A few years ago, General Motors' (NYSE:GM) Mary Barra -- who was then GM's global product chief -- announced a sweeping overhaul of the General's convoluted global product line. Just as Ford (NYSE:F) had done, GM said that it would consolidate its offerings around a much smaller number of platforms and engines, in an effort to save money and improve quality.
That has worked out very well for Ford. It's still a work in progress at GM, and will be until about 2018 -- but the signs so far have been very encouraging.
Last week, GM announced a new family of small, high-tech gasoline engines that will power its next generation of fuel-efficient cars. As Fool contributor John Rosevear explains in this video, these engines fit right into GM's global plan -- but they take a few cues from key rivals like Ford.
A transcript of the video is below.
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John Rosevear: Hey Fools, it's John Rosevear, senior auto analyst for Fool.com. General Motors certainly has a lot going on these days, with this big recall scandal, but their business continues to move on and I want to talk about something else right now. GM announced this week that it's launching a new line of engines, a new version of what GM calls the Ecotec engine family, and if you're a Ford fan some of this is going to sound really familiar.
This is a new family of small fuel efficient gasoline engines, there are 11 different versions, some will have turbos and some won't but they're all small, just 1 liter to 1.5 liters, mostly four cylinders but the smallest ones are three cylinders, and GM says that they're modular, they share parts and engineering and they're easier to build.
These are going to debut over the next couple of years, and GM says that by 2017 they'll be building more than 2.5 million of these a year and they'll be used in 27 different GM models around the world. One of the first of those will be the next-generation Chevy Cruze, which GM says it will launch in China later this year.
There are a few reasons why this is all significant from a business perspective. First, this is part of one of GM's biggest corporate initiatives, streamlining its global product portfolio to cut costs and improve economies of scale. That's a project that was started by Mary Barra before she became GM's CEO, and it's key to her plan, GM's plan, to increase profitability over the next few years.
Second, these engines are more fuel efficient than the ones they're replacing, and we all know automakers are under pressure around the world to increase fuel economy, and GM says these engines are also designed to support hybrid systems and alternative fuels, so they're a step forward on the green front.
Third, as I hinted at earlier, GM is clearly responding to some of its competition here. Ford has a 1.0-liter, three-cylinder, turbocharged engine that has won a bunch of awards, it has done well for them in Europe for a couple of years now and it just came to the U.S., it's now an option on the Fiesta here. So now GM will also have a 1.0-liter, three-cylinder, turbocharged engine, and they say it will be "up to 25 percent quieter" than Ford's.
But it's not just Ford, Volkswagen (NASDAQOTH:VLKAY) has a 1.4-liter, four-cylinder turbo that has won some acclaim for its advanced technology, and now GM will have a similar engine, and GM says it's "up to 50 percent quieter" than VW's.
That new GM 1.4-liter turbo engine is going into the new Cruze that launches in China, by the way, GM says it puts out 148 horsepower and it'll come with an all new dual-clutch gearbox, that's an automated transmission that you can shift manually with paddle shifters. That's coming out in China later this year, but we don't know when or if it's coming to the U.S. But these engines will be in a lot of U.S. models before long, as GM continues to streamline its global production and boost fuel economy. Thanks for watching.
John Rosevear owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.