GM delays most future product, r&d in cash crunch

ERJ staff report (TB)

Jamie Lareau and Robert Sherefkin, Crain staff

Detroit, Michigan -- General Motors is postponing nearly all of its spending on product development in 2009 and 2010 -- a cost-cutting move that could delay the introduction of key vehicles in the US, such as the Chevrolet Cruze.

The automaker also is cutting spending on engineering, design and r&d, say sources familiar with GM's plans. So far, nothing has been officially canceled, but nearly everything is delayed, the sources say.

"The 2009 stuff that's too late to cancel is coming out, then everything else gets pushed out anywhere between three months and up to a year," said one of the sources. "It's not just capital budget; it's also engineering, design ... everything that would cause money to flow out in 2009."

General Motors is taking drastic action to avoid running out of money sometime next year. With its product delays, GM hopes to save as much as $1.5 billion, said the source.

GM spokesman Dee Allen declined to comment on plans for individual products. "There have been all kinds of speculation," he said. "We've said we're reviewing our portfolio, and we do that as a regular course of business."

Two high-profile vehicles -- the Chevrolet Camaro and the Chevrolet Volt plug-in hybrid -- are protected from the cutbacks, says one source close to GM. Likewise, the restyled Buick LaCrosse and possibly the Cadillac CTS wagon are still due to market as planned.

Since those products are ready for production, GM would not save much money by delaying them. In addition, the Volt is pivotal to GM's plan to match Toyota Motor Corp. as a technology leader and environmentally conscious corporation.

The LaCrosse is due in spring. The CTS wagon is due for the 2010 model year, but the launch date has not been set.

But GM tentatively will push back the launch of the Chevrolet Cruze, which was supposed to debut in the 2011 model year. That launch will be delayed six months to a year, say sources familiar with GM's plans.

Union members at GM's Lordstown, Ohio, plant, which would build the Cruze, say they have not been told of a holdup.

"Everything I've heard is that we're in the process of moving forward," said Dave Green, president of UAW Local 1714 in Lordstown. "There has been speculation that it would get delayed, but leadership said GM has not notified us of any delay."

Meanwhile, the Chevrolet Malibu sedan was to be restyled and re-engineered in the 2012 model year. But with the cost cutting, the revamped Malibu probably won't debut until the 2013 model year.

GM executives are meeting daily to find ways to shift money out of other things and into key product launches. Said one source: "There's still a lot of fine-tuning, and a lot of it could change."

From Automotive News (A Crain publication)