- The Washington Times - Wednesday, March 23, 2005

NEW YORK (AP) — Shifting resources to key high-volume vehicles and educating potential buyers about unique aspects of its cars and trucks are part of General Motors Corp.’s strategy for fixing its ailing North American business, the head of GM North America said yesterday.

Gary Cowger acknowledged the troublesome start to the year for the world’s biggest automaker, saying it was hurt by strong business at the end of 2004, rising interest rates, competition and health care costs.

“We’re facing a difficult situation that will require a lot of hard work, but we’re extremely focused on what we need to do,” Mr. Cowger said at the opening of the two-day press preview for the New York International Auto Show.

Speaking yesterday at Morgan Stanley’s global automotive conference in New York, GM Vice Chairman Bob Lutz echoed Mr. Cowger’s sentiments: “Sure, we face short-term challenges, and this is not going to be a banner year. It’s a difficult period of adjustment, but we’ll get through it. Long term, I think we’re doing all the things we need to position ourselves for success.”

As a sign of its determination to come out of the slump, GM confirmed yesterday it was considering raising cash by selling a stake in its commercial mortgage interest business, which handles loans for hotels, hospitals, golf courses and other entities. GMAC Commercial Mortgage Corp. collects payments on mortgages valued at $249 billion.

Mr. Lutz warned the company may phase out one of its weaker car brands if sales fail to meet projections, Reuters reported.

He did not specify which car might be dropped, but described Buick and Pontiac as “damaged brands” due to lack of investment over the years.

GM spokeswoman Toni Simonetti said the automaker is in discussions about selling a stake in the unit, but that GM would remain a significant stakeholder. She declined to say how much GM is seeking, to whom the company is talking or how large a stake the automaker would like to retain.

The Wall Street Journal reported yesterday the sale could raise as much as $1 billion should outside investors take as much as a 50 percent stake.

“We like the business,” Mr. Simonetti said. “It’s a growth business. It’s profitable.”

Mr. Simonetti noted that GM put its commercial mortgage business up for sale in 2003 but pulled it off the market because the company wasn’t satisfied with any potential offers.

GM slashed its first-quarter and full-year earnings forecasts last week, but Mr. Cowger said company managers are focused on turning around the business.

That includes spending incentive dollars more strategically, reallocating resources for vehicles with greater potential for high-volume sales and improving marketing, he said.

In particular, he said GM needs to do a better job of conveying to customers the unique aspects of its cars and trucks.

He cited the company’s announcement in January that it plans to put two safety features — OnStar in-vehicle communications service and electronic stability control — in all of its vehicles by the end of 2010.

GM claims it would be the first automaker to make both features standard across its entire fleet.

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