How GM Could Save Itself: A Fuel Efficient Chevrolet Cruze

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.

Nancy Libby, Chevrolet's communications manager, says the new Cruze will be "a little bit bigger" than the Cobalt, and not a direct replacement for it. Will it achieve 40 mpg? "We don't know the fuel economy, but it will be segment leading," she said. Power comes from a 1.4-liter turbocharged four-cylinder engine, but that's about it for details.

As a world compact car, to be built in Russia, Australia, Europe and Korea, the Cruze is incredibly important to GM. "The compact segment is the fastest-growing niche in the marketplace, so it's very important we have a highly competitive product there," Libby said.

If GM is serious, it will cancel the hybrid Escalade program and figure a way to shoehorn the dual-mode hybrid system into the Cruze. Maybe 50 mpg would be achieved, and buyers would flock to this super-green Chevy.