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GM shifts strategy to fight sales dip

NEW YORK - Shifting resources to key high-volume vehicles and educating potential buyers about unique aspects of its car and trucks are part of General Motors Corp.'s strategy for fixing its ailing North American business, the head of GM North America said Wednesday.

Gary Cowger acknowledged the troublesome start to the year for the world's biggest automaker, saying it was hurt by strong business at the end of 2004, rising interest rates, competition and health care costs.

"We're facing a difficult situation that will require a lot of hard work, but we're extremely focused on what we need to do," Cowger said during a two-day media preview for the New York International Auto Show.

Speaking Wednesday at Morgan Stanley's global automotive conference in New York, GM vice chairman Bob Lutz echoed Cowger's sentiments: "Sure, we face short-term challenges, and this is not going to be a banner year. It's a difficult period of adjustment, but we'll get through it. Long term, I think we're doing all the things we need to position ourselves for success."

GM confirmed Wednesday it is considering selling a stake in its commercial mortgage interest business, which handles loans for hotels, hospitals, golf courses and other entities. GMAC Commercial Mortgage Corp. collects payments on mortgages valued at $249-billion.

GM spokeswoman Toni Simonetti said the automaker is in discussions about selling a stake in the unit, but GM would remain a significant stakeholder. She declined to say how much GM is seeking, who the company is talking to or how large a stake the automaker would like to retain.

The Wall Street Journal reported Wednesday the sale could raise as much as $1-billion should outside investors take as much as a 50 percent stake.

"We like the business," Simonetti said. "It's a growth business. It's profitable."

Simonetti noted that GM put its commercial mortgage business up for sale in 2003 but pulled it off the market because it wasn't satisfied with potential offers.

Cowger said GM's financial outlook may have changed when it slashed its first-quarter and full-year earnings forecasts last week, but company managers remain focused on turning around the business.

That includes spending incentive dollars more strategically, reallocating resources for vehicles with greater potential for high-volume sales and improving marketing, Cowger said.

In particular, he said GM needs to do a better job of conveying to customers the unique aspects of its cars and trucks.

He cited the company's announcement in January that it plans to put two safety features - OnStar in-vehicle communications service and electronic stability control - in all of its vehicles by the end of 2010. GM officials say it would be the first automaker to make both features standard across its fleet.

"We want to make sure people are aware of the things only GM can do," Cowger said.

Despite GM's sluggish beginning to 2005 - sales were off 6.2 percent combined for January and February versus last year - Cowger said he's encouraged by demand for some new vehicles.

For example, he said the Chevrolet Cobalt, the replacement for the high-volume Cavalier, ranked in the top 10 in small car sales in February and could climb into the top three in March.

Since Cobalt's launch in November, it's attracted more buyers who are younger than 35 - 34.3 percent - than Toyota Motor Corp.'s popular Corolla and Matrix cars.

Cowger said he expects GM sales of trucks and big sport utility vehicles, which generate larger profits than cars, to be much improved in March over January and February.

In a new report, Art Spinella, president of CNW Marketing Research in Bandon, Ore., said a portion of GM's problems seem to emanate from the retail side of the business.

Spinella said GM may boast healthy customer loyalty levels and improving brand perception, but consumers generally don't like GM dealer locations and the automaker's trade-in values are less than the industry average.

GM shares fell 88 cents to close at $28.66 on the New York Stock Exchange. Its shares have traded in the last week at prices not seen in a decade.

[Last modified March 24, 2005, 01:19:16]