GM betting on fuel efficiency despite low oil cost
Consumers might be saving plenty at the pump thanks to the low cost of crude, but General Motors (NYSE: GM) is not abandoning its commitment to fuel efficiency, GM North America President Mark Reuss said Wednesday.
"Anybody who plans on a long-lead capital intensive business for episodic oil price and gas price fluctuation is at risk," he said on CNBC's "Squawk Box." "What we like to do is look at real, permanent changes in societal trends around conservation, fuel economy, electrification."
Reuss said the Cadillac CT6, which GM unveiled at the New York International Show on Tuesday, embodies that strategy.
The car is the largest scale application of the company's new approach to using a mix of steel, aluminum and other materials to build vehicles light enough to meet tougher fuel efficiency standards, but big enough for customers who want spacious cars.
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GM engineers are studying variations on the CT6's multimaterial construction for at least four other future vehicles, and other models could be derived from the CT6's "Omega" architecture, Travis Hester, CT6's chief engineer, told Reuters.
Automakers are under pressure in the United States and China to dramatically increase fuel efficiency over the next decade to reduce greenhouse gas emissions. But as oil prices tumble, consumers in the world's two richest auto markets are paying premiums for luxury sedans and sport utility vehicles, not small cars.
That means automakers are racing to build vehicles that are large, but light.
Ruess told CNBC the 2016 Chevrolet Malibu would introduce something "groundbreaking" in the midsize car market, noting the vehicle's hybrid option gets a best-in-class 47 miles per gallon. At the same time, GM added 4 inches to the new Malibu to give drivers more space and subtracted 300 pounds of weight.
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To win over skeptical consumers, GM's ads for the new Malibu will tout quality, styling, fuel-efficiency and a myriad of safety and connectivity features.
GM's sales goals for the Malibu are important because the car is a key piece of GM Chief Executive Mary Barra's strategy for delivering 10 percent profit margins in North America and return on capital of 20 percent globally.
To hit its targets, GM will have to overcome a legacy of playing catch-up in a segment crowded with strong entries, including the long-time leaders Toyota (Tokyo Stock Exchange: 7203.T-JP) Camry and Honda (Tokyo Stock Exchange: 7267.T-JP) Accord. GM's Japanese rivals also benefit from the cheap yen to help defend their dominant market shares.
The current car is profitable, GM officials say. But it lags the competition by various measures. Over the last five years, GM has spent an average of $801 a car promoting the Malibu, according to data compiled by Kantar Media. Honda has spent an average of $539 a car touting the Accord and sold an average of 60 percent more sedans a year.
-Reuters contributed to this report.
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