GM Viability Plan: Pontiac Scrapped

Motoring Channel Staff - 28/April/2009

Detroit, America – As General Motors continues to restructure to avoid filing for bankruptcy in the US and as domestic sales of its cars slump by almost half, more and more brands are falling by the wayside.

GM's new CEO, Fritz Henderson (replacing Rick Wagoner who was sacked by US President Barack Obama for not doing enough), announced that the 90-year-old Pontiac marque would be closed at the end of 2010.

Henderson has taken the axe to many aspects of what was once the world's larger car maker, and well known General Motors assets such as Hummer and Saab will sold off or closed down by the end of 2009 as well.

The ramifications of the Pontiac closure pose the greatest problem for GM's Australian operations (in the form of Holden) whose Commodore exports to the US account for large chunks of its revenue.

"Our decision on Pontiac would result in the phase out of the G8 from the Australian operation," Henderson said in a webcast press conference. 

"It is actually in many ways a very fine car but we're just not able to put the marketing resources behind it. 

"And we will work with dealers to sell down the inventory and phase out production, and we would anticipate that by the end of this year," added Herderson.

While America is not Holden's only export market, the loss of Commodore exports to North America has the potential to create major headaches for Holden.

Sales of the Commodore and locally made large cars in general have been declining over the past decade and export markets were one way of keeping these vehicles viable.

After spending some $77 million to modify to Commodore for the American market, it is now possible that Holden will miss out on close to $1 billion in export revenue.

In tough economic times, hard decisions will have to be made, however there is a chance that the Commodore could be rebadged as a Chevrolet and exported to the United States when financial conditions improve in the years ahead.

Outlined in the restructure plan, General Motors will focus on four 'core' brands:

Chevrolet
Cadillac
Buick
GMC 

Furthermore General Motor's CEO Fritz Henderson said that much of the North American dealer networks will be 'aggressively restructured' (read: downsized by more than 40%) and various factories will be idled or closed to reduce costs.

"We are taking tough but necessary actions that are critical to GM's long-term viability," said Mr Henderson, GM's president and CEO.

"Our responsibility is clear - to secure GM’s future - and we intend to succeed," stated Henderson.

Have already received more than US$15 billion in loans from the US Government, General Motors is taking drastic measures to avoid filing for bankruptcy.

Another facet of the GM restructure plan argues for debts to be turned in equity, which if accepted could end up making the US Government the majority stakeholder in General Motors, with around 50% ownership. 

The Unity Auto Workers union could also benefit with a possible 39% ownership.

The plan also involves converting lenders' interests into equity, which could result in the US Government owning  as much as 50 per cent of the company and the United Auto Workers union holding 39 per cent.

General Motors hopes to return to profitability with a new outlook based on government advice and the fast-tracking of its zero emission electric car projects..

"The Viability Plan reflects the direction of President Obama and the US Treasury that GM should go further and faster on our restructuring," Mr Henderson said.

GM's CEO Mr Henderson said: "Very importantly, development and testing of the Chevrolet Volt extended-range electric car remains on track for start of production by the end of 2010 and arrival in Chevrolet dealer showrooms soon thereafter."

Related Links:
- Ford, GM, Chrysler: Restructured (2009)
- Adelaide Motor Show Cancelled (2009)
- End Game for Saab, Pontiac? (2008)
- Car Dealers Face Finance Crisis (2008)
- US Car Makers: Grim Future (2008)