Starting with the new Chevrolet Cruze compact, the basic
underpinnings of vehicle lines could last a dozen years or more, GM
President Dan Ammann told Reuters.
The move underscores the balancing act the automaker faces in
tackling conflicting challenges as the growth of auto sales in the
U.S. and China slows. GM and its rivals face increasing pressure to
prove they can keep core product lines fresh, meet stricter
emissions and safety standards, and forge a future in ride-sharing
and autonomous vehicles - all while returning more cash to
Over the next several years, the company will undertake the most
extensive overhaul of its vehicle development process in decades, GM
The goal is to design its global fleet of vehicles with just a few
basic building blocks, spreading the engineering and research costs
for a given lineup of cars and SUVs over millions more vehicles.
A single platform, underpinning multiple models, might stay largely
same for more than a decade, GM executives said. Global product
development chief Mark Reuss said the company aims for up to 2.5
million sales a year from a variety of models built on the same
platform as the Cruze compact, including the mechanically similar
European Opel Astra.
Exterior styling will change more often, with updates of sheet metal
or plastic skins - so-called “top hats” in GM parlance. The
automaker also plans to freshen electronic features with software
updates delivered over the internet.
The move to fewer and long-lasting platforms poses multiple risks.
GM could end up with platforms that are technologically outdated,
analysts cautioned, or not appealing to diverse customers in
different global markets. Further, most of GM’s rivals are also
moving to slash the number of different vehicle platforms they use.
“The advantage could be short-lived,” said Jeff Schuster, senior
vice president at LMC Automotive, a forecasting company.
Making the company leaner will also require increased spending in
the short term.
GM said it plans to initially increase capital spending to about $9
billion a year through 2019, up from $7 billion a year in 2014.
For the period 2016 through 2019, capital spending will rise to
between 5 percent and 5.5 percent of revenue, up from 4.4 percent in
After that, Ammann said, capital spending will fall closer to 2014
levels as a share of revenue, with much of it directed to new
priorities. Spending less on dies and welding machines will allow
for more investment in developing autonomous vehicles, delivering
services through high-speed internet connections in cars, and new
businesses such as ride sharing, executives said.
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TGM earlier this month invested $500 million in ride-hailing company Lyft, and last week it said it was launching car-sharing ventures
under the new brand, Maven. On Thursday, GM grouped all its
autonomous and electric vehicle engineering under one executive in a
move to speed development of those technologies.
he short-term increase in capital spending will pay for projects
such as a $1.4 billion overhaul of the Arlington, Texas factory that
builds GM’s cash cows - large sport utility vehicles such as the
The increased spending makes it critical for GM Chief Executive Mary
Barra to deliver the promised savings over the long term. The
company has largely failed over the past three decades to execute
previous plans to control engineering costs.
GM executives said longer-lived vehicle designs are just one element
of the cost-cutting strategy. Others include longer-term contracts
to suppliers that could allow for cheaper parts and using less steel
and plastic as engineers shave hundreds of pounds from future
The automaker is also launching a $5 billion effort with Shanghai
Automotive Industry Corp to engineer a new, low-cost vehicle line
for sale in emerging markets. The partnership is the most extensive
attempt yet by GM to collaborate with its Chinese partner.
GM has discovered it can build the complex dies used to stamp metal
vehicle parts in China for 20 to 40 percent less than it would spend
in the U.S. or Europe, Ammann said.
The automaker’s overhaul could be a tough sell to investors.
GM shares are down nearly 15 percent since Jan. 1, despite the
automaker’s record profits and its plans to return $16 billion to
shareholders in buybacks and increased dividends from 2015 to 2017.
Other automakers’ shares are also off sharply, as analysts warn that
global auto sales and profits have likely peaked for now.
Intensified competition in a flat market could force automakers to
cut prices, potentially nullifying the benefit of any savings from
more efficient engineering, said Bernstein analyst Max Warburton.
“The auto industry,” he said, “has a proven ability to invest to the
point of zero return.”
(Editing by Brian Thevenot)
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