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GM CEO uncertain that US auto sales will hit forecast, says company plans to be more efficient
DETROIT (AP) ' The top executive at General Motors Co. is having doubts about whether U.S. auto sales will recover this year as expected, even as the stock market rebounded a bit Tuesday from its huge losses.
Speaking to industry analysts about GM's long-term financial plans Tuesday, GM Chairman and CEO Dan Akerson said the company is sticking with its U.S. sales forecast of around 13 million cars and trucks for the year, but he's not certain sales will make it that high.
"There's a lot of turmoil in the business, and turmoil means uncertainty," Akerson said. GM's finances, he said, are strong enough to "power through these dips" in sales.
The statements came amid optimistic predictions for the future of the company, which has made billions just two years out of bankruptcy protection. Analysts were told that GM is looking to become more efficient in the future so it can make even stronger profits, and that it plans to raise factory capacity by 45 percent in Brazil, Russia, India and China by 2014 to take advantage of expected sales growth.
Company executives made the statements at GM's second-annual global business conference. The U.S. stock market slide and international government debt problems barely were mentioned during the presentation, which lasted more than four hours.
GM's shares have lost more than 20 percent of their value since its November initial public stock offering, although they recovered a bit with the rest of the market on Tuesday. GM closed up 97 cents or nearly 4 percent, at $25.54.
During the presentation, GM executives outlined cost-saving measures that included halving the number of frames it bases its vehicles on across the globe. In 2010, GM had 30 frames, known in the industry as platforms. By 2018 it plans to cut that number to 14. It also will sell more of the cars and trucks built on those platforms across the globe, saving on manufacturing, engineering and design costs. The company also plans to cut the number of engines it develops, as well as reducing the number of parts it uses across the globe.
"There's a lot of complexity. We need to simplify it," Akerson said. "More of our components will be common and more of our vehicles will be on global architectures."
GM said just 6 percent of its cars and trucks are built off of global platforms now. That will rise to 90 percent by 2018 as the company tries to catch up with industry leaders.
Ford Motor Co., for example, began a similar effort four years ago and it is on track to cut its global platforms to 12 by 2013, according to a research note from Bank of America released Tuesday. Ford had 27 platforms in 2007. Ford aims to build 83 percent of its cars and trucks off global platforms in 2013.
GM executives also said the company plans to keep its annual capital investment consistent, even when car sales are down. That will save money by ending the practice of stopping and starting projects. GM product development chief Mary Barra estimated that slowdowns, cancellations and other turmoil have been costing the company $1 billion per year.
Barra said the popular GMC Terrain, Buick Enclave and Chevrolet Equinox crossovers were delayed by nearly two years because of GM's financial problems during the mid-2000s. Now they're among the company's strongest sellers.
"That just highlights what we can do if we don't have that challenge," she said.
Barra wouldn't say exactly how much the company will save from cutting platforms and other changes.
GM earned $5.7 billion in the first half of 2011, but the company said last week that it expects results to be "modestly lower" in the second half because of seasonal drops in sales and possible increases in incentive spending. Last week GM reported its sixth-straight profitable quarter from April through June, with net income of $2.5 billion. The company slashed brands, plants and debt during its 2009 bankruptcy restructuring.
Akerson said GM is set up to break even at the low point in the vehicle sales cycle, and can be even more profitable when car and truck sales recover across the globe.
"When the market does recover, we should be able to really leverage it beyond what you've seen so far," Akerson said.
GM remains part-owned by the government, which took a share in the automaker as part of a $50 billion bailout. The government sold some of its interest in November as part of GM's initial public offering, but still holds 500 million GM shares. The government needs $26.4 billion to recoup its full investment in GM, meaning GM's shares would have to sell for roughly $53 per share.
Chief Financial Officer Dan Amman said the company won't talk about buying back common shares or paying dividends until early next year, after it better knows what will happen to the economy. Both could help boost the company's stock price.
AP Auto Writer Dee-Ann Durbin contributed to this report.