Reuters is reporting that General Motors Corp. is delaying planned spending on product development for 2009 and 2010 in a bid to save cash.
The reduced spending, along with cuts to design, engineering and research budgets, could delay the launch of vehicles such as the Chevrolet Cruze, a fuel-efficient, small sedan that GM has touted as crucial to its turnaround effort.
Automotive News quoted an unnamed person familiar with GM’s plans as saying the cutbacks were aimed at saving as much as US$1.5 billion.
GM spokesman Tom Wilkinson said the automaker was reviewing its spending because of an industry-wide slump in sales, but declined to discuss whether specific vehicle programs such as the Cruze could be delayed as a result.
“We look at our portfolio on a monthly basis,” he said. “We are looking at our capital spending in the midst of the industry downturn.”
Wilkinson said GM was pushing ahead with development of the highly anticipated Chevy Volt, an all-electric car scheduled for release in 2010. In May, GM scrapped development plans for a replacement platform for its full-size SUVs like the Cadillac Escalade because of a sharp and continued drop in demand for full-size sport utility vehicles. More recently, GM has announced a series of stepped-up cost cutting as it battles to shore up its cash position amid a global slump in auto sales that threatens to overrun its restructuring plans.
In an unusual step also driven by cost cutting, GM said earlier this month that it was pulling two new models it had planned to display at the Los Angeles Auto show. Without new borrowing or asset sales, GM is in danger of running dangerously low on cash in 2009, analysts have said. GM ended the second quarter with US$21 billion in cash and has been burning through more than US$1 billion per month. It needs a minimum of US$11 billion to run its operations, GM has said.
The automaker has been in talks with Cerberus Capital Management since September about a merger with Chrysler, the struggling No. 3 U. S. automaker owned by Cerberus.
GM has asked the government for US$10 billion to support that transaction, which could also include a transfer of its remaining stake in finance company GMAC to Cerberus, sources familiar with those discussions have said.