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To grow, GM tries to make small cars cool

In General Motors hoped-for turn-around, its biggest product challenge may be small cars.

WARREN, Mich.--For all the attention on the electric Chevy Volt, General Motors has big expectations for another key car segment: small cars.

The auto giant opened up its design studios and testing grounds to the media on Tuesday to showcase its product pipeline of 25 new models over the coming two years. Having dramatically cut costs, its turnaround now rides on its ability to sell new cars.

Certainly, GM will continue to sell SUVs, trucks, and large sedans--highly profitable product categories that flourished when gasoline was cheaper than now. But GM's designers have sharpened their focus on smaller fuel-efficient cars and crossovers, betting that rising gasoline prices are inevitable.

"The days when we did a great Silverado (pickup truck) and did an adequate small car--over. We can't do that as a company," CEO Fritz Henderson said during a press conference on Tuesday. "If we do (small cars) well, I think we'll reopen ourselves to a market that frankly we haven't done as well as we should."

The Chevy Spark, one of GM's upcoming 'small and cool' cars. General Motors

The smaller cars--none would qualify as a tiny, two-seater--will help the company meet fleet mileage mandates and help GM better compete on fuel efficiency, company executives and analysts said.

But GM's vice president of global design, Ed Welburn, made clear that the goal isn't just to turn out "econoboxes" that post good mileage ratings.

"Cool and small is the next big thing," said Welburn said. "Small cars have been done before but it was always like, 'I can't afford big so I have this.' I believe small cars can be cool."

Higher gasoline prices
During a tour of GM's design studios on Tuesday, company executives showed the compact cars and smaller crossovers in its pipeline. Later this year, GM will release the Chevrolet Cruze, a four-door compact, and introduce a two-door compact, the Chevy Spark, in 2012.

Although the Chevrolet entry-level brand will tend to have most of its compacts, even its higher-end brands--Buick, GMC, and Cadillac--will introduce or are exploring smaller models.

On Tuesday, Welburn took the wraps off an entry-level Cadillac. Even designers at its GMC brand, known for its giant SUVs and trucks, have created a model of a compact, which roughly resembles a Nissan Cube.

Meanwhile, its Buick lineup will feature a smaller crossover, a new compact sedan, and a plug-in hybrid crossover, which will all be available over the next two years.

GM has been able to get substantially better fuel efficiency on its large vehicles, too, noted Dennis Virag, the president of Automotive Consulting Group in Ann Arbor, Mich. The Chevy Equinox, for example, gets about 32 miles per gallon while most SUVs get about 20 or 22, he said.

"The whole trend in the industry is towards smaller and fuel-efficient vehicles but the consumer still wants the amenities," Virag said.

Henderson said that GM is seeking to meet or exceed the industry benchmark on fuel efficiency not only to meet government mandates but to appeal to consumers who expect gasoline prices to continue going up.

"Our fundamental premise of planning for higher gas prices is the right premise," he said.

Corrected at 9:17 a.m. PDT: The name of the maker of the Cube was incorrect. It is Nissan.