Oracle of Delphi

GM delays all development spending through 2010

41 posts in this topic

A story from the Crain sisters, Automotive News and Autoweek, reports that General Motors has cut product development spending for 2009 in an effort to save approximately $1.5 billion next year. Reductions in engineering, design and R&D work on future models has been rumored for the last week, possibly causing the delay (or death) of a few select models. However, the Camaro and Volt haven't been affected by the cuts (no surprise, since they're all but complete), and the new Buick LaCrosse, Chevrolet Traverse and Cadillac CTS Wagon should hit the market has planned, late next year and early in 2010.

After the story surfaced earlier today, the Detroit News got in on the action and spoke with GM spokesman Tom Wilkinson who said of the AN report, "We think they are probably overplaying this a little bit." We'll see.

Link: http://www.autoblog.com/2008/10/29/gm-dela...g-through-2010/

0

Share this post


Link to post
Share on other sites

Lemme guess...

You're somehow happy about your parent company basically being bankrupt?

0

Share this post


Link to post
Share on other sites

Well, with cars sales crashing down, I can see why...

Honda is pretty much planning the same thing for a few of their models......

0

Share this post


Link to post
Share on other sites
Lemme guess...

You're somehow happy about your parent company basically being bankrupt?

Not at all, just pointing out they don't have money to do the bread and butter cars, so how on earth can people like you who want the niche RWD cars to go forward, think that GM can afford to do that?

0

Share this post


Link to post
Share on other sites

This is a bad idea, they need better product. Leaving dated or uncompetitive products on the market for another year or two aren't going to get it done. Toyota already spends about a billion dollars a year on development than GM does, Toyota will now have a $2.5+ plus advantage in 2009, and half the models to spend it on. This is also why Cadillac will never be BMW or Mercedes, GM is too broke to fund them. R&D is the absolute last thing that should be cut.

0

Share this post


Link to post
Share on other sites
This is a bad idea, they need better product. Leaving dated or uncompetitive products on the market for another year or two aren't going to get it done. Toyota already spends about a billion dollars a year on development than GM does, Toyota will now have a $2.5+ plus advantage in 2009, and half the models to spend it on. This is also why Cadillac will never be BMW or Mercedes, GM is too broke to fund them. R&D is the absolute last thing that should be cut.

It really doesn't make a difference...what everyone fails to realize (as PCS is saying-and he is right) is GM has NO money for everything...they can barely keep the lights on at their plant (My dad's plant being a good example)

It's not going to make a diiference beacuse there will be quite a few models heading for the door...

I'd give you guys a partial list, but then I would be hung then banned.... :(

There are quite a few models that are not needed anymore..and they won't be.

There will be replacements, but not as many.

And cars/trucks that are/may be here will be used world wide (Cruze)

As I keep saying, this is not the best time to be a car nut......

0

Share this post


Link to post
Share on other sites
This is a bad idea, they need better product. Leaving dated or uncompetitive products on the market for another year or two aren't going to get it done. Toyota already spends about a billion dollars a year on development than GM does, Toyota will now have a $2.5+ plus advantage in 2009, and half the models to spend it on. This is also why Cadillac will never be BMW or Mercedes, GM is too broke to fund them. R&D is the absolute last thing that should be cut.

What if you spend so much on R&D that you default, and have to go chapter 11?

When the bottom falls out of your market, it's all about survival, and continuing the same R&D spend that you had prior may not be the best way to do that. To be sure, none of the options are palatable.

0

Share this post


Link to post
Share on other sites
What if you spend so much on R&D that you default, and have to go chapter 11?

When the bottom falls out of your market, it's all about survival, and continuing the same R&D spend that you had prior may not be the best way to do that. To be sure, none of the options are palatable.

:yes:

0

Share this post


Link to post
Share on other sites

I wonder if this is a sign of the impending merger with Chrysler. Maybe GM is cutting development of models that Chrysler already has covered (like larger RWD performance sedans).

0

Share this post


Link to post
Share on other sites

They should cut brands before they cut R&D spending. They were spending 6 billion over 8 brands, spending 4.5 billion over 8 brands is just going to make even weaker brands. GM already has dated and uncompetitive products throughout the lineup, cutting funding is just going to lead to an even more uncompetitive line.

The only way GM will ever recover is to build a better car than Honda, Toyota, BMW, Mercedes, sell in higher volume and charge more for it than they do. The plan of dated models, product overlap and selling the rebate, not the product isn't working and it is why GM has lost $60 billion in the past 5 years.

0

Share this post


Link to post
Share on other sites
It's not going to make a diiference beacuse there will be quite a few models heading for the door...

I'd give you guys a partial list, but then I would be hung then banned.... :(

There are quite a few models that are not needed anymore..and they won't be.

Lemme guess... It's all of the fun and individualistic models.

Bring on the homogeny!!! 'Cause we all know that's how GM makes it's money! :rolleyes:

0

Share this post


Link to post
Share on other sites
Honda is pretty much planning the same thing for a few of their models......

Source?

0

Share this post


Link to post
Share on other sites
However, the Camaro and Volt haven't been affected by the cuts (no surprise, since they're all but complete)...

The Volt wasn't affected because it is GM's main leverage to get money out of the government. I'm not sure what your definition of "complete" is, but as far as I know there is not even one single complete prototype.

0

Share this post


Link to post
Share on other sites
The only way GM will ever recover is to build a better car than Honda, Toyota, BMW, Mercedes, sell in higher volume and charge more for it than they do. The plan of dated models, product overlap and selling the rebate, not the product isn't working and it is why GM has lost $60 billion in the past 5 years.

GM has actually lost $62.8 Billion in JUST the last 12 months. They have lost over $70 Billion in the since the start of 2005. AND this does not include the third quarter 2008 loses either. Based on the acceleration seen from Q1(-$3B) to Q2(-$15B) and if that continues to grow at that rate GM would see their losses increase to almost $100 Billion dollars. GM is only worth $3.83 Billion as that is what their current market cap or current value of all stock is worth. Now if you consider that at the end of the second quarter 2008 GM was worth NEGATIVE $56.96 Billion when considering all of their assets and liabilities and had a cash flow of -$15.471 Billion GM is already Bankrupt. They just haven't filed the paperwork. GM could not pay back it's outstanding debt if it had to today by selling off assets. That is the very definition of bankruptcy. GM says they won't declare it, but that doesn't mean they aren't bankrupt.

So if GM delays all R&D spending through 2010 that should ease their financial burden in the short run, but have a serious impact in the long. GM doesn't report their R&D so we don't know how efficient it is. I have to wonder though. Microsoft for instance spent $2.4 Billion in the last quarter on R&D and Apple spent $292 Million. So Microsoft spent over 8 times what Apple did and has almost nothing to show for it, while Apple has brand new iPods, iPhones, and Laptops. You have to wonder whether GM is spending money like M$ or Apple.

Also, I saw a nice quote about Apple from when Steve Jobs came back as interim CEO and it reminded me a lot of GM. Steve was talking about the automakers and their concept cars. He said that you go to the auto show and you see an amazing concept, but when the real model hits the showroom it sucks. He said what happens is that the designers design a great product and then the finance people say you can do this or that and so it gets worse, then the engineers say you can do this or that and it gets worse still and then finally the manufacturing department says you can't do this or that and it gets a lot worse. Pretty soon you get the car to market and it's a TOTAL letdown. Now when Apple designed the original iMac (the one with the clear see through case that was so hot about 10 years ago), they showed the design to their different departments internally as their new product direction. Shortly after that Steve received reports from the engineering, finance and manufacturing departments about why they couldn't do this or that. Steve called them together and explained that he wasn't asking them to give him reasons why they couldn't build it. He told them their jobs were to find a way to build the design. Some people said it couldn't be done and they were told to leave. It turns out someone else took their jobs and found a way to overcome these problems and get the product built. GM's problems are the same that Apple had with that first iMac. They build amazing concept cars and then their internal departments tell the leaders why it can't be done. Unfortunately the board doesn't have the confidence to tell their subordinates to find a way to make it happen. And we get cars like the G6 concept that are truly stunning, that get turned into crap like the G6 production car. Only once that I can remember has a car made it to market looking pretty much like the concept and that was the Solstice. Unfortunately the car was poorly engineered and ended up being to impractical for most people to consider. But still it looked pretty much just like the concept car and it sold like hot cakes when it was launched. Of course dealers marked them up over sticker and drove demand down pretty fast, but still.

I guess what I'm trying to say is that GM shouldn't be cutting R&D, they should be cutting the negative Nancys that tell the CEO, no I can't build your car that way let's make it worse to accommodate my lake of innovation or gumption. Then they can spend the money on design and innovation that translates to an awesome product on the street. That would also eliminate the bureaucracy, because you know that if you can't get the job done they'll find someone who can.

On a side note, I'd also like GM to keep it's mouth shut about upcoming models. I love the Volt, but I really think GM messed up by telling the press they were going to build it. GM should have simply waited until they had the production car ready to go to production then Introduced the product to a stunned and delighted press and public, with manufacturing starting in just a few short weeks an delivery coming, etc.... Instead they announce pretty soon after the concept had made it's rounds that due to impressive demand they would be developing a real car to become available by 2010. Now all of their competitors know GMs product roadmap and can plan accordingly. Before this Toyota though plug ins wouldn't work. Now that GM is building the Volt Toyota is racing to get their version into a Prius ASAP. If GM had kept it's mouth shut they could have had the market to themselves for much longer.

0

Share this post


Link to post
Share on other sites
They should cut brands before they cut R&D spending.

Cutting brands costs money unless they can find a buyer. So if they do as you suggest, they'd have to cut R&D spending further. Maybe GM knows more about their business than you do. Just maybe.

0

Share this post


Link to post
Share on other sites
GM's problems are the same that Apple had with that first iMac. They build amazing concept cars and then their internal departments tell the leaders why it can't be done. Unfortunately the board doesn't have the confidence to tell their subordinates to find a way to make it happen. And we get cars like the G6 concept that are truly stunning, that get turned into crap like the G6 production car. Only once that I can remember has a car made it to market looking pretty much like the concept and that was the Solstice. Unfortunately the car was poorly engineered and ended up being to impractical for most people to consider. But still it looked pretty much just like the concept car and it sold like hot cakes when it was launched. Of course dealers marked them up over sticker and drove demand down pretty fast, but still.

I guess what I'm trying to say is that GM shouldn't be cutting R&D, they should be cutting the negative Nancys that tell the CEO, no I can't build your car that way let's make it worse to accommodate my lake of innovation or gumption. Then they can spend the money on design and innovation that translates to an awesome product on the street. That would also eliminate the bureaucracy, because you know that if you can't get the job done they'll find someone who can.

So the result the one time they did what what you suggest was a poorly engineered car, eh?

And you want them to do that again?

0

Share this post


Link to post
Share on other sites

FYI, the Cruze is going on sale in Korea as we speak. I think we could say it's further along than the Volt and Camaro.

Cutting back on new model development is not new and not unique to GM. Nissan, Mazda, Honda and Mitsubishi have all done it, and even Toyota has only recently slashed new product roll-outs in the domestic market. Old models are being dropped left and right with no replacements in sight. Even new models for overseas markets that would normally be offered in Japan as a matter of course are nowhere to be seen. And the same goes for new engines and transmissions. As for cost-cutting, well the new Suzuki Alto/Nissan Pixo mini car has rear doors with fixed glass. Now the Alto is built and sold in India, but we are talking about the European models. Not even the benchmark for cheap cars, the Dacia Logan, goes so far.

0

Share this post


Link to post
Share on other sites
Source?

Because I am the source. :P

It's been mentioned on the Honda boards...and from a Honda insider.

It's not going to be anywhere near GM, and it effects their slower selling models....

0

Share this post


Link to post
Share on other sites

You cannot cut or shrink your way to prosperity.

I hope these reports are wrong. GM needs new blood, revenue streams.

0

Share this post


Link to post
Share on other sites
GM has actually lost $62.8 Billion in JUST the last 12 months. They have lost over $70 Billion in the since the start of 2005. AND this does not include the third quarter 2008 loses either. Based on the acceleration seen from Q1(-$3B) to Q2(-$15B) and if that continues to grow at that rate GM would see their losses increase to almost $100 Billion dollars. GM is only worth $3.83 Billion as that is what their current market cap or current value of all stock is worth. Now if you consider that at the end of the second quarter 2008 GM was worth NEGATIVE $56.96 Billion when considering all of their assets and liabilities and had a cash flow of -$15.471 Billion GM is already Bankrupt. They just haven't filed the paperwork. GM could not pay back it's outstanding debt if it had to today by selling off assets. That is the very definition of bankruptcy. GM says they won't declare it, but that doesn't mean they aren't bankrupt.

Stick to what you know. That's all BS. GM's value is market cap plus the outstanding debt. It's called enterprise value. Of course it's purely subjective, and in the current climate the market cap is highly volatile. Your definition of bankruptcy is also false. The negative net cashflow is a sign of how bad things are, but it merely points to the potential of bankruptcy—a point where GM is unable to pay its bills. Money is flowing out faster than it is coming in and GM is drawing upon reserves. If and when those reserves run out the company will be bankrupt. Paper losses are irrelevant. GM currently has two aims, structural and operational reform to get cashflow back into the black and restore reserves and profits; and asset sales and temporary spending cuts to stretch out current reserves long enough to reach that point.

Companies can become bankrupt even when assets far exceed debts, and never go bankrupt even if debts far exceed saleable assets. Companies can go bankrupt when cashflow is positive and operations are profitable. In the current climate that is happening all the time to companies large and small who can't refinance their lines of credit. It's yet another reason stocks are so volatile right now. How much GM can get for its assets is not only highly subjective but irrelevant for determining bankruptcy.

The value you see on the balance sheets is called the book value. It's just an estimate and is meant to be conservative, but includes not just physical assets, but businesses and intellectual property which may be hard to set a stable value on. The market cap represents investors' estimate of the true value of GM's assets, plus the current value of future earnings (or losses), less the outstanding debt. The company is certainly worth far more as a going concern than in liquidation. It's in no-one's interest to see GM fail, least of all its lenders, and while the latter may have some dumb ideas which may make things worse, they will do anything to avoid an actual bankruptcy.

0

Share this post


Link to post
Share on other sites
Not at all, just pointing out they don't have money to do the bread and butter cars, so how on earth can people like you who want the niche RWD cars to go forward, think that GM can afford to do that?

The G8, G8 Ute, Park Ave and Caprice are already developed.

0

Share this post


Link to post
Share on other sites

as far as cutting brands, GM is waiting to see if the merger goes through. then, you will see brands cut.

DODGE JEEP CHRYSLER

jeep will be sold. I feel Chrysler gets laid to rest. same thing with dodge. what GM is waiting on is to see if they are able to kill those brands, not their own (Pontiac, Buick).

Saturn is untouchable as it is and where they are taking it, Chevy and Caddy also. Saab is too unimportant to be involved in this.

So IMO Pontiac and Buick's future waits while we find out what happens to Dodge and Chrysler. It will be cheaper to kill those brands than Buick and Pontiac.

GMC will just get folded into 'Chevy Commercial' over time.

Chevy = Chevrolet world products (GMDAT, GMNA)

Saturn = GME

Caddy = Caddy

Buick and Pontiac = ?

Chrysler = nostalgia t-shirts sold at Steve and Barry's

Dodge = logos on NASCAR jackets

Edited by regfootball
0

Share this post


Link to post
Share on other sites
Chrysler = nostalgia t-shirts sold at Steve and Barry's

Dodge = logos on NASCAR jackets

It has been bankrupt and long gone before Lehman Brothers.

0

Share this post


Link to post
Share on other sites

nope. the one in the mall near me is still open, and is remaining open. maybe bankrupt, but still open.

Edited by regfootball
0

Share this post


Link to post
Share on other sites

Hummer is a damaged brand and is going so Jeep should stay with GM. Dodge should replace Pontiac which is also a damaged brand and Chrysler and Buick brands are essentially the same so the least damaged brand should survive.

Edited by SoCalCTS
0

Share this post


Link to post
Share on other sites

Your content will need to be approved by a moderator

Guest
You are commenting as a guest. If you have an account, please sign in.
Reply to this topic...

×   You have pasted content with formatting.   Remove formatting

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor