GM Limits Marketing to $15B, Hacks Payroll by 20%

Following a slip in U.S. sales of 16 percent this year, General Motors has announced sweeping cost-cutting measures, including a 20 percent reduction in payroll for salaried workers.

The company will also cut costs in sales and marketing, limiting its capital spending to $15 billion through 2009 and focusing on product launches and brand advertising.

The “difficult decisions” were a necessity because of the downturn in the American auto market, says GM’s chairman, Rick Wagoner, The New York Times writes.

GM’s cuts will trim $10 billion in costs, which will “buy them some time,” according to John Casesa of the Casesa Shapiro Group consulting firm. The company hopes to generate up to $4 billion by selling assets, though executives wouldn’t say what might be sold beyond the Hummer brand. GM also plans to speed delivery of some of its new products, like the Chevrolet Equinox crossover and the Cadillac CTS coupe.

The 16 percent drop in sales is destroying GM’s cash reserves at the rate of more than $1 billion per month, some analysts say. The fear on Wall Street is that the company will run out of money before the market rights itself.

Investors also fear that GM’s profit center - trucks and SUVs - has evaporated. Through June, GM’s truck sales are off 20 percent, writes BusinessWeek. In response, GM will cut truck production in North America by 300,000 units by the end of 2009, and will delay the next-generation large pickup and SUV program, according to MediaPost.