|The Chevrolet Cruze.|
DETROIT ( TheStreet) -- While GM ( GM) isn't happy about the soaring cost of oil, it is pleased to have four new compact cars to sell to fuel-conscious buyers. "I will tell you that we were concerned about this (fuel price increases) well before it was on the front page of any paper in the U.S. or around the world," said CEO Dan Akerson during the automaker's earnings conference call on Thursday. "We've been contingency planning going back to
before the IPO on what we would do, how we would react.
"Fundamentally, we're automotive manufacturers, so the market's going to be what the market's going to be," Akerson said. "
But look at it systematically -- energy's going to be more expensive and we've got to prepare for that, and it's come a little bit earlier than the world economy anticipated. So we're going to have to react." Akerson said GM North America is well-positioned, already geared up to expand its fuel-efficient vehicle lines in 2011. The Chevrolet Cruze, recently introduced, is selling well. The Sonic will come to market this summer: "We hope and expect it will have the same sort of acceptance as the Cruze has," Akerson said. The Buick Verano, built on the Cruze platform, comes to market in the fall. And the Volt is shaping perceptions, although production levels are relatively low, at least for the moment. "By the end of this year we'll have four really good entries in to the compact segment with high mileage models," Akerson said. " They are the right products, fortunately, by good planning, happenstance, I don't know, but they are good products at the right time." Nicholas Colas, strategist for ConvergEx Group, said automakers still can't produce the profits on small cars that they produce on bigger vehicles. "The fundamentals of the business haven't changed entirely," Colas said in an interview. "They still make more money on a big truck or SUV. So when gas prices go up, industry profits go down. There's no way around it." While it is true that U.S. manufacturers have focused on making compact cars with premium features, Colas said there is a limit. "The price point is important in small cars," he said. "When a small car has $3,000 worth of equipment that diminishes the appeal."
During the call, Mark Reuss, president of GM North America, acknowledged that "traditionally, we haven't done very well on a financial basis on those cars." But Reuss noted that the vehicle mix may minimize the negative impact. "We continue to see strength in some of our higher contribution margin vehicles as well," he said. For instance, GM crossovers are doing well, as consumers select them over full-frame SUVs. And the Buick LaCrosse comes with eAssist technology that uses a lithium-ion battery and a small electric motor to increase fuel economy by 25% to an estimated 25/37 miles per gallon (city/highway). Reuss added that GM has "some surprises coming." Ford ( F) has also been benefitting from gains in the small car market. In January, combined sales of small cars Focus and Fiesta enabled Ford's small car retail sales to increase by 99 %, while Ford achieved its highest retail share since 2006 in California,
a small car stronghold. A new Focus will become available in the spring. "Higher gasoline prices are factoring into vehicle purchase decisions," said Ken Czubay, vice president of U.S. marketing, sales and service. -- Written by Ted Reed in Charlotte . >To contact the writer of this article, click here: Ted Reed