GM wants to sell Americans on diesel

A version of its new Cruze compact features something few American cars have - a diesel engine. The question is, will it sell?

By Doron Levin, contributor

FORTUNE -- General Motors Co. is attempting to bury bad memories of failed diesel cars from the 1970s and 1980s. The Detroit automaker is attempting to turn to a fresh page with the new Chevrolet Cruze Turbo Diesel.

The latest version of Chevrolet's (GM) popular Cruze compact aims to attract car buyers now served mostly byVolkswagen's diesel models. Built in Lordstown, Ohio with an engine imported from GM's Opel subsidiary in Germany and adapted to use in the U.S., the new model's fuel efficiency is rated at 42 miles per gallon on the highway.

GM declined to say how many vehicles it plans to sell -- but the hope is that buyers will give the high-mileage model good reviews. Should that happen, GM might find justification to build diesel engines in the U.S. and offer diesel in other vehicles.

Chris Perry, a GM marketing executive, said the Cruze Turbo Diesel "is primed to win over diesel devotees and compact car buyers with its performance, torque and fuel economy." Global engineering expertise developed "a world-class, low-emissions engine to give U.S. and Canadian customers a car that's both fun to drive and practical at the pump."

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Starting in the late 1970s, GM sold a diesel-powered Oldsmobile that suffered from technical glitches, leading to class-action litigation and a settlement on behalf of angry consumers. A diesel-powered Chevette was sold through 1986, with no particular success. Not only did the Olds engine debacle fail to win adherents, it detracted from the company's reputation for engineering prowess.

Studies showed that American consumers equated the word "diesel" with dirt, smoke, noise and smell -- based on their experience with diesel-powered trucks and buses. Advanced diesel engines for cars have proven clean, quiet and efficient, but no U.S.-based manufacturer has wanted to take a chance with buyers.

But an older cohort is giving way to a new generation that doesn't really know diesels. If they drove Mercedes' diesel-powered E350 BlueTec, they'd likely be believers. Chrysler is planning to sell a diesel version of its Grand Cherokee; likewise, Mazda will import a Mazda6 sedan with a diesel.

"The market for diesel cars in the U.S. is small at present, but is expected to grow due to Corporate Average Fuel Economy requirements and expected increases in gas prices," said Mike Omotoso, powertrain analyst at LMC Automotive. "So far, the German automakers haven't had any diesel car competition in North America. GM could do well with it, particularly with younger buyers who don't have the old prejudices against diesel."

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VW has carved out a niche of enthusiastic, satisfied owners of diesel-powered vehicles. Mercedes-Benz has introduced its BlueTec line of diesels that sell for $50,000 and more to high-end buyers. "We expect to beat (VW) Jetta," said Cristi Landy, a Chevrolet marketing executive at the Chicago Auto Show, in terms of price, mileage, and performance. The Cruze Turbo Diesel will start at less than $26,000, compared with the $26,325 starting price for Jetta Diesel.

GM sold half a million diesel-powered cars outside the U.S. last year, including 33,000 Cruzes. With a bit of luck, the Cruze Diesel could find an audience, giving GM another flavor of its popular compact. But the bigger payoff will be if GM is able to introduce the engine option across its model lineup -- a boost it badly needs.

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