In April, Chevrolet displayed three “minicars” at the New York Auto Show: the Grove, the Beat, and the Trax. At the time, there was no thought of selling those cars in the United States. The display was merely intended to show off the capabilities of GM’s Asian operations to the Wall Street financial crowd.
 
That was then. 
 
In less than six months, thinking at GM has done a turn-about. It is now seriously considering offering one or more of these cars in the American market.
 
The disclosure came in remarks made by Michael Grimaldi, president and chief executive officer of Daewoo Automotive Technology, speaking to a meeting of the Society of Automotive Analysts in Detroit. Daewoo, located in South Korea is a subsidiary of GM. Grimaldi is also a GM vice-president. It was Daewoo that designed the minicars displayed in New York.
 
"Based on the phenomenal response [to the cars at the New York Auto Show], we understand what is required to federalize [the minicars]. Now we have to decide whether it makes sense for competitive reasons and because of the shift in the market. I won’t put a time line on [deciding]. There are a lot of questions being asked. The discussions in Washington, the future of CAFE and what’s happening on fuel prices - all that weighs on it," he said.
 
Grimaldi was blunt: "With energy, fuel conservation, and environmental concerns now becoming [more important], I believe we have crossed a line and turned a corner. It’s no longer a debate. We all understand the actions being taken in the U.S. Congress are going to drive a significant change in vehicle powertrain technology and alternate fuels.
 
"GM doesn’t sell a minicar here in North America because there is no market. If there appears to have been a shift and if we can make those vehicles economically, we can then determine if we should introduce those vehicles” in the United States. We are going to see significant changes, in obviously not just GM’s portfolio, but everyone’s products. It’s going to take a broad comprehensive strategy."
 
Grimaldi may have an agenda. After all, production by Daewoo of cars for the United States market would be a plus for Daewoo and probably a feather in his own corporate cap. But, clearly, he is also reflecting the thinking of top GM management.

There is no question that GM is planning to increase production outside the United States. Moreover, it is also prepared to move production out of the United States. Recent reports have said that both GM and Ford warned the United Auto Workers that they will move production from the United States if the union does not agree to substantial cuts in wages and benefits. Even if the union acquiesces, the trend toward foreign production, particularly in places like China and Korea, is already set.

GM is in a perfect position to make use of its Daewoo subsidiary to build cars for sale in America, and elsewhere.

In fact, that’s pretty much just what Grimaldi said: “"There is a major shift within GM to make sure we support these major markets around the world and one of those major markets is Asia. GM has a philosophy [that] it will manufacture and build in those countries where it has significant volume. We’re investing more resources in both design as well as our engineering organization. We’re looking forward to the introduction of our new mini and small cars that will come to markets around the world in the next several years." To that end, Grimaldi said that G.M. plans to invest $6.7 billion in Daewoo within the next four years.

Daewoo expects to have the minicars in production in South Korea “within two years,” according to Grimaldi. That means that if GM hedged its bets and insured that the minicars were designed to be federalized, if necessary, it could have them on the market in America in about that same time frame, provided it makes the decision now.

There are a number of reasons to believe that GM will decide to bring the minicars to the United States, and quickly. Even if Congress doesn’t boost mandated corporate fuel economy regulations to 35 mpg by 2020, which is the Democratic party proposal adopted in the Senate, it’s well within the realm of possibility that the market may effectively enforce a mileage requirement at least that high. The demand for petroleum in China and other recently industrializing countries can only grow. There is almost no chance that the United States will increase its domestic oil production, given the political influence of environmentalists and their jaundiced attitude toward both oil companies and cars. 

If gasoline hits $5.00 a gallon as a consequence of all this, the market for a minicar could become huge. Though mini-cars are unlikely to replace the “Texas Cadillac” (i.e., the Suburban) for those who live in the Western United States, the majority of Americans live along East Coast. That area is highly urbanized and a minicar might make sense there. Last, but certainly not least, the average American household owns two or more cars. So, Americans no longer need a car that can do everything. A specialized car that works in an urban setting and is fuel efficient could actually become a fashion item in those areas.
 
This much is certain: GM’s top management is preparing for an American auto market that is very different than it is today. One indication is the corporate commitment to the Volt electric hybrid, aimed at 2010 introduction. The Daewoo minicars give GM another option for that same market. No other domestic automaker is as close to market with either a lithium ion hybrid or a minicar as GM. Indeed, it is questionable whether even Toyota is as far advanced in these areas as GM.

Source: The Car Connection

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