General Motors

"All this merger talk is very interesting," said a Chrysler executive who asked not to be identified. "There is certainly always a time when things like that make a lot of sense."

And this is that time. It would have been unthinkable as little as a year ago, but now it's all about the cash. GM, which lost $18.8 billion in the first six months of 2008, has $21 billion of it left on hand. With car sales in the basement, the company could run through that by the end of the second quarter.

Chrysler bid for cool last month was no less than three proposed EVs.

Chrysler's big asset right now is not its SUV-heavy product line: It's $11 billion in cash. GM's share price dipped below $5 in the wild flailings of the last week, and its market capitalization fell to a marginal $3.6 billion.

A billionaire could put the whole U.S. auto industry in his or her back pocket right now. As the Wall Street Journal reported, "At Friday's prices, someone with $8 billion or so lying around could have bought all the public stock in both companies [Ford and GM], and had change left over."

If Chrysler were to be merged with General Motors -- and it looks about 50-50 at this point -- they would create a rather lopsided company. Both entities are like luxury liners that didn't want to turn around when the SUV phenomenon started to go south. And when they did start to move, they both had the same green idea: series hybrids, in which a small gas engine acts as a generator to drive an electric motor (which is what turns the wheels).

GM was first with the ingenious Chevrolet Volt, which is due to be on the market by 2010, but then Chrysler, not to be outdone, said it had two cars just like it (a Jeep Wrangler and a Chrysler Town and Country minivan). As announced in September, the cars had huge lithium-ion battery packs. But the small gas engines are in the let's-look-around phase.

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General Motors has some real clunkers for which it waves a green flag. Take the new $71,685 Cadillac Escalade Hybrid, which goes on sale this month. It costs $3,600 more than a standard Escalade, and achieves fuel economy of...20 mpg in town and 21 on the highway. Sure, the conventional Escalade is much worse at 12 and 15 mpg, but even as an innovative dual-mode hybrid, the Sierra Club is not going to be celebrating its release.

The all-new Cruze: 40 mpg?

GM should see waving flags in its sales numbers. The Escalade, for instance, was down more than 40 percent from July 2007 to July 2008. Nobody wants big SUVs.

But GM has some models that do deserve attention, such as the Cobalt Xtra Fuel Economy (XFE). For 2009, that one gets a very impressive 37 highway mpg (one mpg more than in 2008), a feat it achieves via variable valve timing, a new and taller final drive and trick tires with low rolling resistance.

The Cobalt is kind of plain-jane, but it's got bragging rights. When it was introduced last year, the XFE was six percent of Cobalt sales; now it's 15 percent. Through July, the 2008 Cobalt was a whopping 29 percent of total Chevrolet sales. The Cobalt line is only around through the 2010 model year, however, and will be replaced by the all-new Cruze (which rides on GM's compact Delta platform).

Initial reports have said the Cruze, built in Lordstown, Ohio and around the world, will get more than 40 mpg, but there's also news that the car will be larger than the Cobalt -- a danger sign.

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I don't really understand General Motors. The company is totally on the ropes, reporting a three-month loss of $15.5 billion in early August, with North American sales down 20 percent. Some 74,000 workers could lose their jobs in a new round of buyouts and early retirements. And more factories making big SUVs and trucks will close.

The Tahoe XFE: only modest fuel-efficiency gains.

We're still waiting for competitive small cars that would get people excited about going into a GM showroom. Meanwhile, the company's strategy is...to make minuscule improvements to its big Silverados, Sierras, Tahoes and Yukons and paint them PR green.

The new Xtra Fuel Economy (XFE) models (all with two-wheel-drive and the 5.3-liter V-8 engine), deliver a five percent improvement in highway mileage and seven percent in city driving! Wow! A combination of weight loss, aerodynamics and mechanical improvements gets them to 15 city and 21 highway! Standard big boys are at 14/20, so if you do much highway driving you'll hardly notice an improvement.

The same basic problem exists with GM's big hybrids. The '06 Chevy Silverado Hybrid, for instance, delivers 16/19 mpg. Not exactly impressive, and again hardly better than the standard (and cheaper) truck. For '09, GM will put its sophisticated dual-mode hybrid system in the Silverado, for a claimed 25 percent overall fuel economy improvement. But it's still a gas guzzler.

Guess what? GM trotted out its $50,000 dual-mode Yukon and Tahoe hybrids (21 city/22 highway, comparable to a standard four-cylinder Toyota Camry), and sales have been, well, slow. Instead of the projected 10,000 to 15,000 per year, GM has been selling more like 500 a month.

Here's the problem: They're too big! People don't want big cars and trucks anymore! GM argues that it can have more impact on the environment by improving the performance of the big vehicles that "people want to buy" than it can making small, fuel-efficient cars. But that argument is threadbare today.

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