010, will be Chevrolet’s first global small car. With its sleek, arched roofline and high-tech interior, “it’s one of the global Chevrolet products that are the future of where this brand is going to be,” says Wayne Brannon, Chevy’s European chief.

GM has been trying for several years to establish Chevrolet as its main global brand. Unlike rivals Toyota (TM) and Honda (HMC), GM has a balkanized brand portfolio—with Chevy dominant in the U.S., Opel in Europe, and Buick in China. After taking over South Korea’s Daewoo in 2002, GM rebranded some of its models and now sells them under the Chevrolet name in Asia and Europe.
A Crucial Moment

But the Cruze is a brand-new design—and it comes at a critical time. GM needs foreign growth to offset a deep U.S. auto sales slump (BusinessWeek.com, 10/1/08). At the same time, Chevy is counting on the Cruze to fight its way back into the compact car market in the U.S. (BusinessWeek.com, 9/15/08), which has now become vitally important as customers flee gas-guzzling SUVs and trucks. Though the company hasn’t yet disclosed fuel-efficiency figures for the Cruze, it has promised they’ll be “north of 40 mpg.” (BusinessWeek.com, 9/15/08).

European motorists will be a tough audience for the Cruze. Fuel economy of 40-plus miles per gallon (under 5.9 liters/100 km) may impress Americans, but it’s ho-hum to Europeans who drive Volkswagen (VOWG.DE), Ford (F), and even Mercedes (DAI) models getting 50 to 60 mpg. Fuel efficiency is crucial in the Old World, with gas costing $8 a gallon and up in most countries.

And while the Cruze’s design is a big leap forward from Chevy’s existing Cobalt compact, it won’t stand out in the crowded field of stylish European models. Another problem: Most Western Europeans prefer hatchbacks, while the Cruze is a 4-door sedan.

“It will do moderately well, but it’s unlikely to change Chevrolet’s fortunes,” says Paul Newton, an auto analyst for consultancy Global Insight in London. He predicts only 12,000 Cruzes will be sold in Western Europe in 2009 and 30,000 in 2010—barely a drop in the region’s 14.2 million total annual auto sales.
Eastern Strategy

For now, Chevy is pinning its hopes for the Cruze mainly on the Continent’s eastern rim, in countries such as Russia, Poland, Hungary, Romania, and Turkey. Brannon says the Cruze will be positioned as a “good value for money” vehicle, with marketing emphasis on the brand’s “iconic” American roots. Chevrolet hasn’t announced pricing for the Cruze, though it has said the U.S. version will cost more than the Cobalt, which sells for $15,000 to $17,000.

Chevy has reasons for optimism in Eastern Europe. Its Polish-made Aveo, a Daewoo-developed subcompact, is selling well in the region, and Eastern European drivers are more partial to four-door sedans than their counterparts in the West.

Already, strong sales in Russia and Ukraine helped Chevy rack up an impressive 23% sales growth Europewide during the first half of this year, after a 26% rise in 2007. Still, Chevy’s market share in Europe as a whole is barely above 2%. Global Insight reckons Cruze sales in Eastern Europe will be no more than 50,000 in 2010. Western European automakers, including VW with its Skoda brand, already have built strong customer bases in the region, Newton says.

The European version of the Cruze will have a 1.6-liter or 1.8-liter gasoline engine, or a 2-liter diesel engine. It will be manufactured initially in South Korea, although GM plans to open an assembly line in St. Petersburg, Russia. The U.S. version will be built in Lordstown, Ohio.

Will the Cruze be a game-changer? Perhaps not in Europe. But if it can post respectable sales in this fiercely competitive market, it could give a big boost to Chevy’s global brand aspirations.

With David Welch in Detroit
General Motors Corp. displayed the most important car in its global turnaround plan Wednesday night on the eve of the Paris motor show.
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The Chevrolet Cruze, a roomy and stylish compact sedan, will be built on at least four continents and become the face of GM’s effort to transform Chevrolet from a parochial American brand into a global powerhouse like Toyota, Ford and Volkswagen.

“The Cruze is much more important to GM than the Volt,” the celebrated extended-range electric car Chevrolet will launch in 2010, said Stephanie Brinley of consultant AutoPacific. While the revolutionary Volt has generated reams of positive publicity for GM, it will initially sell in small numbers and almost certainly lose money.

Cruze sales should hit hundreds of thousands a year early in the next decade and generate cash. Lots of it, GM hopes.

“Chevrolet is GM’s biggest brand and the third-largest automotive brand in the world,” said GM President and Chief Operating Officer Fritz Henderson. “It’s extraordinarily efficient to have one key brand you throw resources to.”

Using global resources — and assuming high volumes from global sales — allowed GM to give the Cruze a roomy interior and sophisticated features that are a cut above its previous U.S. small cars.

Chevrolet has yet to reveal U.S. prices for the Cruze, which is to go on sale in America in spring 2010, a year after it hits Europe. However, executives expect the car to end GM’s decades-long habit of losing money on most compact cars it sells in the United States.

The Cruze will replace the Cobalt in Chevrolet’s lineup. While GM has sold the Cobalt largely on the strength of heavy incentives, the company expects the Cruze to sell for about the same price as popular compacts like the Honda Civic and Toyota Corolla, said Chevrolet general manager Ed Peper.

“The Cruze has a shot at being Chevrolet’s best-selling car in the United States,” Peper said. Unless the bottom falls out of the market, that suggests Chevrolet expects to sell more than 300,000 Cruzes annually in the United States. Chevrolet sold 200,620 Cobalts last year.

“It’s a real step up in looks and content,” said Rebecca Lindland of analyst Global Insight. “This is a small car they can get more money for.”

In addition to stylish lines reminiscent of the hot-selling Chevrolet Malibu, the Cruze will offer more interior space and better fuel economy than any other compact car sold in America, Peper said. U.S. versions of the Cruze, which will come with a six-speed automatic transmission and a high-tech 1.4-liter four-cylinder engine, are expected to top 40 m.p.g. on the highway.

“The Cruze is really important in North America,” said Jim Hall, managing director of 2953 Analytics, a Birmingham forecasting firm. “Chevrolet needs a fuel-economy leader in a high-volume segment.”

American Chevrolet dealers may eventually get a compact minivan like the Cruze-based Orlando concept car shown in Paris Wednesday. The Orlando could top 30 m.p.g. on the highway, Peper said.

“Chevrolet’s vehicles are becoming exponentially better,” said Joe Phillippi, principal of AutoTrends Consulting, Short Hills, N.J. “I’m very impressed by the Orlando. It’s gotta be somewhere in the product plan.”

GM has grand plans for the Cruze in Europe, where Chevrolet sales have risen steadily since the brand debuted there a couple of years ago.

“This is the car that puts Chevrolet design and value in the heart of the European market,” said Wayne Brannon, executive director of Chevrolet Europe. Chevrolet has been on a tear in Europe, propelling GM to record sales there and gaining customers in new markets, like Russia and the Ukraine, as well as established ones, like Italy.

So far, Chevrolet’s European lineup has relied on vehicles that were designed and developed by Daewoo before GM took control of the Korean automaker.

The Cruze is the first high-volume Chevrolet conceived from the ground up for sale around the world. More global Chevrolets will arrive as the Daewoo models reach the end of their lives over the next several years.

The Cruze uses the next generation of GM’s global compact-car architecture, which was developed in Germany and will also underpin GM Europe’s best-selling car, the Opel Astra that is to debut in 2009.

The Cruze was designed and engineered in GM’s Korean tech center, with input from all the regions around the world that will sell the car. “The team in South Korea really knows how to do a car this size,” said GM design chief Ed Welburn.

GM has used the Chevrolet brand in South America, Africa and other outposts for decades. Previously, everything from basic engineering to the look and color of Chevy’s bow-tie badge varied wildly from region to region. Chevrolets in most of the world were simply small European Opels with a Chevy badge awkwardly grafted on.

Chevrolet enters a new age with the Cruze. “There’s one bow-tie for the planet,” Welburn said.

The Cruze’s appearance and technology are the fruit of many global summits within GM design and engineering. While the car will debut with a direct-injected, turbocharged 1.4-liter gasoline engine and six-speed automatic transmission in the United States, Europe is to get a line of diesel and gasoline engines.

The Cruze’s interior also was developed to cover an array of price ranges around the world. Developing markets will get relatively basic features and materials, while places like America and Europe will offer higher levels of comfort and equipment.

The Cruze goes on sale in Europe next spring with cars assembled in Korea. GM will start building the Cruze in St. Petersburg, Russia, late in 2009. American assembly begins in Lordstown, Ohio, in spring 2010.

But sales were better than expected at General Motors, which reported a 16 percent decline and estimated that its market share rose to the highest level in more than three years.

“We are looking at a very fragile economy,” Emily Kolinski-Morris, Ford’s chief economist, said on a conference call with analysts and reporters. “I don’t think anyone can say where the bottom might be.”

Sales were off 34 percent at Ford, 33 percent at Chrysler and 32 percent at Toyota. Honda, which had fared much better than its rivals in the first half of the year, reported a 24 percent decline.

Car dealers have been struggling to draw customers into their showrooms. Through August, vehicle sales nationwide were down 11.2 percent.

The three Detroit automakers have suffered most as high gasoline prices decimated demand for pickup trucks and sport utility vehicles. Sales of light truck are down more than 20 percent so far this year at G.M., Ford and Chrysler.

The companies have increased discounts on slow-selling models, with limited success. G.M. offered all shoppers an “employee pricing” discount on most models throughout September.

“In a very difficult and challenging industry, our relative performance was outstanding,” G.M.’s chief sales analyst, Michael C. DiGiovanni, said.

Michael Futrell, the general manager of the Champion Chevrolet dealership in Tallahassee, Fla., said he was able to offer deals like a Chevrolet Silverado pickup truck at $6,500 below cost, yet few people were interested.

He said car shoppers were typically hesitant in the months before a presidential election, but the weak economy had made this fall much worse.

“People want to buy but they just don’t want to pull the trigger until they know who’s going to be in office and what this economy’s going to do,” Mr. Futrell said. “What the consumer doesn’t understand is that there’s probably not a better time to buy a car. The deals are out there, but I think everybody’s so skeptical that they’re trying to hold off.”

He said the first half of September was actually better than expected but that sales dried up after the extent of Wall Street’s troubles became apparent.

“It was like somebody just turned the spigot off,” he said.

Automakers hope the new models they are introducing this fall will help attract more shoppers. Chrysler is introducing a redesigned version of its pickup, the Dodge Ram, and Ford will start selling its revamped pickup, the F-series, next month. G.M. has just started production of a crossover vehicle, the Chevrolet Traverse.

In addition to the drop in September sales, the American auto industry has been hit hard by the credit crisis. And with banks tightening up their lending, any hope for a recovery in vehicle sales this year has been dashed.

The biggest problem for the industry is the difficulties prospective car buyers are having in securing loans.

In 2007, nearly 83 percent of applications for auto loans in the United States were approved, according to CNW Marketing Research of Bandon, Ore. But so far this year, the approval rate has plunged to 63 percent.

“It frankly has become a nightmare for dealers and consumers who need a vehicle,” said Art Spinella, CNW’s president. “This is the worst we have seen it since we’ve been tracking it since 1984.”

Many shoppers — some with blue-chip credit histories — are able to get loans only at high rates.

“Instead of paying 7 percent like they should pay, they might have to pay 9 or 10 percent, and they’re just passing,” said Larry Kelly, general manager of Ritchey Cadillac-Buick-Pontiac-GMC in Daytona Beach, Fla.

The squeeze is particularly severe for customers with less-than-stellar credit scores who need subprime loans at higher interest rates.

While 67 percent of those consumers were approved for loans in 2007, only 22 percent are getting them this year, according to CNW.

“The subprime market has, for all intents and purposes, dried up,” Mr. Spinella said.

Automakers have already experienced a drastic drop in sales of larger vehicles like pickups and sport utility vehicles because of gas prices that hit $4 a gallon this spring.

But Mark LaNeve, head of North American sales for General Motors, estimates that G.M. is losing 10,000 to 12,000 sales a month because of tighter lending practices.

“It’s a bigger problem than $4-a-gallon gas,” said James Press, a Chrysler vice chairman. “We have buyers coming in, but they can’t get a loan.”

One Pennsylvania auto dealer said the credit squeeze was only adding to problems caused by a weak economy that many fear could turn into a recession.

Tight credit, economic worries and high gasoline prices cut automakers’ U.S. sales once again in September, with beleaguered Ford Motor Co. reporting a 34 per cent decline from the same month last year.

It was Ford’s worst sales month this year.

General Motors Corp.’s sales drop was a less severe 16 per cent, mostly thanks to an offer of employee pricing on most of its vehicles.

Hyundai Motor Co., whose single-digit sales decline this year has looked like a success against the Detroit automakers’ slide, reported its U.S. sales fell 25 per cent.

Other automakers were set to release their results later Wednesday.

Analysts have predicted September declines of more than 20 per cent for most major automakers when compared with the same month last year.

Jim Farley, Ford’s vice-president for marketing, said economic conditions have raised uncertainty among buyers.

“Even if you have good credit, there’s a reluctance to pull the trigger on a big-ticket item,” he said.

Canadian consumers and businesses, particularly in oil-rich parts of the country, have been less affected than their American counterparts by the economic downturn.

However, the United States is vitally important for the Canadian manufacturers since most cars and trucks made in Ontario are exported to U.S. buyers. And the Canadian economy is also slowing.

The three big Detroit-based auto companies, whether in the United States or Canada, have been especially hard hit by high fuel prices, a drop-off in construction activity and rising consumer unease.

If overall U.S. industry sales drop in September, it will be the 11th straight month of year-over-year decline - the longest string of down months since 14 straight negative months ended in December 1991, according to Autodata Corp.

Dealers from many manufacturers have said their customers are having an increasingly hard time qualifying for loans to buy autos, as banks have restricted lending and several automakers’ finance arms have limited or discontinued leasing.

George Pipas, Ford’s top sales analyst, said nearly all automakers saw “extremely weak” sales in the waning days of the month as the Wall Street crisis grew.

“It was tantamount, really, to a natural disaster,” he said.

Ford sales also were hurt as buyers continued to favour small fuel-efficient cars over trucks and sport utility vehicles. Ford’s truck sales were down 39 per cent, while car sales dropped 19 per cent.

Sales increased only on the Focus small car, up five per cent; the Ontario-built Crown Victoria large sedan, up three per cent; and the Lincoln Town Car, up 69 per cent.

Sales of F-series pickup trucks, Ford’s top selling model, were down almost 42 per cent.

Ford, like its competitors, has been trying to shift its factories and model lineup from trucks and SUVs to more efficient cars and crossover vehicles.

The Dearborn-based automaker has lost $23.9 billion in the past 2 1/2 years.

General Motors Corp. has performed strongly overseas but plummeting demand for its most profitable products in the U.S. has led to losses of $57.5 billion in the past 18 months.

GM’s light truck demand fell 19 per cent in September, while car sales slid 10 per cent.

For 2009, the Malibu Hybrid is rated at 26 city and 34 highway—meaning a much healthier 4-mpg boost over the base-level Malibu. The difference in the lowest end MSRP between the two vehicles remained the same. The conventional Malibu starts at $20,745, while the Chevy Malibu Hybrid starts at $24,695. In other words, the cost per mpg improvement was cut in half.

“The hybrid improvement is primarily the result of new battery charging control software that reduces load on the engine, and the hybrid also uses new 17-inch low rolling resistance tires,” GM spokesperson, Nancy Libby, told Hybridcars.com. “They were 16-inch tires in 2008.”

The 2009 Malibu Hybrid continues to fall short of the Camry Hybrid’s EPA rating of 33 in the city, but now matches the Camry’s 34 mpg on the highway. The base level MSRP for the Toyota Camry Hybrid is $26,150—$1,500 higher than the Malibu Hybrid.

Based on GM’s long-wheel based Epsilon platform, the 2009 Malibu Hybrid’s powertrain is defined by a 2.4-liter Ecotec four-cylinder engine and a 36-volt electric starter-motor-generator tied to a nickel metal hydride battery pack. Output stands at 164 horsepower, plenty for a car of its size and weight. Energy is channeled through a smooth-shifting four-speed transmission.
The 2009 Chevrolet Malibu In the Real World

We took the 2009 Malibu Hybrid on a 156-mile loop from Strasburg, Penn., to Washington, DC, and then back north to Towson, Md. The route was comprised of approximately 60 percent highway driving, 25 percent country road, and 15 percent in-town or urban traffic. To inform the driver of how the hybrid system is operating, the Malibu Hybrid offers a simple gauge with an “Eco” indicator and a “power assist” needle.

Our combined fuel economy on this mixed test was 29.8 miles per gallon. For comparison, our mixed driving test of the Toyota Camry Hybrid earlier this month resulted in fuel economy of 35.2 miles per gallon. Based on this cycle, Toyota’s full hybrid had a clear advantage.

The 2009 Malibu Hybrid, like its conventional variant, handles well. It maneuvers nimbly in traffic and responds quickly to driver inputs—even better than the Camry. The Malibu Hybrid’s longer wheelbase lends itself to a comfortable ride, making it a competent car for longer daily commutes. The overall driving comfort of the Camry is hard to beat though.

Consumers might also want to consider that the Malibu Hybrid offers a $1,300 tax credit, which Toyota hybrids no longer carry.

The current credit crisis—with or without a $700 billion bailout—has already spread from Wall Street to commercial banks, and from the financial sector to other parts of the economy, including to the auto industry. Here’s how the credit crunch is impacting key players in the hybrid vehicle market.
Consumers Are Staying Home

While demand for hybrids remains strong, the overall vehicle market is shrinking. Some analysts are predicting that this month’s sales will be off as much as 25 percent from last year. One of the biggest issues is tighter credit and lending standards. Many buyers can’t qualify for financing, or must pay more for their car loans; in addition, leasing has been discontinued for many domestic models.

The result is that it is more difficult and costly to get consumers into new vehicles. To make matters worse, fewer people are shopping. Some buyers are postponing big purchases in anticipation of an economic downturn, while others have lost jobs or homes and are struggling just to make the payments on vehicles they already own. In this climate, hybrid sales could suffer if consumers continue staying home—or if they opt for cheaper, no-frills vehicles rather than cutting-edge technology.
Dealers Are Getting Squeezed

Many car dealers were already suffering before the recent market downturn. With fewer shoppers on their lots, things have gone from bad to worse. To compound the problem, dealers are now struggling to maintain their own credit. Dealerships use what is called “floorplanning” financing: they buy vehicles for their inventories using credit from banks or captive finance companies. Recently GMAC, Chrysler Financial, and others began raising floorplanning interest rates, a move that squeezes dealer profits and makes sellers think twice about stocking expensive vehicles.

In the future, expect to see dealers use more caution in ordering new, unproven hybrid, electric and alternative fuel models. You can also expect to see more dealers throwing in the towel. The country’s largest volume Chevrolet dealer—Columbus, Ga.-based Bill Heard Enterprises, founded in 1919—shut its doors last week as rising floorplanning costs and falling sales eroded profits on the 88,000 vehicles it sold each year.
Manufacturers Lack Investment Funds

Auto companies live on credit, both in the short-term to sustain operations and in the long-term to invest in new vehicles and manufacturing facilities. For some, that credit has nearly dried up. Two weeks ago, General Motors made a $3.5 billion withdrawal from an existing credit line, raising concerns about the company’s long-term liquidity.

While GM still has billions in the bank, the company burned through more than $7 billion in the first half of the year. And the spending isn’t scheduled to stop. GM will spend nearly $400 million on a new plant to make small engines for the Chevrolet Volt plug-in hybrid and other vehicles. GM, Ford, and Chrysler—with its big plans for electric cars—are hoping that loans from the federal government will replace some of the financing that’s been lost from private sector banks. But if federal loans don’t come through in a timely manner, some new vehicles requiring a lot of R & D spending could be in jeopardy.
Battery Manufacturers Lack Access to Credit

Batteries are a key component in hybrid and plug-in hybrid vehicles, but developing new battery technologies and manufacturing them on a large scale is capital-intensive. A single manufacturing facility can cost $150 to $300 million, and that’s after a company has spent millions to create a viable product. Like the automakers, battery companies now have less access to credit, which means it’s harder for them to invest in new facilities or expand existing plants. The challenge is greatest for smaller companies such as A123 Systems. While their innovative battery designs may hold the most promise for making plug-in hybrids a reality, small battery companies cannot be successful unless they can build the facilities needed to guarantee a reliable supply to large OEMs.

In contrast, large battery makers such as Panasonic EV (a joint venture between Toyota and Matsushita) may have an advantage in the current era. With access to capital from large corporate parents, these firms are better positioned to make new investments in production, allowing them to continue their dominance of hybrid battery markets.
After the Storm Clears

Fear of economic recession has brought oil prices back to earth. Although crude remains above $100 per barrel, US gas prices have settled at under $4 a gallon. While consumers are not likely to forget this summer’s pain at the pump, interest in fuel-saving technologies like hybrids will ride up and down with gas prices. Yet, the long-term forecast is for sustained and consistently rising gas prices. So the looming question is which auto companies will best be able to weather the storm—and to emerge ready to deliver hybrids and other advanced fuel-saving vehicles when consumers return to dealerships demanding high-mpg vehicles.

Mashpee Police directed traffic around the scene for over two hours while waiting for utility crews to arrive and stabilize the severely damaged pole so the car could be removed and the pole could be replaced.  The car sustained heavy damage, including air bag deployment, and the driver was transported to Falmouth Hospital with apparent minor injuries.

COMCAST workers on scene reported that several hundred customers in the area were affected due to damage to their equipment mounted to the pole.

Photos and story by John Bellerose.

Coast Guard prepares for tropical storm, warns mariners

BOSTON - Coast Guard units in New England are pre-staging crews and equipment and warning mariners today in anticipation of Tropical Storm Kyle which is expected to arrive Sunday.

The National Weather Service is calling for wind gusts up to 80 knots and seas around 10-20 feet offshore.

“When we get a report of an empty boat drifting, we don’t know if someone is in distress or if a boat just broke free from the dock,” said Lt. Jonathan Rice, a command duty officer for the Coast Guard First District command center. “To avoid those false alarms, which take assets away from true distress calls, we ask owners to notify us if they lose a boat and keep contact information inside their vessels.”

Coast Guard shore units are broadcasting weather warnings via VHF-FM radio and a Falcon jet crew from Coast Guard Air Station Cape Cod, Mass., is flying offshore and broadcasting the latest weather to mariners at sea.

High seas, heavy rains, and damaging winds that accompany tropical storms may present serious dangers to mariners and coastal communities. Assistance by the Coast Guard and other agencies may be degraded or unavailable immediately before, during, and after the storm.

For mariners who are underway, the Coast Guard urges them to seek shelter from the storm.

The Coast Guard urges boat owners not underway to secure their canoes, kayaks and boats both before and after the storm and if they discover that their boats have broken loose during the storm, report it as soon as possible to the nearest Coast Guard station.

“When we get a report of an empty boat drifting, we don’t know if someone is in distress or if a boat just broke free from the dock,” said Lt. Jonathan Rice, a command duty officer for the Coast Guard First District command center. “To avoid those false alarms, which take assets away from true distress calls, we ask owners to notify us if they lose a boat and keep contact information inside their vessels.”

Mariners are encouraged to closely monitor VHF-FM channel 16 for updated storm information. For more marine weather information please visit National Oceanic and Atmospheric Administration (NOAA).
The Euclid Corridor project has turned the heart of the city into a collapsed artery — lined with empty storefronts, darkened windows and dust, dust, dust.

Cadillac Ranch is fixin’ to change that.

On Thursday, Oct. 9, the “All American Bar & Grill” will swing open its doors in the old May Co. location, 200 Euclid Ave. But it’s what’s behind the unassuming doors that will surprise Clevelanders.

Cadillac Ranch, part of a Columbus-based chain, is a maze of a complex that features an Americana-themed bar-restaurant with a mechanical bull, hundreds of hanging guitars, stone pillars, colorful murals, 35 flat-screen TVs, a VIP mezzanine and a dance floor.

And that’s just one of the three places.

There’s also an upscale martini bar, called, uh, Bartini’s, and a spacious Las Vegas-style dance club called Cleveland Bar Room. Both open Friday, Oct. 24.

Altogether, the complex shoehorns three themes and nine full-service bars into 24,000 square feet.

“We want to provide every level of entertainment, from the casual to the upscale,” says regional manager Mike Morales. “You can come in for a burger or a steak and then go into the martini lounge and relax with a cocktail. Or dance. Or even ride a mechanical bull.”

The idea, says Morales, is to strike a middle ground between East Fourth Street and the Gateway District.

My 2006 election protest at the outrageous gouge the party leaders inflict on tagalong journalists — $9,300 per week plus hotels and taxes — was a rented Hummer complete with beer, er, juice fridge, a fearlessly heavy-footed photographer named Steve and power hookups so we could file stories on the fly.

Trouble was, you could almost feel the brute getting lighter with every snowdrift we hit during that Christmas tour as tankfuls of gasoline combusted at a truly astonishing rate, which explains why, in an era when a $1.20 litre is considered an OK price, the iconic Hummer is now on the auto sector’s most endangered species list.

Even so, a pair of intrepid newspaper columnists managed to spend an entire week chasing the leaders around southern Ontario for the price of just one day on the official national tour. For economic — if not environmental — reasons a repeat road trip seemed in order, minus the military-vehicle mode of transportation.

Curiously, riding in a Hummer didn’t seem to trigger an environmental backlash just 32 months ago, except for a good-natured expletive hurled at us from current Green Party leader Elizabeth May as we passed her on an escalator.

But times have changed and an election featuring a Green Shift carbon tax referendum justified the move from Hummer to hybrid.

That’s a long way of explaining how I reached Chatham yesterday in a rented Prius that drove like a 110-horsepower golf cart in gridlocked Toronto traffic and has me sitting in the southwestern corner of Ontario down barely half a tank.

Toyota Canada agreed to rent us a hard-to-find Prius for four days, complete with a distracting video screen that tracks fuel consumption and has me fixated on keeping highway fuel use below five litres per 100 kilometres, even while keeping pace with the 130-kilometre-an-hour average speed of Highway 401 motorists.

But the cleaner mode of transportation is not the reason to depart the official tours as this campaign reaches the midway point, particularly now that Prime Minister Stephen Harper has curtailed his exposure to one private photo-op and one campaign rally per day with a few minutes of media chat time in between.

It’s for an up-close look at an election people seem determined to ignore, even though strategists consider this the “hinge week” where voters start locking in their choices.

There’s not one election sign visible from the highway in the two-hour-plus dash to Chatham from Toronto. Even in towns and villages along the way.

But beyond taking the election pulse, there’s a new secondary challenge on this road trip: my drive to get back to Toronto on the original tank of gasoline.

That objective has roughly the odds of the Liberals forming a majority government, but at least it’s a green shift goal that’s easy to understand and, having rejected the Hummer alternative, it’s a plus for the environment.

General Motors Corp. plans to distribute marketing materials for its Hummer brand and a French transmission plant in October as part of a plan to accelerate the $15-billion cost-cutting and fund-raising plan it announced in July, Treasurer Walter Borst said Wednesday in a presentation to analysts.
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Speaking at the Deutsche Bank Leveraged Finance Conference, Borst said GM is progressing on a fast pace in the cash-generating plan it announced July 15 and has hired “additional outside resources to help us meet or exceed these targets.”

Borst said GM hopes to raise $2 billion to $4 billion in cash through asset sales, but is considering the sale of assets “significantly in excess of this amount.”

“I would anticipate additional announcements for you here in the fourth quarter,” he said. “We believe we can monetize certain assets without impacting the strategic direction of the company.”

GM issued what it refers to as its liquidity plan on July 15 to quiet Wall Street concerns that the company may not have enough cash to sustain itself until 2010. While the plan initially quelled that concern, more recent mayhem in financial markets again has the automaker confronting worries that it doesn’t have enough cash to make it through the current downturn and may now have more trouble raising money.

GM Daewoo said Wednesday that it will draw the rest of a $2-billion line of credit from the Korea Development Bank for new car development and facility improvements. A GM Daewoo spokesman said the loan is unrelated to GM’s North American restructuring.

GM shares fell 37 cents to $10.35.

Walter Borst said in a slide presentation at a Deutsche Bank investor conference that the company expects to distribute marketing materials for both operations in October.

This confirms top management’s indications in July that the iconic Hummer gas-guzzler unit might be divested.

Slides posted on GM’s website Wednesday say the assets under review are worth $2 billion to $4 billion.

“We believe that we can monetize certain assets without impacting the strategic direction of the company,” Borst said during his presentation, posted on GM’s investor site.

GM and other automakers have faced liquidity problems as losses have mounted and U.S. sales have declined. GM announced a plan in July to cut $10 billion in costs and raise $5 billion through asset sales and borrowing through the end of next year.

Borst said GM expects the global vehicle market to grow from 70.6 million units last year to more than 75 million in 2010, and GM is positioned to capture that growth in emerging markets.

This growth, coupled with cost cuts and other management decisions, will set the stage for improved financial results by 2010, he said.

By 2010, GM will sell two-thirds of its vehicles outside the United States, compared with 59 per cent in 2007, he said.

He said GM plans to reduce its North American structural costs from $33.2 billion in 2007 to between $26 billion and $27 billion in 2010.

Borst said GM is shoring up its liquidity and has the scale to be well positioned for an industry rebound.

“We’re making changes to compete and win in what we think is an industry revolution,” he said.

General Motors Corp. intends to distribute marketing materials to potential buyers of its Hummer brand and a French manufacturing plant in October. That’s part of a strategy to accelerate the $15-billion cost-cutting and fund-raising plan it announced in July, GM Treasurer Walter Borst said today in a presentation to analysts.
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Speaking at the Deutsche Bank Leveraged Finance Conference, which was webcast, Borst said GM is progressing on a fast pace in the cash-generating plan it announced July 15 and has hired “additional outside resources to help us meet or exceed these targets.”

Borst said GM hopes to raise between $2 billion and $4 billion in cash through asset sales but is considering the sale of assets “significantly in excess of this amount.”

“I would anticipate additional announcements for you here in the fourth quarter,” Borst said. “We believe we can monetize certain assets without impacting the strategic direction of the company.”

GM issued what it refers to as its liquidity plan on July 15 to quiet Wall Street concerns that the company may not have enough cash to sustain itself until 2010. While the plan initially quelled that concern, more recent mayhem in financial markets again has the automaker confronting worries that it doesn’t have enough cash to make it through the current downturn and may now have more trouble raising the funds in the troubled credit markets.

Borst said the automaker remains on track and believes it will meet or exceed its targets.

GM has already eliminated $1.5 billion in operating costs this year and believes it is on track to cut an additional $8.5 billion next year through actions such as plant capacity adjustments, eliminating health care for employees 65 and older, thinning the ranks of its salaried workers through a retirement incentive program, selling off inventory and freezing spending on its large-truck programs.

In July, GM said it also planned to raise between $2 billion and $3 billion by borrowing against foreign subsidiaries, brands, real estate or its remaining 49% stake in financial company GMAC. Borst said GM continues to take advantage of its options as they become available. Still, analysts said GM’s decision to draw down the remaining $3.5 billion from a $4.5 billion line of credit last Friday raised anew concerns that GM’s funding options are limited.

“Given the uncertainty facing U.S. financial institutions at present, we think securing the additional liquidity is understandable,” Goldman Sachs auto analyst Patrick Archambault wrote in a note to investors. “However, we see the liquidity draw as a net negative, as it suggests that GM itself sees limited funding options in the near future.”

Borst said the automaker is confident that its actions are preparing itself to participate when the market rebounds and is simply accessing capital to secure itself in the face of uncertain financial markets.

“We have some significant expenditures over the next few months,” he said. “With all the uncertainty in the capital markets and the credit markets, it just seemed like a good time to take the money in-house and make sure it was available to us if and when we need it.”

The agency cut GM’s rating by one notch to ‘CCC’, the eighth-lowest speculative grade in its corporate rating scale.

In a previous downgrade, Fitch said it would cut ratings again if GM’s capacity to refinance short-term maturities were impaired, or if its cash position fell below $15 billion.

“Fitch believes that GM would reach minimum required levels of available liquidity within the next 12 months without access to external capital,” analysts said in a note. “Contributing factors include weakening overseas results and the impact of the credit crisis on GM and GMAC’s ability to finance retail sales.”. For more see [ID:nWNA4677].

Fitch is expecting operating losses, restructuring costs and supplier issues to continue to drain cash through 2009.

“External sources of capital for GM remain limited, indicating that liquidity drains will accelerate through year-end 2008,” said the note.

Fitch said it is “highly probable” that GM will attain federal financing in the near term, although the amount, terms, structure and timing of any loan are uncertain.

“In all, Fitch believes that GM will be challenged to raise financing in an amount that exceeds $10 billion, and will therefore be unable to offset expected liquidity drains over the next 12 months,” said the note.

GM has made progress in cutting costs, although the process has not kept pace with the decline in revenues. The rating agency is expecting that losses from operations will extend into 2010 as the company struggles to complete the restructuring of its work force, manufacturing footprint and product line-up.

“With the rapid migration of the market to more fuel-efficient vehicles, GM’s product lineup will remain misaligned with market demand over the near term,” it said.

Separately, Standard & Poor’s said Monday it is sticking with its ‘B-’rating for GM, the sixth-lowest investment grade, after the company on Friday said it was drawing down the remaining $3.5 billion of its secured revolving credit facility.

“This action underscores the anxious state of the capital markets,” S&P said in a statement.

If the current stress in credit markets continues, it could delay or complicate GM’s plans to raise an additional $2 billion to $3 billion from secured debt issuance and another $2 billion to $4 billion from asset sales, said the agency.

GM said it will use proceeds from the draw to retire $750 million of debt maturities coming due in October. The funds would also be available to pay Delphi Corporation more than $1.2 billion as part of its reorganization efforts, if a court approves revised agreements between the two companies submitted Sept. 12. [ID:nN19384642]. (Reporting by Ciara Linnane; Editing by James Dalgleish)

Fitch Ratings downgraded General Motors Corp.’s credit rating deeper into junk status Monday, saying the automaker faces headwinds in almost every direction and its liquidity could drop to “minimum required levels” within the next year.

The credit ratings agency said it reduced GM’s issuer default rating one notch to “CCC” from “B-.” Both ratings are noninvestment, or junk, grade.

Fitch analyst Mark Oline said GM faces pressures from tightening credit in the U.S., weakening overseas sales, rising raw materials prices, continued sales declines in North America and the need for a large amount of capital spending to transform its lineup from trucks and sport utility vehicles to smaller, more fuel-efficient models.

“If industry sales stay flat in 2009 with a deeply depressed 2008, we do think that the revenue pressures that GM and the industry will face will likely be in excess of their ability to reduce costs,” Oline said in an interview. “So we do project that liquidity will continue to decrease, and the company’s access to capital is severely limited by the conditions of the industry and the capital markets.”

On Friday, GM said it was drawing down the last $3.5 billion of a $4.5 billion secured revolving credit facility to add liquidity during “uncertain times in the capital markets.”

The Detroit automaker has been profitable overseas but has lost $57.5 billion in the past year and a half as high gas prices and the weakened economy have sent domestic sales into a dive. GM burned through $3.6 billion in cash during the second quarter, although it said that rate should slow for the rest of the year.

Chief Financial Officer Ray Young has said GM had $21 billion in cash and $5 billion available through credit lines at the end of June for total liquidity of $26 billion, which he called a strong position.

Oline said GM needs a minimum of $11 billion to $14 billion to keep the confidence of parts suppliers and consumers.

GM announced a liquidity plan in July that calls for cutting $10 billion in costs and raising another $5 billion through asset sales and borrowing over the next 15 months.

The company may have to cut more costs if the credit markets remain tight, Chief Operating Officer Fritz Henderson has said. While he expected GM to meet its liquidity targets, Henderson said last week that he could not predict what will happen in the credit markets, which affect consumer and corporate borrowing.

Tight capital market conditions also could spill into the market for asset-backed securities, affecting GM’s ability to competitively finance car and truck deals, Oline said.

At the same time, he said, there’s a strong likelihood that the U.S. auto industry will get loans from the federal government to transform its factories and product lineup. The industry wants Congress to fund $25 billion in loans that were approved in last year’s energy bill.

Oline said it’s also likely that the United Auto Workers union will allow GM to delay making payments into a trust fund that is to take on GM’s huge retiree health care costs starting in 2010. By then, the company also will see more benefits from its historic cost-cutting agreement with the UAW, Oline said. GM has pegged those savings at $3 billion per year.

Pickup truck sales, which had accounted for a huge chunk of GM’s revenue, are likely to rebound when the housing industry starts to recover from its slump, Oline said. If truck sales rebound by 2010 when GM starts to see more benefits from the UAW contract, and if the economy improves by then, GM could recover, he said.

“You could see some significant improvement in cash flow,” Oline said. said. “Clearly they need both time and liquidity, and the market is increasingly short on both.”

GM shares fell $1.50, or 11.5 percent, to $11.58 Monday.

At a time when the US economy is spluttering, the country’s most venerable car brand seems to be running out of gas.

“General Motors is closely related to the old economy, the manufacturing economy that America was largely based for the good part of the last century,” said Karl Brauer, editor-in-chief of automotive website Edmunds.com.

As manufacturing declines in the new century, so has GM, that potent symbol of US industry.

The company was founded in 1908 in Flint, Michigan — the hometown of filmmaker Michael Moore, whose first documentary ‘Roger and Me’ focused on GM plant closings in Flint in the late 1980s.

At its start GM was known for being an innovative industry leader.

GM started as “pioneers,” and kept it up for quite a while, said Leslie Kendall, curator of the Peterson Automotive Museum in Los Angeles.

The electric self starter was a GM first, introduced only four years after the company’s founding.

Independent front suspension, the V12 and V16 engines, fins, flaps, the Cadillac and the Chevrolet Corvette — a global automotive icon for 55 years — all came out of Flint, Michigan.

But, Kendall noted, the company “went from being a leader to becoming a follower, from setting the trends to following the trends.”

The oil crises of the 1970s saw the company’s market share begin to slip, as frugal Japanese models overtook GM’s muscle cars like the Pontiac GTO and the Chevrolet Camaro.

In these decades GM “seemed to have lost their ways, they became ponderous, all the creative enthusiasm seemed to have been drained,” said Kendall.

“There’s nothing wrong with following the trends, if you do it right, in a timely way and profitably, but they had trouble with that,” said Kendall.

The big shots of this era were the Chrysler Voyager minivan in 1983, and the Ford Explorer, the first family SUV, in 1993.

But GM had trouble keeping ahead of the curve.

“Cadillac was offering a S75 limousine along with the Cimarron, which was a Chevrolet Cavalier in a party dress, and not a pretty one,” Kendall said, adding: “They started to squander the public confidence.”

Even when the company had the good ideas, they came at the wrong time.

For example, the revolutionary battery-powered EV-1 in 1996 could have turned the company’s fortunes, but it was “too far ahead of its time,” according to Brauer.

Brauer attributes GM’s current state to a lack of diversity.

“When SUVs and big trucks are selling well, that’s fine … but the company didn’t plan enough variety in the product line-up,” he said, adding that “when the market shifted they didn’t have anywhere to go.”

GM however has not remained stagnant in the face of soaring oil prices.

In Europe the company’s Opel brand hopes to corner the market for smaller, more fuel efficient models.

For the 2009 model year GM have introduced the Chevrolet Volt, an electric car that hopes to take off where the EV-1 crashed.

But is it too late?

“I find it somewhat ironic that in the same week as GM is celebrating its 100th anniversary, the other biggest headline is, “Will the government bail out the domestics in order to prevent them from going under?” commented Brauer.

Kendall offered a philosophic take: “Nobody can be on top forever. Everything is cyclical, GM is cyclical too.

“The time may come, hopefully soon, when GM and US car manufacturers will return to world marketplace dominance. But who knows when that’s gonna be?”

General Motors (GM Quote - Cramer on GM - Stock Picks) announced Friday it intends to draw down the remaining $3.5 billion of its $4.5 billion line of credit.

The automaker said the move is aimed at maintaining a “high level of financial flexibility” as it continues to restructure during uncertain times in the capital markets.

“Accessing the funds available to us is a prudent liquidity measure. Drawing on the revolver now improves our liquidity position at a time when the capital markets have become more challenging,” said Walter Borst, GM’s treasurer.

The company set up the secured revolving credit facility in July 2006 with a consortium of banks.

Also Friday, GM announced the completion of a $322 million debt to equity exchange that the company says will improve its liquidity by reducing debt and interest costs. GM issued 28.3 million new shares of its common stock in exchange for $322 million principal amount of its 1.5% Series D Senior Convertible Debentures, which mature in June 2009.

GM shares finished Friday up $3.15 at $13.08.

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“Accessing the funds available to us is a prudent liquidity measure. Drawing on the revolver now improves our liquidity position at a time when the capital markets have become more challenging,” GM Treasurer Walter Borst said Friday.

“The revolver draw will bolster the company’s liquidity position,” Borst said.

Borst said the proceeds from the draw would also be available to be used to retire 750 million dollars of debt maturities coming due in October, and to pay Delphi Corporation in excess of 1.2 billion dollars as part of its reorganization efforts, assuming court approval of the revised agreements between GM and Delphi that were filed with the court earlier this month.

The US Pension Benefit Guarantee Corporation had demanded that bankrupt the Delphi Corp come up with 1.2 billion to cover pension liabilities by the end of September.

Delphi, which is based in Troy, Michigan, filed for bankruptcy and has solicited more than 11 billion dollars in financial assistance from GM, which originally spun of the company in 1999.

GM secured the 4.5-billon-dollar revolving credit facility in July 2006 from a consortium of banks and provides liquidity that GM can draw on from time to time to fund working capital and other needs.

At the time, GM executives had said they doubted they would need to draw on the facility.

However, car and truck in the United States have dropped sharply this year and are not expected to recover until 2009 at the earliest and GM reported slender cash reserves of approximately 16 billion dollars at the end of June.

The slender reserves had prompted speculation GM could be forced into bankruptcy.

In July, GM announced a plan to bolster liquidity through internal operating actions, asset sales and the capital markets.

“The internal operating elements of the plan remain on track and the company continues to look to opportunistically access the capital markets,” GM said in a statement.

GM also announced the completion of a 322-million-dollar debt to equity to exchange. The amount involved in the transaction is relatively. In addition, the debenture will mature in June in less than one year.

GM also is campaigning to have the US government release 25 billion dollars in guaranteed loans that could be used to finance the development of new technology.

General Motors Corp. (GM:  News ) said Friday that it intends to draw down the remaining $3.5 billion of its $4.5 billion secured revolving credit facility to maintain a high level of financial flexibility for its ongoing restructuring during these uncertain times in the capital markets.

The company said it will use the proceeds from the draw to retire $750 million of debt maturities coming due in October, and to pay Delphi Corp. in excess of $1.2 billion as part of its reorganization efforts.

In addition, the company said it has completed a $322 million debt to equity exchange.

by RTT Staff Writer