GM finally steps up

NEW YORK (Fortune) -- In opera, it isn't over until the fat lady sings. In the auto business, it isn't official until General Motors opens its mouth.

That day comes Tuesday in Wilmington, Delaware when embattled GM (GM, Fortune 500) chairman and CEO Rick Wagoner will explain to shareholders just how the automaker plans to survive the changes sweeping the industry. On Tuesday morning, Wagoner gave a hint of what's to come during a press conference preceding the start of the annual meeting: a big push into crossover cars, plans to close four GM plants and the possible sale of its Hummer sport utility vehicle division.

Observers from Tokyo to Toledo are paying close attention.

Automakers are going through an unprecedented two-dip depression in the U.S. Not only is the subprime crisis and the attendant economic slump driving sales to a 15-year low. But also, expensive gasoline and looming federal and state fuel economy standards have sent panicked consumers fleeing from their pickup trucks and SUVs, which are very profitable for Detroit, into low-profit or no profit passenger cars.

Late to catch this trend as usual, General Motors and Ford (F, Fortune 500) are frantically rewriting their product plans for the next dozen years to account for changing standards while they try to prop up sales of their current model lines in the short term.

Meanwhile, there is chaos at the nation's dealerships. Light trucks aren't selling so they are sitting in inventory. Owners aren't buying because they either can't sell the truck they have or can't get the price they need in order to afford the down payment on a new one. Other customers, who took advantage of easy credit terms a year or two ago, are failing to make their monthly payments and getting their vehicles repossessed.

Ford stepped up the plate first. Twelve days ago, it announced production cuts, the accelerated introduction of more small cars, and continued shrinkage of the company. Along with that came the news that it couldn't make the auto business profitable in 2009 as it had promised, and then later, that its U.S. market share would fall below the level that it had targeted.

Expect GM to announce much of the same production cutbacks and shifts in product emphasis on Tuesday. It won't be as specific about future earnings as Ford because it got out of the guidance game a couple of years ago.

One area where GM is expected to strut its stuff is in alternative fuels. The company was early to the party - some say too early - in building a battery-powered car and developing fuel cells. Now both of those technologies have been put in the shade by gas-electric hybrids and plug-in hybrids.

GM leads Ford and Chrysler in gas-electric hybrids, but that's a race among the lame and the halt. In terms of commercial success, it can't match Toyota (TM) or even Honda (HMC).

But you can expect GM to thump its chest a bit over the plug-in Chevy Volt that it plans to get to the market by end of 2010. The Volt can run about 40 miles on a charge of electricity, and several hundred miles beyond that when its auxiliary gasoline engine kicks in. But at a rumored price of as high as $40,000, the Volt will be good for bragging rights, and not much more.

Tuesday's meeting could be Wagoner's chance to finally assert himself as the leader of both his company and the industry. As GM has piled up enormous losses and suffered from an array of troubles that go well beyond its slumping car sales, Wagoner has been all too willing to stay in the background.

The strategy backfires when other step forward to take credit for initiatives Wagoner has put in place, such as his declaration in 2006 that GM is determined to be the industry's technology leader. Or when GM stock collapses to a multi-year low, and it is a lead director, not Wagoner, who has to step forward and calm investor fears.

Now, when there is so much confusion in the market place and among investors, is the time for Wagoner to step up, create a vision for the months ahead, and suggest how GM and the rest of the auto industry are going to meet this looming challenge.

In a way, his timing couldn't be better. Expensive gasoline is pushing American consumers in the direction they've been resisting for 30 years - toward more fuel-efficient automobiles. It is up to Wagoner to explain how GM plans to profit from this overdue change. And do it forcefully.