Gm Delays Most Future Product, R&d In Cash Crunch

fbachman · October 29, 2008

Automotive News

October 29, 2008 - 12:01 am ET

DETROIT -- 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 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, the Chevrolet Traverse 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, and the Traverse will debut in the first quarter. 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."

chuck16 · October 29, 2008

Few had me worried there. The only 2 cars that could save GM are the VOLT and the Camaro, and they better start getting those ones out on the road FAST! If they want to stay at least a little competitive...

-Evan

jrrod2004 · October 29, 2008

Few had me worried there. The only 2 cars that could save GM are the VOLT and the Camaro, and they better start getting those ones out on the road FAST! If they want to stay at least a little competitive...

-Evan

+1

502chevy · October 29, 2008

very true, i think they might have a little issue selling the ss camaro except to the true sports car enthusiast that has to have the V8, but with the potent V6 with 300hp and 27mpg i think it will be a hit. esp. if they can keep the price down and offer some incentive to buying a new vehicle. and with the volt it is very important they market it well because in my mind it is going to be a car that can define the company with the technology involved with it. i mean it will appeal to a large quantity of comsumers these days.

as for me i will be after the ss camaro when i get my truck paid off. so i am glad they are coming through finally with this car.

Darkanion · October 29, 2008

Few had me worried there. The only 2 cars that could save GM are the VOLT and the Camaro, and they better start getting those ones out on the road FAST! If they want to stay at least a little competitive...

-Evan

I don't think the Volt is the 'savior' a lot of people think it will be. To me, it's over priced ($40k, so I've heard) and under-performs (40 mile range, before the on-board motor kicks in). It's a nice halo product, but I don't think it's going to be the barn-stormer in sales that a lot of people are expecting.

The Camaro...? That remains to be seen. If (when?) fuel prices start going back up, I think the Cruze will be much more vital to GM. Early reports are claiming 40+ mpg and a sub-$20k price.

If the Camaro can hit the streets when fuel prices are like they are right now, I think it could be a huge hit, the first year. But, as prices head north... and especially if/when we get back in the $4/gallon neighborhood, I think GM will be wishing they had spent $$ on the Cruze, rather than finishing-up whatever is left to do on the CTS Wagon.

Of the products named in that article, I think the CTS Wagon is the least "needed" vehicle of the bunch.

certifiedcustom · October 29, 2008

Here is a broader perspective on the "fun" in Detroit. Not good.

http://www.autoextremist.com/current/

rvsahs · October 29, 2008

Few had me worried there. The only 2 cars that could save GM are the VOLT and the Camaro, and they better start getting those ones out on the road FAST! If they want to stay at least a little competitive...

-Evan

I don't think the Volt is the 'savior' a lot of people think it will be. To me, it's over priced ($40k, so I've heard) and under-performs (40 mile range, before the on-board motor kicks in). It's a nice halo product, but I don't think it's going to be the barn-stormer in sales that a lot of people are expecting.

The Camaro...? That remains to be seen. If (when?) fuel prices start going back up, I think the Cruze will be much more vital to GM. Early reports are claiming 40+ mpg and a sub-$20k price.

If the Camaro can hit the streets when fuel prices are like they are right now, I think it could be a huge hit, the first year. But, as prices head north... and especially if/when we get back in the $4/gallon neighborhood, I think GM will be wishing they had spent $$ on the Cruze, rather than finishing-up whatever is left to do on the CTS Wagon.

Of the products named in that article, I think the CTS Wagon is the least "needed" vehicle of the bunch.

Yea, I've read where GM has $21 billion in cash. Seems like a lot until you realize that they are spending a billion of it per month and credit is tight/expensive due to S&P's low credit rating for GM. The Camaro and Volt give GM some much needed pizzaz but a car for the masses like the Cruze will be the meal ticket when gas prices head north.

fbachman · October 29, 2008

What GM and a LOT of folks are banking on now, is that the commercial paper market eases up BEFORE their cash reserves run out.

If it does NOT, it's going to get ugly.

That's why they are tightening belts on cash right now. IT's wait and see. Trust me, it's not only the car industry.

DofD · October 29, 2008

I can see this being a reasonable option for GM. R&D is extremely expensive and a lot of the time has no cash payoff for many years.

As for the Cruze I can see them holding off for a couple of years and making due with a few styling changes to the Cobalt. The Volt and Camaro are high profile vehicles for GM so keeping them are needed.

gave20 · October 29, 2008

The volt will not save GM, it was foolish of them to put the technology into an electric car. I'm very disappointed GM is not pushing their gas/hybrid vehicles. Most are getting around 24 city, this is a huge improvement that utilizes existing energy sources. Why not exploit this technology? Plus I don't see the advantage of electric cars, all we doing is moving the money spent on fuel to now pay a higher electric bill. Not smart in my opinion.

Darkanion · October 29, 2008

Plus I don't see the advantage of electric cars, all we doing is moving the money spent on fuel to now pay a higher electric bill. Not smart in my opinion.

I completely agree with you on that! EV's just move our transportation expenses from one fuel source to another... It might be cheaper in the short-run. But, down the road, people's electric bills are going to go through the roof...

If EV's catch on, the energy grids will need to be upgraded... (CA already has problems with rolling blackouts when everyone turns on their AC... just wait until everyone is plugging in their 'cool & trendy new electric cars,' too!) I don't know about the electric companies everyone else is using, but I know darn good and well that my electric company isn't going to just "absorb" the costs of upgrading the grids.

EV's in my opinion are a short-sighted gimmick vehicle. Perhaps useful as a short commuter vehicle, but not much else.

2000DV4.8 · October 29, 2008

Plus I don't see the advantage of electric cars, all we doing is moving the money spent on fuel to now pay a higher electric bill. Not smart in my opinion.

I completely agree with you on that! EV's just move our transportation expenses from one fuel source to another... It might be cheaper in the short-run. But, down the road, people's electric bills are going to go through the roof...

If EV's catch on, the energy grids will need to be upgraded... (CA already has problems with rolling blackouts when everyone turns on their AC... just wait until everyone is plugging in their 'cool & trendy new electric cars,' too!) I don't know about the electric companies everyone else is using, but I know darn good and well that my electric company isn't going to just "absorb" the costs of upgrading the grids.

EV's in my opinion are a short-sighted gimmick vehicle. Perhaps useful as a short commuter vehicle, but not much else.

+ bajillions of numbers

I don't see how people can think that they're 'emissions free'. Where the eff does that electricity you use COME from.

VMax2007 · October 29, 2008

Plus I don't see the advantage of electric cars, all we doing is moving the money spent on fuel to now pay a higher electric bill. Not smart in my opinion.

I completely agree with you on that! EV's just move our transportation expenses from one fuel source to another... It might be cheaper in the short-run. But, down the road, people's electric bills are going to go through the roof...

If EV's catch on, the energy grids will need to be upgraded... (CA already has problems with rolling blackouts when everyone turns on their AC... just wait until everyone is plugging in their 'cool & trendy new electric cars,' too!) I don't know about the electric companies everyone else is using, but I know darn good and well that my electric company isn't going to just "absorb" the costs of upgrading the grids.

EV's in my opinion are a short-sighted gimmick vehicle. Perhaps useful as a short commuter vehicle, but not much else.

Wrong! The cost of electric is something 8 cents on the dollar when compared to gas. I have heard the average annual cost for electricity to recharge the Volt will be approximatley the same as your refrigerator/freezer.

Would you trade your annual gas pump costs for your annual Refrigerator/freezer costs?

It also won't tax our electric grid much because most people will be charging at night, when electricity demand is down.

As for the cost of the car, yes 40K is high, but it will go down,and the guberment will likely subsidize it with HUGE rebates. I have heard around 5-8K to start.

the Volt is the beginning to a great alternative.