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GM pulls plug on '08 line of cars
Product czar Bob Lutz wants to speed new trucks, SUVs to market faster.
By Ed Garsten / The Detroit News
General Motors Corp. Vice Chairman Bob Lutz wipes
smudges off the Buick Velite in 2004. GM is dropping the
rear-drive architecture on which the car is based.
DETROIT -- General Motors Corp. has killed plans for a new line of rear-wheel drive passenger cars slated to reach North American showrooms in 2008, in large part to free up resources to bring its next generation of large pickups and sport utility vehicles to market quicker.
The news comes after GM reassured investors, suppliers and Wall Street analysts last week that future car and truck programs would remain on schedule despite a new cost-cutting effort.
The automaker is under severe pressure to streamline after announcing last week its 2005 earnings would fall as much as 80 percent below previous estimates.
"While work on particular North American applications of our premium rear-wheel drive midsize vehicle architecture have indeed been stopped, we have begun to study new approaches to efficiently capitalize on future opportunities we see for future midsize rear-wheel drive applications," Marc Beckers, a spokesman for GM, said.
The rear-drive "global architecture" -- dubbed Zeta -- was to provide the basic underpinnings for an array of cars and crossover vehicles for markets around the world. It will continue to be the basis for products sold in regions outside North America.
GM's decision to kill the Zeta program puts the brakes on development of the next generation Pontiac GTO sports car, and new entries for Chevrolet, Buick and Pontiac. The current GTO is already being produced by GM's Holden unit in Australia.
Bob Lutz, GM's vice chairman for product development, canceled development of the premium rear-wheel models for North America, according to two people familiar with the situation.
It was Lutz who first championed the new rear-wheel drive platform. The renowned car expert announced the Zeta program in 2003 as the industry was turning its attention toward rear-wheel drive vehicles.
But he pulled the plug on the North America models after determining the vehicles could not be engineered and assembled to sell at prices competitive with the popular Chrysler 300C, Ford Mustang and other models, without sacrificing quality and content.
In addition, GM is anxious to free up resources to speed up the launch of its new line of full-size pickup trucks. They are not expected to arrive until 2006.
Many in the industry expected the Zeta architecture would mean the return of the Chevrolet Camaro and production versions of the Buick Velite concept car, which debuted at the 2004 New York auto show to rave reviews.
"This is scary. It puts GM behind the eight ball," said Joseph Phillippi of AutoTrends Consulting in Short Hills, N.J. "It makes you wonder why can't they get it right. Where does it seemingly go wrong?"
The retreat from Zeta could delay the introduction of GM's new rear-wheel drive passenger cars by at least a year, Phillippi said.
That's bad news for the automaker, which has seen only lukewarm early sales for several of its newly launched products, such as the Pontiac G6, Chevrolet Cobalt and Buick LaCrosse. The new Chevrolet Equinox, a small SUV, has been a strong seller.
Global Insight market analyst John Wolkonowicz said GM's decision to stop the development of Zeta-based vehicles for North America means a missed opportunity to compete.
"The Chrysler 300C is a watershed car like the 1986 Ford Taurus," said Wolkonowicz. "With Zeta, GM had an answer."
For sure, GM has not given up on rear-wheel drive vehicles. Two roadsters, the Pontiac Solstice and Saturn Sky, will be rear-wheel drive entries. Other rear-wheel drive GM cars include the Cadillac CTS and STS sedans, the Chevrolet Corvette and the Pontiac GTO.
GM Chairman Rick Wagoner last week said there would be no reduction in capital spending in light of the abrupt profit warning and signaled new product programs would be safe from the budget ax.
"Product remains the first and most important element of the strategy to get North America on track," he said.
Through February, GM sales are down 10 percent from last year and its market share has slipped to 24.9 percent, compared with 26.7 percent a year ago, according to Autodata Corp.
"When you have an automaker struggling from a market share or sales standpoint, the worst thing you can do is slow introduction of product," said Erich Merkle, an analyst with Grand Rapids consultants IRN Inc. "It may point to some issues GM is having internally, perhaps from a communication perspective between what the market wants and what GM can afford."
