"In chaos lies opportunity," said GM president Gary Cowger at this week's New York International Auto Show, putting the best face on the crisis besetting the world's biggest auto maker.

GM has more opportunities to rise above chaos than anyone could wish for.

On March 16, GM stunned investors by retreating from rosy profit forecasts of $4 (U.S.) to $5 per share for 2005, dropping the forecast to a measly $1 to $2 — an unforeseen and sickening turnabout that prompted Wall Street to pronounce even the revised forecast overly optimistic.

GM shares plunged 14 per cent to $29, losing $2.7 billion in shareholder value in just one trading session. The market cap of the world's largest industrial enterprise, at $16.4 billion, slipped below that of Harley-Davidson Inc. ($17.7 billion), a niche player with 3 per cent of GM's revenues that was given up for dead in the early 1980s.

All three major U.S. credit rating agencies are poised to slash ratings on GM's $290 billion mountain of debt, which would drive up GM's already punishing borrowing costs.

GM now warns it might generate as little as $600 million in profits this year, a dramatic fall from $3.6 billion in 2004 — itself an anemic performance derived mostly from financing vehicle purchases rather than making and selling product.

So lacklustre is the street appeal of GM models, Hummers and radically redesigned Cadillacs excepted, that the company's U.S. market share dipped to a perilously low 24.9 per cent in January and February, down from 27.2 per cent in the year-earlier period.

Because of its huge fixed costs in plant capacity and wage and benefit obligations to a small city's worth of active personnel and retirees, market share declines translate into significant financial losses.

If GM's market share drops below 25 per cent, "GM begins to lose money," and starts to burn through its cash reserves," top auto analyst John Casesa of Merrill Lynch & Co. warned.

Craig Hutson, senior bond analyst at research firm Gimme Credit, was also gloomy. "If customers don't take a strong liking to GM's new line of trucks," Hutson said, "then GM will have to shrink the company."

GM, which has a stable of brands, including Chevrolet, Pontiac, Buick, Cadillac, GMC, Saturn, Saab and Hummer, has stagnated for decades.

The last time GM was in this much trouble was in 1992 when it lost $23 billion. This prompted GM to take the unprecedented step of ousting its CEO, triggering a wave of CEO firings in corporate North America that continues to this day. The victim, an aloof Robert Stempel, seemed in denial about GM's intractable woes.

Not surprisingly, current CEO Richard Wagoner, 52, is under enormous pressure from GM's board. But unlike Stempel, he's done a lot of things right.

Former college basketball star Wagoner declared upon taking the reins at GM in 2000 that he was a team player. The self-effacing CEO immediately proved it, ceding the limelight to high-profile recruits, including financial whiz John Devine and legendary "car guy" Bob Lutz, 73, a former Chrysler Corp. president who commutes to work by self-piloted helicopter and is Wagoner's design czar.

Wagoner's gutsy response to the soft economy after the terrorism attacks of Sept. 11, 2001, was a brazen attempt to regain market share with a hugely generous rebate plan in which GM was accused of practically giving vehicles away. The gambit worked for a while, forcing smaller rivals Ford Motor Co. and DaimlerChrysler AG to follow suit.

On Wagoner's watch, GM made great improvements in product quality, measured by the authoritative J.D. Power annual surveys. Productivity also improved, notably at GM's Oshawa production complex, whose Number 1 and Number 2 plants ranked second and third worldwide, respectively, in the latest Harbour Consulting survey. And Consumer Reports found that two Oshawa-produced models, the Buick Regal and Chevrolet Monte Carlo, were the most reliable vehicles in their class in 2004.

In relatively short order, Wagoner made impressive cuts in operating costs, and GM has been relentless in squeezing suppliers. In contrast to Stempel and his star-crossed predecessor, Roger Smith of "Roger & Me" mockumentary fame, Wagoner gets high marks from most peers.

His ambitious to-do list embraces everything from a revamped product line to novel joint ventures with Fiat SpA and others, to repairing fractious relations with GM's 7,600 U.S. dealers.

The competition is more fierce than Wagoner had reason to expect.

Carlos Ghosn, world's hottest auto executive, is pitting a rejuvenated Nissan/Infiniti against GM in the lucrative North American market just five years or so after obituaries were being written for the Number 2 Japanese auto maker.

Dieter Zetsche has surprised even himself with the speed of his turnaround at a Chrysler that was staring into the abyss as recently as 2001. And Toyota, whose market cap far exceeds that of GM, Ford and DaimlerChrysler combined, has recently made official its goal of eclipsing GM in vehicle production by 2007 — a strategy that betrays Toyota's willingness to pursue market share gains at the expense of profit maximization.

While GM's unusually activist board might be tempted to replace Wagoner, it's a restructuring of the company that's needed, not the expedient of a coaching change.

Truth is, GM has at least six surplus plants it can't readily close due to onerous labour contracts — a roadblock that did not confront Ghosn in Japan. As it is, the 3,000 workers in Lansing, Mich., that GM announced this month it will "permanently" lay off will continue to be paid an average of $6,700 per month in wages and benefits — or $20 million in total — until they choose to remove themselves from the payroll by taking another job or retiring.

And in contrast with post-World War II start-ups Toyota and Honda, GM is a century-old firm with so-called legacy costs that amount to $5 billion a year paid to 1.1 million employees, retirees and their dependents. GM's biggest supplier isn't U.S. Steel, it's Michigan Blue Cross.

The employee liabilities add $1,525 to the manufacturing cost of each GM vehicle — a non-factor in Canada, Japan, Europe and other jurisdictions with government-administered medicare plans and resulting lower health-care costs. That explains why Toyota earned about $2,000 profit on each of its North American vehicle sales last year, compared with a paltry $290 for GM.

Wagoner has his detractors, to be sure. MaryAnn Keller, doyenne of Detroit analysts, told The New York Times earlier this month that GM is "careering from one mess to another," and that "the only thing that could make things better is a major restructuring."

Sean Egan of debt-rating firm Egan Jones added: "Some drastic action is needed in the very near future to even have a chance of turning around GM's slow slide to irrelevance."

Drastic moves are afoot. Lutz dropped a bomb at a session with Morgan Stanley analysts this week, saying a venerable brand — maybe Pontiac or Buick — will meet Oldsmobile's fate and be shut down in the absence of a dramatic turnaround.

For public consumption, a much cheerier Mark LaNeve, newly charged with overhauling GM's marketing efforts, told visitors at the New York auto show this week of bold plans to reposition Buick as "pristine quality, with quiet tuning"; Pontiac as "gritty street performance, authentic Detroit-built iron"; and Saturn as "sophisticated European flair, and no-hassle selling."

But nothing is so common at GM than periodic grandiose makeover plans that fall flat. Image revivals are underway at Pontiac and Saab, not that many have noticed.

GM has gamely secured product placements for its Buick LaCrosse on the hit TV series Desperate Housewives, and conceived an Aerosmith "Dream On" soundtrack for the vehicle's TV spots. But Buick sales are still slumping.

What to do?

Stick to your knitting. BMW AG stumbled with its acquisition of Rover Group; and Ford's long, profit-challenged dalliance with Jaguar PLC has succeeded only in making a Jag look like a Taurus.

GM's preoccupation with tiny, money-losing Saab is a pointless diversion from the more promising, higher-volume Saturn initiative, which after a brilliant start was left to languish. Ditto the Fiat deal, a Wagoner gambit that simply yoked GM to the sad-sack of European auto makers without yielding enough of the ballyhooed technology-sharing benefits that were expected to help turn around GM's chronically ailing European division.

Cut the number of factories and some of the eight GM brands.

To achieve the plant closings, start negotiating now with the United Auto Workers. Don't wait till the 2007 contract expiration to request concessions on gold-plated layoff-pay and more co-pays on health care.

To achieve the worker concessions, cut management salaries and bonuses, sending the same kind of shared sacrifice message that worked for Lee Iacocca when he was pulling Chrysler back from the brink in the early 1980s. Make profit-sharing and stock-purchase plans a bigger component of compensation for salaried and wage-earning employees alike.

Roy Chapin, former CEO of American Motors Corp., once observed that GM's enviable size allowed GM to get away "with some product atrocities of the sort that would have done in Packard or Nash or Hudson."

True enough. But with "atrocities" like the Corvair and junkbox Vega a fading memory, GM's size now works against it in nurturing the illusion that a styling breakthrough somewhere — the rap-star fetish with Caddy SUVs, for instance — can paper over the continuing malaise throughout the rest of the lineup.

BMW's 3 series, accounting for about half of the Munich auto maker's sales, is a make-it-or-break-it proposition for the company. None of GM's eight brands has that status, and it shows in the desultory manner in which they are marketed.

Wagoner is bullish enough to have insisted in a January press conference that after 73 years of being the industry's top dog, "the betting is we'll be ahead for the next 73 years."

But then he turned a bit philosophical.

"Is it a birthright?" Wagoner asked of GM's longevity. "Absolutely not. Could we blow it next year? I doubt it. Could we blow it in 10 years? For sure. We could do anything in 10 years."

He could bust up GM without benefit of an antitrust judge. It would go against the character of this GM lifer.

But the choice for Wagoner or his successor is to continue managing GM's steady decline, or, as with the breakup of the Standard Oil Trust, AT&T or the old Canadian Pacific, to break up a sclerotic enterprise into nimble firms, each of which had survival as a first order of business.