GM's Wagoner says economic woes concern

By Jui Chakravorty Das

DETROIT (Reuters) - The top executive at General Motors Corp said Sunday that the woes of the economy were a concern to the automaker but predicted that the second half of 2008 would be better than the first.

Higher gasoline prices combined with a weak housing market have raised concerns that the U.S. economy could tip into recession in 2008 and cause consumers to delay big-ticket purchases such as new vehicles.

"There is a range of uncertainty. I think it's fair to say there has been a reasonable amount of turmoil in financial markets driven off this housing thing," said Rick Wagoner, speaking to reporters at the North American International Auto Show.

U.S. auto sales fell for the second consecutive year in 2007, dragged down by a slowing economy, a slumping housing market and tighter credit markets that pinched less credit-worthy borrowers.

While the consensus view among Wall Street analysts and high-profile investors points to a further decline in the world industry's single largest market in 2008, there is still a debate about how deep it will go -- especially if the U.S. economy tips into outright recession.

Full-year 2007 sales dropped almost 3 percent to 16.14 million vehicles, the lowest since 1998 and down from 16.55 million a year earlier. Wagoner said he expects the market in 2008 to be about as tough as the year just ended, estimating total U.S. industry sales to come in at 16.3 million to 16.5 million units.

"Maybe the range of outcomes is a little broader than what we'd be normally be expecting at this point. Could it come under pressure if things really got worse? Sure," Wagoner said. "But it will be more in this range, not radically smaller or radically better."

Other GM sales executives have said that the automaker expects the current quarter to be the weakest of the year, with the U.S. economy managing to avoid recession.

Analysts agree that a decline of a high magnitude would force more sweeping production cuts and job losses, especially among the Detroit-based automakers that have been banking on a turnaround after already wrenching restructurings.

Wagoner said he expects most of the cost savings from a recent labor deal with the United Auto Workers union to be realized in 2009 and 2010, adding that he expects to announce additional buyouts of the blue-collar work force soon.

"We are working with the UAW on a broader program. ...We'll have something to say about that very soon," Wagoner said. "Quite soon in fact."

$2,500 CAR

Wagoner also said that GM has no plans to compete directly with the "Nano" -- the world's cheapest car made by Indian automaker Tata Motors and sold for about $2,500 -- but said he was open to the idea of entering that segment in India.

"At this point we want to grow aggressively (in India)," Wagoner said. "Whether we eventually get into that product segment, we haven't made a call yet."

Tata launched the Nano in India earlier this month.