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GM's Lutz worries about further sales decline


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GM's Lutz worries about further sales decline

Jamie LaReau
Automotive News
February 10, 2009 - 4:13 pm ET

DETROIT -- As General Motors prepares to present its viability plan to the U.S. Treasury Department next week, product chief Bob Lutz says GM's business model won't work if the market deteriorates further.

"Stability is one thing. We can deal with stability," the vice chairman of global product development said today in an interview with Automotive News. "But if there's a further decline, then it's going to be a very rough situation for everybody."

Lutz, who this week told of plans to retire at year end, said he agrees with Chrysler co-President Jim Press. In recent speeches, Press has said the industry must stop "dreaming about pent-up demand" and adopt a business model that works today.

"I think we can pretty well do that, and that is the plan for the submission we're making to the government on February 17 to demonstrate a survival capability under a scenario that is about like it is today," said Lutz, who will become GM vice chairman and senior adviser on March 1.

But he added that it will be painful to get there.

"It's going to be shedding a lot of jobs, closing a lot of plants, reducing the breadth of the product line, restructuring debt, getting the UAW to buy in on a lot of change," Lutz said. "It's hard to get done, but I'm convinced we can get that done.

"The bad thing is, what if things get worse?"

GM announced today that it is cutting 14 percent of its global salaried work force -- about 10,000 employees -- and temporarily reducing salaries of many who remain.

Lutz said initial reviews of GM's daily sales figures for February show that sales are not improving. He said the United States needs a government stimulus to spur demand, even though it likely won't have an impact until next year.

"But stimulating demand is absolutely vital," Lutz said. "One of the things I think will happen in the short term is that if they can come up with a program that stalls foreclosures. If you could stabilize the housing market, stop the foreclosures and gradually get credit flowing to consumers again, that will help a lot."

For several months, GM has tried to sell vehicles with almost no leasing, basically no fleet business, no daily rental sales and almost no corporate fleet sales, Lutz said.

"So when you see our market share of 21 percent, that's like 21 percent pure retail with very little GMAC financing and no lease," he said.

GM is struggling for survival, Lutz said, but "will deliver a viable survival plan" to the government next week.

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