Automotive News reports this morning that General Motors is “postponing nearly all of its product development spending in 2009 and 2010” to avoid running out of cash next year.

Among many depressing stories to come out of Detroit lately, this is the most depressing yet. I remember the last time they took such a drastic step, in the early 1990s. It took over a decade to get product development back on track. In the interim all of General Motors’ products were at least a half-generation behind the competition.

Remember the 1995 Aurora? Stylistically, it was way ahead of its time even when introduced. Well, it was supposed to be a 1993, and would have been even farther ahead then. Same for everything else in the 1990s. The 1997 Corvette was also originally planned for 1993.

Beyond the impact on products, stopping product development programs is hugely expensive in the long-run. Much of the work that has already been done will now have to be redone, because market conditions will change in the interim. And there’s always a huge cost to starting anything that involves hundreds of people. So you don’t want to have to do it more than once if you can avoid it.

They said this would never happen again, that the long-term effects were so pervasive that just about any other steps should be taken first.

One very confusing bit: aren’t the federal loans supposed to be for new product development? If everything is stopped, where is that money going?

One thing I always gave GM vice chairman Lutz credit for was maintaining Chrysler’s product development spending through the early 1990s, when that soon to be dissolved company was last on the brink and he was second-in-command there. Not this time, apparently.