Automakers have it tough these days as consumers are not only spending less money but also dealing with record oil prices. The unfortunate side effect has been slower-than-expected auto sales and a move by consumers to the less profitable fuel-efficient vehicles. The big three U.S. automakers are now preparing to confront these problems by cutting costs and taking other measures to protect themselves. The question is: Will it be enough?

General Motors Corporation (NYSE: GM) announced that it has pushed some planned capital expenses from the first quarter to later in the year in order to make sure it has enough cash in the event of a worsened downturn in the U.S. Meanwhile, Ford Motor Company (NYSE: F) executives said they were also considering further cost cutting measures to reach profitability in 2009. And finally, Chrysler said it would lower production at several plants in anticipation of weaker sales this year.

Despite the similar actions to cut costs, the automakers seem to disagree on the industry's direction. Chrysler noted that it believes the market will continue to weaken for the rest of the year while General Motors has indicated that it expects sales to rebound during the second half of the year. Howver, all of the automakers have agreed that the selling pace in the first two months of the year came in below projections.

There has also been some concern surrounding the financing subsidiaries that provide auto loans to consumers. In particular, analysts were concerned that GM's 49% ownership in GMAC require it to make further cash infusions in order to ensure liquidity. However, GM has denied that such injections are needed and that its financing wing remains in good shape.

In the end, automakers will likely face a tough rest of the year as they gear up for further cost cutting to meet their internal earnings goals. Investors may want to watch for a turnaround as a combination of that and cost cutting could result in higher-than-expected earnings and a boost in the share price. Combined, these factors make GM and F two companies worth watching!

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