General Motors executives are running the company "minute by minute" as they slash the product development budget to save as much as $1.5 billion.

GM's decision to delay key vehicles such as the Chevrolet Cruze as long as a year is a sign of desperation, analysts warn. The bottom line: Dealers won't get a timely delivery of the products that are supposed to ensure GM's recovery.

Last week Automotive News reported that GM is slashing its product development budgets for the next two years, with as much as 80 percent of the cuts coming in 2009.

The Chevrolet Volt and Camaro cars won't be delayed. Most other models will.

"It's not just capital budget," says a source familiar with GM's plan. "It's also engineering, design--everything that would cause money to flow out in 2009."

The cash-flow crisis is one of the most "intense financial situations" in GM history, adds a second source. That source insists that GM's product development cutbacks are not a sign of collapse. But for any automaker, a sharp reduction of product spending is a desperate measure.




'Last resort'
"It's a very dangerous thing to delay product programs because it makes it very difficult to avoid sales declines in the future," says John Casesa, a principal of the Casesa Shapiro Group in New York. "It's really the last resort and underscores how dire the liquidity situation has become."

As of this summer, GM was burning through an estimated $1 billion of cash a month. According to one informed estimate, GM may have about $17 billion in cash left.

Since the company needs $11 billion to $14 billion on hand to maintain normal operations, it may face a cash-flow crisis this winter. In a research note last week, Standard & Poor's listed GM's credit rating at B- with negative implications.

S&P analyst Gregg Lemos Stein describes that as a "deep to speculative grade" that could deteriorate further. "The cash flow is our primary concern," Lemos Stein said. "That's why we have them on credit watch. There are tremendous calls for their cash just for operating the business."


Some debuts in 2009
Nothing has been canceled, but nearly everything is delayed, sources say. For example, the Chevrolet Malibu sedan was to be re-engineered in the 2012 model year . Budget cuts will delay it until the 2013 model year.

However, the budget cuts won't affect vehicles that already are complete. The Buick LaCrosse and Chevrolet Camaro will debut as planned in 2009.

Likewise, the Chevrolet Volt electric plug-in car is considered too important to delay. The Volt remains on schedule for its launch in November 2010.

Other vehicles could be delayed anywhere from six weeks to a year. But GM executives are working to restore the Cruze to its initial intended launch date, the source noted. GM had planned to launch the Cruze in 2010 as a 2011 model.

Industry analyst Doug Scott says GM should do everything possible to protect high-volume vehicles like the Cruze, which has been tentatively delayed six months to a year.

"I find it difficult to believe that they would not bring the Cruze to market and put everything else on hold," said Scott, who is senior vice president of the consulting firm GfK Automotive in suburban Detroit. "This is an environment where a core model strategy is absolutely valuable, and that means you have to have two models on full throttle. You can't do it just on the back of the Malibu."