GM, on the verge of bankruptcy, is desperately fighting to survive. The company was rumored to slash its Pontiac niche brand as part of the survival bid, and today at a special press conference it confirmed these rumors
Pontiac was a brand that saw its popularity peak in the 1970s, when its Firebird and GTO series were burning up the sales charts, and making their way into movies and television. Meanwhile, models like the Grand Am provided GM with steady sales.
Through the 1980s and 1990s the brand declined in popularity, selling fewer vehicles. However, before the worst of the recession, the brand seemed poised to make a comeback, with the new Pontiac G8 and Solstice earning strong reviews. Sadly, though, these efforts will now be laid to rest.
Fritz Henderson, GM president and CEO, acknowledged that the decision was a painful one, stating, "We are taking tough but necessary actions that are critical to GM's long-term viability. Our responsibility is clear - to secure GM's future - and we intend to succeed. At the same time, we also understand the impact these actions will have on our employees, dealers, unions, suppliers, shareholders, bondholders, and communities, and we will do whatever we can to mitigate the effects on the extended GM team."
GM plans not only to cut the Pontiac brand, but also its number of nameplates. The total nameplates in 2010 will be 34, down 29 percent from the 48 nameplates in 2009. GM will also cut 42 percent of its dealerships by the end of 2010, going from 6,246 (in 2008) to 3,605. GM will also produce 190,000 fewer vehicles in the second and third quarters. Also, the sales or liquidation of the Saab, Hummer, and Saturn brands will be completed by the end of 2009, at the latest.
The new strategy calls for sole focus on GM's four core brands -- Chevrolet, GMC, Buick, and Cadillac. States Mr. Henderson optimistically, "We have strong new product coming for our four core brands: the Chevrolet Camaro, Equinox, Cruze and Volt; Buick LaCrosse; GMC Terrain; and Cadillac SRX and CTS Sport Wagon and Coupe. A tighter focus by GM and its dealers will help give these products the capital investment, marketing and advertising support they need to be truly successful."
GM now says that if the industry can sell 10 million vehicles annually, it can break even with costs. The break even comes thanks to steep cuts. GM will close 13 of its 47 assembly, powertrain, and stamping plants. It will also cut 33,000 of its 71,000 (2008) hourly employees by 2011. The new plan calls for 7,000 to 8,000 more hourly employees than the previous rejected proposal in February.
One key trouble spot is the issue of bonds. GM owes billions to bondholders and has proposed a debt for equity swap, which it hopes will reduce its debt by anywhere from $27B USD to $44B USD, including U.S. Treasury debt conversion, VEBA modification and bond exchange.
An intriguing aspect of the new plan is that it will place majority ownership of the company in the hands of the unions (UAW, CAW) and the American taxpayers. The plan calls for the U.S. Treasury to accept GM stock, rather than cash for repayment of its loans. Furthermore, the unions would also receive a major equity stake, in exchange for forgiving major debts. The plan would cede 89 percent of the company to the unions and taxpayers.
GM also plans on aggressively marketing its upcoming 2010 Chevy Volt electric vehicle and spending $5.4B USD in research and new technology investments this year. Between 2010 and 2014, it hopes to spend $5.3B USD to $6.7B USD annually on new technology investments.
Mr. Henderson realizes that his company is relying on the government for survival. He adds, "The Viability Plan reflects the direction of President Obama and the U.S. Treasury that GM should go further and faster on our restructuring. We appreciate their support and direction. This stronger, leaner business model will enable GM to keep doing what it does best - provide great new cars, trucks and crossovers to our customers, and continue to develop new advanced propulsion technologies that are vital for our country's economy and environment."