GM cuts development money

FLINT (WJRT) -- (10/29/08) -- Another cost-cutting move by General Motors could have an effect on the Flint area.

Published reports say GM is postponing nearly all of its spending on product development for the next two years.

The Cruze was supposed to debut in the 2011 model year and replace the Chevy Cobalt.  It now appears the launch has been delayed -- perhaps by as much as one year.

The Cruze will be powered by a 1.4 liter engine to be built at a new plant on Van Slyke Road in Flint. The same engine will also go into the Chevy Volt, GM's plug-in electric car, which is still planned to be in showrooms sometime in 2010.

GM's commitment to that engine and the plant where it will be produced saved 300 UAW jobs in Mid-Michigan.

Putting product development on hold can have long-term consequences.  Keith Moreland is a business professor at UM-Flint. "Those are expenditures made today that are essentially an investment in the future."

The spending cuts could hurt GM a few years down the road.

"It's critical, really. If you want evidence of that you just have to go back to the 70s and 80s when General Motors and U.S. automakers were putting out new product on a 4-6 year timeline. And the Japanese were putting out new products on 2-4 year timeline," said Kettering University professor Craig Hoff.

The moves won't affect 2009 model year cars, but sources say everything else is being pushed back three months to a year.

"The biggest problem is they're going to be at a competitive disadvantage," Hoff said.

"The companies that spend money on product development, on the future, are the ones that are able to grow," Moreland added.

Local UAW leaders say because the Chevy Volt is still on the production schedule, construction of the new engine plant will continue.

But production of the engine for the Chevy Cruze could be delayed.

GM is burning through its cash reserves at an astounding rate. Reducing spending on engineering, design and research and development could save the automaker $1.5 billion.

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