• Financial Times, Monday, February 9, 2009 10:32 AM

Although carmakers are traditionally loath to talk about reducing research and development -- the future lifeblood of their businesses -- they warn that cuts to R&D budgets will be next as they slash costs across their operations, John Reed reports.

Christoph Huss, president of the International Association of Automotive Engineers and a group vp at BMW, insists that cutting R&D is "not a viable option," given the regulatory pressure automakers face globally to produce cleaner and safer cars.

But industry consultants say many car companies are already in effect doing so by delaying or mothballing new models. "Everybody's cutting to the bone," says Michael Robinet, vp for global forecasts with CSM Worldwide. "The danger is that they will begin sawing off limbs."

The squeeze is strongest at America's cash-poor domestic carmakers, Reed writes, which face pressure from regulators to build higher mileage-per-gallon vehicles even as they make painful cost cuts to their operations to avoid bankruptcy.

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