GM: NAO can survive downtown

General Motors Corp.'s North American Operations could break even on a cash-flow basis in 1995, even if a mild downturn -- a 7% to 10% dip -- occurs in the U.S. new vehicle market, top executives tell financial analysts in a meeting in Rye, NY.

Analysts say GM brass also told them the company is taking a more critical approach to reviewing management performance and is tying executive bonuses closer to company financial results.

GM says it will take 12 to 18 months to get its costs down so that NAO can break even on a net-income basis in a mild downturn, or on a cash-flow basis, should vehicle sales decline by as much as 15%. The break-even cash flow is essential to fund product programs without going into the red, something GM has not been able to do in 15 years.

Analysts say GM is sticking to its 1995 vehicle sales forecast of 15.6 million light vehicles, but won't forecast the market for 1996 or 1997. European sales are projected at 12.2 million units, up from about 11.9 million in 1994. Mexico is expected to be in a recession for the next two years, and GM also sees Brazil and Argentina dipping below 1994 sales levels.

Chief Financial Officer J. Michael Losh says GM is targeting a cash balance of $13 billion to $15 billion. The automaker reported an $11 billion cash balance at the end of 1994.

But even as GM focuses on cost reduction to become more profitable, it intends to create more truck production capacity by early 1996. Analysts were told some existing car facilities will be converted to build trucks. No plants were named.