GM gets on the hybrid highway

Sales for the world's biggest automaker are puny now, but Toyota had better watch out, say some industry watchers.

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By Peter Valdes-Dapena, staff writer

2008 GMC Yulkon Hybrid: For now, GM's full-size hybrid SUVs are making up the bulk of the company's pint-sized hybrid sales volume.
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NEW YORK ( -- General Motors is far from being a market player with hybrid vehicles, but it may be in a position to deliver down the road, according to some industry analysts.

GM sold 843 hybrids of all types during the first quarter of 2008, according to the industry newspaper Automotive News. That's right: 843. There are no missing zeroes. About 655 of them were full-size GMC and Chevrolet hybrid SUVs.

Compare that with Ford, which sold 5,225 hybrids during that time. The hands-down hybrid leader, Toyota, sold 278,000 in the U.S. alone last year and 430,000 worldwide.

It's not that GM doesn't have any hybrid products. In fact, the automaker boasts more different hybrid models than any other company except Toyota, the company that makes 85% of all hybrids sold in America. It's that GM isn't building many of them.

General Motors says that's changing, and some analysts are ready to believe them.

Eric Fedeva, an analyst with automotive market researcher CSM Worldwide, expects GM to seriously increase its hybrid output, turning the automaker into a serious contender within the next few years. He expects it to produce 40,000 to 50,000 hybrids this year, more than doubling last year's production.

"For GM, we're looking at a fairly substantial increase in volume," he said. Within a few years, according to Fedeva, GM should be producing about 300,000 hybrids annually.

"I think they're going to give Toyota a run for their money," said Lonnie Miller, an analyst with market research firm R.L. Polk. "If they actually deliver on the full range of models," he added.

The main reason GM is so far behind is that it's just getting going. With bigger business problems to worry about, GM didn't see the need to pursue an expensive technology that, even today, makes up less than 3% of the U.S. auto market.

By the late 1990s, when Honda and Toyota were introducing their first hybrids in the U.S., GM executives had already considered the idea and given it a pass. "We had looked at those and thought the benefit to the consumer wasn't commensurate with the cost," said GM spokesman Tom Wilkinson.

In other words, hybrid technology would cost more than it would save in gasoline. And GM executives were right, but people bought Toyota and Honda's hybrid cars anyway. So those companies, along with Ford, made more hybrids, reaping enormous public image benefits. (Toyota also says that its Prius hybrid, at least, is profitable.)

By 2003, GM was selling its first hybrids: city buses. It took until late 2006 for the automaker to produce its first hybrid passenger car, a "mild hybrid" version of the Saturn Vue SUV. Mild hybrids (GM itself doesn't use the term) cannot run under electric power alone but use an electric motor to provide additional boost and to allow the gasoline engine to shut off whenever the vehicle stops.

The advantage of a mild hybrid system, fitting GM's early objection to hybrids, is that they cost less to build and buy, but with more modest fuel savings.

GM currently makes five different hybrid sedan and SUV models, with three more expected in coming months.

Production of GM's first full hybrids, full-size SUVs, has only recently begun, so it's no surprise that sales are low. The company stands by projections of 10,000 full-sized hybrid SUV sales this year, which would require a big increase in production.

But more surprising are the lower sales numbers for GM's "mild hybrid" SUVs and cars. GM now has three vehicles on the market with this drivetrain.

GM blames battery problems for low production of those vehicles so far this year. The hybrid batteries in many first-generation Vue Green Line SUVs quickly lost their ability to hold a charge, said GM's Wilkinson, prompting a recall to replace the batteries.

The recall lasted into the early part of this year, Wilkinson said, putting a crimp on production and sales while GM worked out the problem. Now that battery problems have been solved, GM will produce more of these vehicles, he said.

Assuming GM can get a handle on production, hybrid shopping trends bode well for the automaker taking a competitive spot in coming years, said R.L. Polk's Miller.

A recent R.L. Polk study indicated that car buyers tend to stay with the same vehicle type when switching to a hybrid. More than half of Lexus LS hybrid sedan buyers already had a luxury sedan, according to the study, and about 30 percent of Honda Civic Hybrid buyers already had a small car.

GM's broad spread could enable it to capture more customers entering the hybrid market for th first time, said Miller. The company has also been marketing its hybrids heavily, raising consumer awareness, even if the vehicles are hard to find, said Miller, and should eventually boost sales as they become available.

GM's reliance on large SUVs and trucks actually gives it more of an impetus to invest in hybrids, said CSM's Fedeva. Adding hybrid powertrains will make these vehicles more palatable to buyers and help keep GM's fuel economy average in line with new federal requirements.

But other analysts are skeptical that GM will put that much real muscle behind its green marketing efforts. Karl Brauer, editor in chief of automotive Web site, predicts GM will be content to produce just a few examples of each of its hybrids, and no one should expect big production numbers.

"They're getting talking points out there so they have something to say when they get asked tough questions," he said.

Brauer sees patience wearing thin with GM's hybrid promises. "They'd better get something out there because there already people who will see through this," he said.

Meanwhile, GM is already marketing the Chevrolet Volt electric car, a vehicle that isn't expected to hit the market until 2010 - provided the hi-tech batteries it needs are production-ready by that time.

If all that falls into place, GM may finally find a way to out-maneuver Toyota. To top of page

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