April 19, 2011 / 9:20 PM / 8 years ago

UPDATE 5-Supply chain biggest near-term challenge-GM CEO

* Akerson says no more problems on supply chain expected

* No comment on Treasury sale of stock

* GM better prepared for $4/gallon gas than in 2008

* GM maintains 13 mln to 13.5 mln U.S. 2011 auto sales (Rewrites first paragraph, adds IHS Automotive sales outlook, executive comments from Toyota, Nissan)

By Deepa Seetharaman and Dena Aubin

NEW YORK, April 19 (Reuters) - General Motors Co (GM.N) has a better grasp of how to handle disruptions in its global network of suppliers, said GM’s chief executive, who also reiterated the automaker’s outlook for vehicle sales this year.

CEO Dan Akerson said on Tuesday ensuring that shortages do not disrupt GM’s supply chain is its biggest near-term challenge.

He also said supply shortages will not force GM to cut its outlook for U.S. vehicle sales in 2011, currently set at between 13 million and 13.5 million. Any problems would only disrupt production for one to two months.

“We’re particularly focused on the semiconductor area,” Akerson told reporters at an event on the sidelines of the New York auto show. “But we’re feeling better than we did a month ago and a lot better than we did five weeks ago.”

The March 11 earthquake and tsunami in Japan and subsequent infrastructure problems forced factories in Japan to close or run with limited power, causing a shortage of key auto parts and supplies, including semiconductors and paint.

Major automakers have dealt with the shortages by curtailing production in North America. GM idled its pickup truck plant in Shreveport, Louisiana, for one week last month.

“I don’t think we’ll have any problems going forward, given what we know today,” Akerson said at the NADA/IHS Automotive Forum.

Akerson said the fact that GM’s operations are still running is “almost heroic” and that GM had “not ten but tens of tens of people in Japan within 48 hours.”

Akerson’s comments came as executives from Toyota Motor Co (7203.T) and Nissan Motor Co (7201.T) said the number of parts at risk for shortages was shrinking. But Toyota also extended its North American production slowdown for six weeks to June 3, underscoring the continued challenges. [ID:nN19289276]

IHS Automotive trimmed its projections for U.S. vehicle sales this year due to surging oil prices and the Japan crisis. The industry forecaster now predicts sales this year will reach 12.9 million, down from its earlier outlook of 13.3 million.

STOCK BELOW IPO PRICE

Supply disruptions, coupled with the surge in fuel prices, have hampered GM’s stock, which has fallen below its IPO price of $33. GM’s stock ended down 1.3 percent at $29.59 on the New York Stock Exchange on Tuesday.

“Oil is a concern on investors’ minds,” Akerson said. “I think the supply chain as a result of the disaster in Japan is an issue. I think we’ve navigated those waters very very credibly.”

Akerson declined to comment on whether the drop in GM’s stock price would hamper the U.S. Treasury’s exit. He also declined to discuss reports the U.S. Treasury was considering a sale of shares.

“They will tell us when they’re getting out, I will not tell them when they’re getting out,” Akerson told reporters. “I don’t know what’s going to go into their calculus. I think there are many, many variables in their consideration and they don’t share that with us.”

The U.S. Treasury advanced $50 billion to GM during the financial crisis to help the top U.S. automaker avoid liquidation and restructure in bankruptcy.

GM got into the precarious position of having to rely on a U.S. government-sponsored bankruptcy in 2009 because of a series of bad decisions leading up to that.

“We had oversupply because we had huge fixed costs, we produced too many cars, the quality went down, they weren’t in the right profile,” said Akerson. “It was like you sat down and said what are 10 worst things we can do, we hit about eight or nine of them.”

GM’s IPO last November cut the government’s stake to 33 percent of common shares outstanding down from 61 percent. The U.S. Treasury may sell more shares to further reduce its stake, a person familiar with the matter said. [ID:nL3E7FJ0E0]

For Breakingviews on GM, click [ID:nN19299912]

THE $120 PLAN

Akerson expected fuel prices to remain high in the near-term as the U.S. auto industry nears the peak summer car driving season.

U.S. pump prices averaged $3.84 a gallon last week, the most expensive since August 2008, and about a dollar higher than a year ago, according to government data released on Monday.

“The likelihood of a sustained decline in the near future appears dim,” Akerson said. “The last time the prices climbed to these levels in the summer of 2008 it caught all of us flat-footed. We’re better prepared today.”

A surge in fuel prices to between $120 and $130 a barrel was chief among GM’s concerns after the company’s IPO, he said.

His team developed what they called a “$120 plan” that included speeding up the production of the next generation of the Chevrolet Malibu, he said, adding the jump in fuel prices had come sooner than expected.

Akerson said small cars such as the Chevrolet Cruze and Sonic, as well as the Buick Verano, would help GM ride out the surge in fuel prices this year.

He said the company was unlikely to speed up production of pickup trucks given the “mileage-sensitive environment” for car shoppers. The company’s top-selling vehicle in March was its Chevrolet Silverado pick-up truck with more than 32,500 in sales, nearly double sales of the Chevrolet Cruze. (Editing by Gerald E. McCormick, Derek Caney, Andre Grenon and Steve Orlofsky)

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