GM to Close Pontiac in 2010
As part of sweeping cuts announced by GM, the brand known for the GTO and the Trans Am will cease to exist by the end of next year.
Pontiac — the brand famous for the GTO, the Firebird, the Star Chief and most recently, the Solstice — is dead. It will be phased out by the end of 2010 as part of sweeping cuts announced Monday by General Motors as it tries to remake itself into a smaller company with fewer plants, workers and dealers.
GM said it will concentrate on four U.S. brands — Chevrolet, Cadillac, Buick and GMC — and that it expects to resolve the fates of Hummer, Saab and Saturn by the end of 2009. It also announced that it will offer stock to its debt holders in an effort to reduce its large debt load. GM warned that it expects to file for Chapter 11 bankruptcy if it does not get enough tenders for the exchange by June 1, but the automaker maintained that it prefers to not have to go into bankruptcy.
"The objective here is not to survive—the objective is to develop a restructuring plan that allows us to win," GM CEO Fritz Henderson said.
The number of nameplates that GM offers will be cut from 48 in 2008 to 34 in 2010.
In addition to the demise of Pontiac, GM plans to cut its U.S. dealer count from 6,246 in 2008 to 3,605—a reduction of 42 percent—by the end of 2010.
The automaker is cutting its manufacturing base from 47 facilities in the United States in 2008 to 34 by 2010, and then to 31 by 2012, which is an acceleration of its earlier cost-cutting plan. More details will be announced in May.
GM's hourly head count will be slashed from 61,000 in the United States in 2008 to 40,000 in 2010 and then level off at 38,000 starting in 2011.
The moves are expected to cut GM's North American structural costs from $30.8 billion in 2008 to $23.2 billion in 2010, which is $1.8 billion more than the plan announced in February. The reductions will allow GM to break even at a much lower sales rate — 10 million industry-wide in the United States — and forecasts market share of 19.5 percent this year and then stabilizing in the 18.4-percent-to-18.9-percent level in the following years.
"Big is only good if you use it to your advantage," Henderson said. "I think we're going to be a global company, but I think the nature of that company will change."
Pontiac once was the third-largest brand in the United States during GM's heyday, trailing only Chevrolet and Ford. Since the 1950s, it's been known as the division of affordable performance cars and has given enthusiasts a number of adrenaline-inducing rides. The GTO was a boulevard terror in the 1960s and helped spawn the true muscle-car era — fast cars with big motors dropped into everyday rides — and the Firebird, a Camaro sibling, has become a staple of pop culture, appearing in movies and TV shows.
Henderson called killing the brand a "tough decision" given its long history. It joins Oldsmobile in the stable of historic divisions GM has mothballed.
"We just didn't think we had a strategy that we were satisfied with that allowed us to win with the Pontiac brand," he said.
Pontiac sales have diminished in recent years, and its lineup has mainly been rebadged cars from other divisions. Still, Pontiac won praise in recent years for the rear-wheel-drive G8, a large, powerful sedan that hearkened back to great Pontiacs of old. Also, the Solstice coupe was launched in 2005, and it has been lauded for its eye-catching design.
The G8 and the Solstice will be phased out with the rest of the Pontiac line, Henderson said.
Henderson said the possibility of bankruptcy has increased — even in the last few months — and said that the offering to its bondholders gives it perhaps its best chance to avoid a court restructuring. The bond exchange is valued at $27 billion.
"It's [bankruptcy] greater today," he said. "The task we have is formidable.
"I would say it's more probably that we would go through the bankruptcy process."
It's also possible that GM's international operations would not be included in a bankruptcy filing.
Under the plan, the U.S. Treasury Department and the UAW VEBA plan would own significant stakes in GM.