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GM: End Pontiac, Slash Dealers


As expected, General Motors (GM) announced on Apr. 27 that it will kill its storied Pontiac brand by next year.

GM CEO Frederick A. Henderson said in a morning news conference that a business analysis found that Pontiac cannot be viable and that Pontiac will be discontinued "no later than 2010." Henderson added that the move was "a tough decision for us."

With the closure or sale of other brands including Saturn, Hummer, and Saab, Henderson said GM will go forward with four brands—Chevrolet, Cadillac, Buick, and GMC.

GM said it would cut 21,000 U.S. factory jobs by next year and slash its dealerships by 42%, from 6,246 to 3,605, from 2008 to 2010.

The automaker plans to ask the government to take company stock in exchange for half of GM's government debt as part of a major restructuring effort needed to get more aid. It will offer 225 shares of common stock for every $1,000 in notes held by bondholders as part of a debt-for-equity swap.

June 1 Restructuring Deadline

GM is living on $15.4 billion in government loans and faces a June 1 deadline to restructure and get more government money. If the restructuring doesn't satisfy the government, the company could go into bankruptcy protection.

GM shares gained 33 cents, or more than 19%, to $2.02 in mid-afternoon trading.

Henderson reiterated that the company would prefer to restructure outside of Chapter 11 bankruptcy.

The move to shutter Pontiac comes as GM is being forced to make a lot of hard decisions to restructure. The automaker has until June 1 to demonstrate to the White House that it has a viable comeback plan that will justify further taxpayer loans.

Most Pontiac showrooms have been combined with GM's GMC and Buick brands. But there are about 40 standalone Pontiac stores.

The company killed the Oldsmobile brand in 2000. It currently is in the process of closing off its Saab brand, waiting to see if investors want to buy it and keep it going. It is also trying to sell its Hummer and Saturn lines. In Europe it is in negotiations to possibly sell its Opel and Vauxhall brands.

Pontiac has been almost a lost brand at GM. It once was positioned as the company's performance brand. "We Build Excitement" was a longstanding ad slogan. It's twin-kidney grille design was taken from BMW's. The high-water mark for Pontiac's brand clarity, most agree, was the 1964 Pontiac GTO, which many point to as the start of the muscle-car era.

The Associated Press contributed to this report.

Kiley is a senior correspondent in BusinessWeek's Detroit bureau. Mintz is news editor for BusinessWeek.com in New York.

David Kiley is a freelance writer based in Ann Arbor, Mich.
Mintz is news editor for BusinessWeek.com in New York.

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