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GM adds new diesel to European Cadillac to spur non-US sales

General Motors Corp. will add a new diesel engine to Cadillac CTS sedans in Europe in 2009 as the world's largest automaker works to lift overseas sales amid a drop in US market share.

The 2.9-liter, six-cylinder engine is being developed with Cento, Italy-based engine-maker VM Motori SpA and features new GM pollution-control technology, said Charles Freese, executive director of GM powertrains. It will be rated at 250 horsepower. „If you're going to compete against BMW and Mercedes in Europe, you need a diesel,” said Casey Selecman, an auto industry forecaster at CSM Worldwide Inc. in Farmington Hills, Michigan. „It also needs to be cleaner and more powerful than the competition.” GM CEO Rick Wagoner, who rejected an alliance last year with Renault SA and Nissan Motor Co., is counting on foreign revenue to help stanch about $13.6 billion (€10.3 billion) in losses over seven quarters through September 30.

Detroit-based GM sold 55% of its vehicles outside the US last year. With diesel-powered vehicles making up about half of sales in most European markets, GM needs a diesel-equipped Cadillac, Freese said. GM will give additional details on the engine today at the Geneva auto show. Cadillac had 3,243 2006 sales in GM's European region, or about 1.3% of the brand's worldwide total. Western Europe sales may reach 6,039 by 2010, according to Lexington, Massachusetts-based Global Insight Inc., on new models and a 2001 dealership accord with Dutch auto retailer Kroymans Corp.

 

„It's a difficult market to try and penetrate because for Europeans, luxury is German,” Global Insight analyst Rebecca Lindland said. „It's sort of counter-intuitive, but the more they seem American, the easier it will be for them to be noticed.” In western and central Europe, 2006 brand registrations for DaimlerChrysler AG's Mercedes rose 4.3% to 725,935 units, while Bayerische Motoren Werke AG gained 4.4% to 678,745, according to the European Automobile Manufacturers Association.

The two automakers are growing in their home markets as GM's US sales decline. The automaker's US market share last year sank to 23.4%, an 81-year low. North America still accounts for 96% of Cadillac sales. The new diesel used GM technology and engineering from VM Motori to meet European emissions rules, Freese said. After debuting in the CTS, the engine will be used in Saab and Opel models. GM isn't planning now to use the engine in the US because of stricter domestic air-quality standards, Freese said.

 

VM Motori, 51% owned by Penske Corp. LLC and 49% owned by DaimlerChrysler, will manufacture the engine, which Freese said should use about 25% less fuel than a similar gasoline model. GM is building more vehicles able to use bio-fuels, gasoline-electric systems and fuel cells that run on hydrogen to compete with models from Toyota Motor Corp. and other rivals that reduce reliance on gasoline. Toyota may pass GM as the largest automaker as early as this year. GM worldwide sales fell to about 9.09 million last year from 9.17 million in 2005.

Toyota's 2006 sales grew 8% to 8.8 million, and the Japanese automaker expects to sell 9.34 million vehicles this year. GM has twice delayed filing its fourth-quarter and full-year 2006 results to restate finances from 2002 through last year's Q3. GM is in talks with DaimlerChrysler's Chrysler unit, which had worldwide sales of 2.7 million vehicles, people familiar with the talks have said. Wagoner also confirmed in January that GM is in preliminary talks about a possible stake in Malaysia's unprofitable carmaker Proton Holdings Bhd. (Bloomberg)