[Mr. Wyndham]

BY KATIE MERX
FREE PRESS BUSINESS WRITER
MEMPHIS, Tenn. -- With its reputation on the mend, sales of new cars and crossovers exceeding expectations, and a new labor deal projected to cut billions from its annual costs, General Motors Corp. is in its best situation in decades, Vice Chairman Bob Lutz said Tuesday.

But the challenge on the path to regaining revered status and sustainable profitability, particularly in the United States, isn't over.

"It's a substantially improved world, and I would say our situation product-wise, reputation-wise, labor-cost-wise is probably the best it's been in 20 years," Lutz said in an interview at a media event in Memphis to promote the launch of the refreshed Chevrolet Malibu. "I would say all of the stars are aligning very nicely. ... But are the worries over? No."

In a wide-ranging interview with the Free Press, Lutz said he wants to make up to 100,000 fuel-efficient Chevrolet Volts in the first year of production. (The first batteries were delivered Tuesday, he said.)

He said that the new UAW contract provides a big boost to GM, as well as rivals Chrysler LLC, which also has a new contract ratified with the UAW, and Ford Motor Co., which is in the midst of negotiations.

"The labor cost gap to the Japanese transplants have been narrowed, but they have not been closed," by the new UAW contract, Lutz said. "It's closer than it ever was before. That's good for a five-minute celebration, but then you say, 'Well, now what?' "

The big fear now, Lutz said, is "ill-conceived" government-imposed fuel economy standards at the state or federal level.

If legislation proposed in California were passed today, Lutz said, GM would have to stop building 80% of the vehicles it produces, and something the size of a Saturn Vue small SUV would have to take the place of a Suburban and a compact Chevrolet Aveo would become the company's midsize car. At the same time, he said, the price would go up.

Still, GM is finally seeing the fruits of its labor with hopes to further its improvements at an accelerated pace with the sales launch of the new Malibu this week, the push to get its electrically driven Chevrolet Volt to market by 2010 and its new cost-cutting UAW contract.

A lot riding on the Malibu
With the Chevrolet Malibu, GM hopes to have a high-volume car that can compete for the same customers that might otherwise be drawn to the top-selling Toyota Camry and Honda Accord.

And in a show of confidence, Chevrolet plans to offer test-drives of those competitors' cars in Chevrolet showrooms.

"The Malibu makes the statement loud and clear that we are very serious about cars," Lutz said. "Malibu is a demonstration of the power of GM when we allow our designers and engineers to do their very best."

No excuses
But the Malibu and other new models are just part of the new GM that is emerging.

At the dawn of 2007, GM publicly stated a goal of producing a long-range electric vehicle by 2010 when it showed the Chevrolet Volt concept car at the North American International Auto Show in Detroit in January. It followed that with the unveiling of a fuel-cell version of the electric vehicle at Auto Shanghai in April and then a diesel version of the so-called E-flex electric propulsion system in Frankfurt, Germany.

"These are all no-excuses vehicles," Lutz said. "This is why I was brought in. ... It's unleashing the engineering and manufacturing power of General Motors."

On Tuesday, Lutz said he continues to be increasingly confident that GM will bring the range-extended Chevrolet Volt to market by 2010.

"We got our first experimental battery pack today" from LG Chem, Lutz said. The battery pack doesn't yet have a cooling system, he said, but doesn't need one for the stage of testing GM and LG Chem are in.

GM expects to receive an experimental battery pack in December from A123Systems, the other battery supplier with which it has a contract, Lutz said.

By the first quarter, GM expects to be running the E-Flex operating system in late model Malibus for testing purposes, he said.

Lutz said the first-generation production version of E-Flex will appear in a vehicle that will look much like the concept car shown at the 2007 Detroit auto show, but with a more traditional front end.

"The engine-motor configuration didn't work. ... Now it has a more classic-looking front end. ... It will be called the Chevrolet Volt."

Lutz said the company has not determined how many Volts it will make in the first year, but said he believes "it's a very safe bet that it will be produced in the tens of thousands" in its first generation.

"This is not sanctioned, not an official GM number, but in the first full year of production I would like to see between 60,000 and 100,000 and then go up from there," Lutz said.

And its future, made more possible by the capital expected to be freed up by GM's new and historic cost-cutting contract, is further linked to the contract in that GM committed to build the electric vehicle at its Detroit Hamtramck Assembly plant, the UAW says.

"We're charging full-speed ahead before we know exactly what the investment is going to be, before we know whether we can make any money off it or not, before we know how many we're going to sell," Lutz said. "This is unusual. This is different from anything I've ever seen in my 40 years in the automobile industry."

Moving in the right direction
The fact that GM's product plans are accelerating at the same time it's been able to cut costs and make itself more competitive with a new UAW labor contract, improves the chances that GM can continue its turnaround and regain a reputation as a revered American automaker, a reputation that has eluded the automaker for decades.

GM's new contract with the UAW gives the automaker the opportunity to save billions through the creation of a retiree health care trust and two-tier wage and benefit system.

The health care trust isn't expected to take over those retiree health costs from GM until 2010. But when it does, it is expected to save GM about $3 billion in each of the first two years of the deal and more after that.

And while none of the advances -- the new products, new contract or plans to launch the first mass-market electric car to take on Toyota's offerings -- on its own gets GM to the position it needs to be in, they do move it in the right direction, analysts and Lutz agreed.

Said auto industry analyst Joseph Phillippi: "On a scale of one to 10, GM's probably at a four" in its renaissance. "They're really starting to bring it all together on the vehicle side ... and with the new contract. It took a long time for them to get there, but they're really starting to accelerate."
Said Lutz: "This is potentially the dawn of a new era, but we're not there yet."

We need to come up with an Anthem or something for GM.