Gm Cuts Costs to the Bone

General Motors is scrutinizing even minor costs like utility bills and is considering delaying the launch of the Chevrolet Cruze compact

By David Welch

Cash is getting so tight at General Motors (GM) that management has launched another wave of cost-cutting. The company is even scrutinizing the electricity bills.

Auto sales are in their worst slump in decades, resulting in a cash burn rate of about $1 billion a month at GM. The company is selling assets to raise money, but as the economic slump appears to be gaining traction, GM is now delaying new models, cutting benefits, laying off salaried workers, and looking at even small items like utility bills.

The latest round of cuts show just how quickly the world has changed around GM and how much pressure the company is under. In July, Chairman and CEO G. Richard Wagoner announced a plan to boost cash by $15 billion through cost-cutting, asset sales, and some borrowing. He said that the $15 billion would be enough even if sales fell to 14 million vehicles in the U.S. Last year, Americans bought 16.2 million vehicles.

Cruze May Be Delayed

But things have gotten worse, including overseas. So GM needs to get leaner for tough times. The company is beginning to delay even some new-vehicle programs that will be pivotal to its turnaround effort. Sources in the company say the Chevrolet Cruze compact will be delayed until 2011, almost a year after it was originally set to launch. The next-generation Chevy Malibu may also be delayed by six months, into 2013, sources say.

GM spokesman Dee Allen would not confirm specific product delays. He said only that GM will "continue to review the portfolio and concentrate on what's most important." He added that some new-car programs "are going to shift around a bit."

Delaying the Cruze and Malibu would conserve cash at a crucial time. Suspending projects now would save cash in 2009, which promises to be at least as difficult for carmakers as 2008 has been. This year the...