DETROIT -- General Motors Co. will get away from the volatile spending on product development that marked the boom and bust cycles of GM's past, GM's CFO said Tuesday.
In a roundtable discussion with reporters at the auto show, Chris Liddell said GM got into trouble historically by ramping up engineering and planning on new products in the good times -- only to pull the plug on programs during downturns.
“It's the world's worst way of running a...capital intensive, high engineering company,” Liddell said. “We wasted a huge amount of money in the last few years by canceling projects which were perfectly acceptable that got started a few years ago in good times.”
Liddell said GM will keep its capital spending constant in both boom and bust years.
“What you should do is have a dollar figure or a certain amount of resources that you commit,” Liddell said, “and you don't allow that to expand in good times and you don't contract it in bad times.”
GM cut way back on research, product development and other capital spending amid the recession that led to its 2009 bankruptcy. Liddell said GM is gradually growing its capital expenditures to roughly the amount the automaker spent historically.
He said that money will go further, though, because GM now has half the number of brands and saves costs by building vehicles on global platforms.
GM capital spending last year totaled $4.7 billion, far below the typical amount historically. It should spend $7.2 billion this year and approach $9 billion by 2014, Morgan Stanley analyst Adam Jonas said in a recent research note.
Liddell said GM should be able hold spending steady because its balance sheet now is structured to break even at market bottoms. And he reiterated his vow that GM will carry relatively little debt on its books, so it shouldn't have to divert money from development projects to pay down debt.
GM cut its debt load from $14 billion to $5 billion last year, Liddell said.