• by Karl Greenberg , July 18, 2008

On Tuesday, General Motors unrolled a new tourniquet to stem the flow of red ink. The company--whose sales were off 18% last month and 16% year-to-date through June--is making across-the board cuts to shore up cash to weather a market that is likely to stumble this year to around 14 million units, the worst numbers in a years.

Among the major changes that General Motors announced were cuts in marketing spend through consolidation of sales and marketing budgets. The company said it would now focus marketing spend on product launches and brand advertising. A GM spokesperson says the company has not delineated how sales and marketing will be consolidated, or how GM divisional and product advertising will be affected.

Launches in coming months include a Buick sedan; coupe and sport wagon versions of Cadillac's CTS; and new crossovers for Saab, Cadillac, and Chevrolet. The company is also preparing to bring back the Chevy Camaro, as well as add a hardtop version to its Pontiac Solstice nameplate. There is also a sport-truck version of the Pontiac G8 on tap.

Dan Gorrell, president of Auto Stratagem, a Tustin, Calif.-based consultancy, says that despite belt-tightening and management changes in the past year, GM still has an overly large bureaucracy. "You have to remember that the system is all set up for a different market situation; they have a structure in place to support eight different brands, which adds complexity to the bureaucracy in general."

Gorrell says that the company's "channel strategy" efforts in recent months to group brands like Pontiac, Buick and GMC, and Hummer, Caddie and Saab will make it easier for the company to jettison a division without suffering massive costs associated with buying out dealers. That's because with the new groupings, dealers won't be left out in the cold if one brand--say, Hummer--is jettisoned.

General Motors says U.S. market share is holding at 20%, that it has reduced incentive spend by 24% since 2004, and that transaction price has increased 3% in that time. Also slimmer is the number of dealerships the company has. GM says it has cut dealership numbers by 635 since the end of 2005.

About the only departmental wallet to get more cash will be the powertrain program in order to develop alternative propulsion and fuel economy technologies and small displacement engines. Of all the vehicles the company says it is bringing out over the next two years, the gas/electric Chevy Volt is the only alternative powertrain vehicle.

GM plans to cut truck production in North America by some 300,000 units by the end of 2009; delay the next-generation large pickup and SUV program; and delay V-8 engine development.