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Last Updated: Thursday, 4 March, 2004, 10:21 GMT
Lifting the lid on GM's strategy
BY Jorn Madslien
BBC News Online business reporter at the Geneva motor show

Opel Tigra convertible
GM is late in introducing diesels to its luxury range

General Motors, the world's largest car company, is preparing to take Europe by storm by introducing diesel engines into its luxury models.

The car maker is planning to produce Cadillac cars with diesel engines in a move that should make the luxurious American marque more appealing to European drivers.

"We will need to bring on diesel engines," GM chairman Rick Wagoner told BBC News Online. "I would envisage over time that more and more Cadillacs would have diesels."

Such plans are unlikely to appeal to traditional motorheads whose love affair with powerful petrol engines remain strong.

But Mr Wagoner's vision is really little more than a reflection of a recent spike in demand for upmarket cars with diesel engines that has made the segment the fastest growing and most profitable in Europe.

Catching up

Having failed to anticipate the change in European drivers' tastes, General Motors almost missed the boat entirely.

We will need to bring on diesel engines
Rick Wagoner, Chairman, General Motors
Its only upmarket European brand, Saab, finally managed a last minute diesel launch, but the Swedish car maker's sales are still lagging those of rivals such as BMW, Mercedes and Audi.

Even Ford's luxury Jaguar brand has responded to demand with several luxurious diesel models, further crowding a market where GM is weak.

"We don't have a big position" in the highly profitable European luxury segment, Mr Wagoner acknowledged.

And he offers no plans for a quick fix.

"We do expect over time to grow the Saab volume," he said, adding that a recent distribution agreement with Kroymans should gradually help carve out a European market for both Cadillac and Corvette.

"We have plans and ambitions, but [also] a lot of work in front of us in the upscale category," Mr Wagoner said.

"It is going to be building from a small volume base and it is going to take some time."

Slow progress

But time is not on Mr Wagoner's side.

Corvette
New sports cars like the revamped Corvette are being launched
GM Europe has been a loss maker for four years. During the last financial year, the European operations racked up net losses of $286m, down from $549m the previous year.

And GM's overall sales growth in Europe continues to be held back by other models that are showing their age.

At just under 1.8m cars sold last year, most of them by Opel and Vauxhall, GM's market share remains stubborn at about 10%.

True, its new Opel Astra (Vauxhall in the UK) has received an exceptionally warm welcome in the market with 30,000 advance orders, but that is not in itself enough to bring about a turn-around.

"We will be restricted somewhat on volumes until we can offer a broader range of engine offerings and probably a little better, broader product range in Europe," Mr Wagoner admitted.

Saabaru

Industry observers believe new Saab models could go some way to help, and indeed they are being built.

GM hopes to sell more Cadillacs in Europe
GM hopes to sell more Cadillacs in Europe
Saab's first sports utility vehicle, the 9-7X is due to be on display at this month's New York Motor Show, and there is also the 9-2X, a smaller four wheel drive that is based on a GM's Japanese subsidiary Subaru and thus nicknamed the Saabaru.

The problem is that both cars are aimed at the US market, and any arrival in Europe is likely to be at least several years down the line.

GM Europe's approach to the UK market is also criticised by motoring industry experts who bemoan the car maker's lack of commitment to convert some key Saab and Cadillac models to right-hand drive.

Executive drama

In addition to sorting out its model line-up in Europe, GM must tidy up after the recent departure of European chief executive Michael Burns who is joining the US supplier Dana.

Mr Burns will eventually be replaced by former GM Asia Pacific executive Frederick Henderson, though as a short-term measure GM guru Bob Lutz is stepping into the top job in Europe.

"Bob has agreed to come in really for a temporary period. Fritz will be coming on 1 June," Mr Wagoner said.

Mammoth tasks lie ahead for both Mr Lutz and Mr Henderson, yet Mr Wagoner was optimistic.

"We're really fortunate to have a guy like (Bob) to step in on an interim, and Fritz is a very talented executive," he said.

GM aims to break even in Europe this year and make profits next year.


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