GM to drop Pontiac by 2010, trade majority stake to U.S. Treasury

The Pontiac G8 has proven to be a unique entry to GM's U.S. lineup that was developed with minimal investment

The Pontiac G8 has proven to be a unique entry to GM's U.S. lineup that was developed with minimal investment

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It’s official. Pontiac will be phased out from General Motors’ portfolio by 2010 as revealed today in the carmaker’s updated Viability Plan, designed to speed the restructuring of its operations in the U.S. into a leaner, more customer-focused, and more cost-competitive unit. The latest Viability Plan was included in an exchange offer whereby GM is also offering certain bondholders shares of GM common stock and accrued interest in exchange for certain outstanding notes that total some $27 billion. One of those bondholders is the U.S. Treasury, which, under the plan offered by GM, could leverage its $15.4 billion in already-granted loans and another $11.6 billion in future loans to gain a majority stake in GM.

The Treasury's majority share means it would be able to appoint all of GM's directors, veto shareholder actions and generally dictate how the company is run. The move essentially gives the government a stick from which to dangle its carrot. The transfer of power to the Treasury will likely take place before the June 1 deadline, though it's not yet clear when. Speaking with Motor Authority in a conference call this afternoon, Ray Young said, "The government itself is not involved in the day-by-day operations of General Motors." The White House reiterated that stance today, saying that it has "no desire to run an auto company on a day-to-day basis."

President Obama has previously stated that, "The United States government has no interest in running GM. We have no intention of running GM," but by taking a majority stake in GM under the proposed debt-for-equity deal, it may be obligated to do just that. Beyond the U.S. Treasury's plans, however, GM has its own plans for the future. As Young said today, "Our next job here is to complete the restructuring, start executing the plan, work with the UAW and U.S. Treasury to finalize the VEBA modifications as well as the U.S. Treasury debt conversion and most importantly get through the bond exchange through the month of May."

The latest Viability Plan builds on the original version submitted to the U.S. Treasury back in February, and outlines plans to accelerate the timeline for a number of important actions and make deeper cuts in several key areas of GM's operations.

The main change is a focus on four core brands in the U.S. - Chevrolet, Cadillac, Buick and GMC – and the shedding of almost half of GM’s dealerships, as a result of which the Pontiac brand will be phased out by the end of 2010, leaving GM with a total of 34 nameplates – a reduction of 29% from 48 nameplates in 2008.

Pontiac was one of the easier GM brands to drop due to its relatively small lineup, consisting of just six models, plus the fact that many Pontiac dealership franchises have already been consolidated with Buick and GMC.

The revised plan also moves up the resolution of Saab, Saturn, and Hummer to the end of 2009, at the latest. GM anticipates reducing its U.S. dealer count from 6,246 in 2008 to 3,605 by the end of 2010, a reduction of 42%. Other major cutbacks include reducing the total number of assembly, powertrain, and stamping plants in the U.S. from 47 in 2008 to 34 by the end of 2010 and to just 31 by 2012. Furthermore, U.S. hourly employment levels are projected to be reduced from about 61,000 in 2008 to 40,000 in 2010, and level off at about 38,000 starting in 2011.

GM also plans to continue discussions with the UAW to modify the terms of the Voluntary Employee Benefit Association (VEBA) agreement, and with the U.S. Treasury regarding possible conversion of its debt to stock as well. In total, the U.S. Treasury debt conversion, VEBA modification and bond exchange could result in at least $44 billion in debt reduction.

The cost savings from all the restructuring is expected to allow GM’s North American operations to break even with total industry sales volume of 10 million vehicles. The lower break-even point better positions GM to generate positive cash flow and earn an adequate return on capital over the course of a normal business cycle, a requirement set forth by the U.S. Treasury.
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Comments (32)
  1. The problem with Pontiac is it holds no brand recognition out side the U.S. killing it off makes as much sense to Americans as killing off Holden to Australians and further more killing off Vauxhall to Europeans.

    Why not keep all three brands in their respective markets but share the same platforms across all three continents.

    If anything kill off Saturn and have its FWD platforms make up the bottom end of Pontiacs line up here in the U.S., Holden in Australia and Vauxhall in Europe.

    Just a thought I came up with by applying common sense!!!!!!!

  2. How about make Pontiacs with rwd and some with awd performance. Saturn can stay because they have good customer service, and people appreciate that.

  3. Trouble with Pontiac is its an anachronism. It relates to a time that has long since passed and that was the time when big American companies ruled the domestic US market be marketing their own competitors. The easy market share days are long gone and running several divisions just to get enough market share to support one (barely two) divisions is outmoded business practice.

  4. Pontiac has an identity, Saturn does not. Pontiac is worth keeping.

  5. Saturn now has an identity as the American arm of GM's Opel brand, just that GM's advertising for the brand well. for lack of a better word, sucks terribly.

  6. I think Opel's true market potential is wasted on Saturn. Saturn began its existence as a quirky budget brand. GM is misguided in trying to move the brand upmarket. I don't think Saturn will ever fully transcend its humble "cheap and cheerful car" beginnings. The brand basically appeals to budget shoppers who are already favoring GM and want the most car they can buy for the money. Their priorities are maximum space for minimum price; style, sportiness, and driving dynamics are further down on their priority lists when looking for a new car. This is why the company has essentially stated that the Insignia will not appear in Saturn's lineup. The Insignia is built on the SWB Epsilon II platform and has "4-door coupe" proportions that limit passenger and cargo volume. The Insignia will never be accepted as the next gen Aura because of this. GM is essentially developing a much different product "based on the Insignia" to be the next gen Aura that will better meet the expectations of Saturn's clientele which will only end up sharing some Opel influenced design cues with the Insignia. Overall, I think Saturn was unnecessary from the start and should be discontinued. The money and effort GM invested in launching this brand could have been focused on making Chevrolet the strongest and most competitive mainstream brand in the market. GM doesn't need 2 mainstream, affordable divisions. Saturn should be closed down. It is redundant and just serves as an in-house competitior to Chevrolet.

    Pontiac is the brand that should be reinvigorated with Opel products. Opel and its products represent what Pontiac should be in the North American auto market: edgy, sporty, and aspirational. Opel products could restore Pontiac to its traditional role of a sporty and moderately premium division that serves as a bridge between Chevrolet (mainstream) and Buick (luxury). The products are designed to fit the priorities of Pontiac's intended demographic; people who value style, sportiness, and driving dynamics more than maximum space and affordability. I think Opel's products could be fitted into Pontiac's lineup with fewer alterations than what is required to make them appropriate for Saturn. Since Pontiac has a brand image more aligned with Opel and a larger established dealership base to make the proposition lucrative for GM, it would make much more sense for Pontiac to become the North American version of Opel.

    I can't quite understand trying to alter Opel to fit the requirements of a budget brand with a limited dealership base (Saturn) when GM has a sporty and moderately premium brand with an established dealership base (Pontiac) that could effectively and successfully represent Opel in North America. I admit that Pontiac's image had been diluted quite a bit by carrying so many rebadged Chevy clones in recent years, but I think it would still be easier to restore Pontiac's brand image with Opel products (along with a couple of RWD products) than to completely transform Saturn into something it's not and was never intended to be.

  7. Cire, do you think your post is long enough?

  8. I'd merger Pontiac and Holden lineups, since both emphasize non-luxury sportiness. For example, the rumoured mid-size sedan Holden Torana (rwd, Alpha platform) should be rebadged as the next-gen G6. Smaller cars (fwd, Gamma and Delta platforms) should point at sporty brands such as Mazda, Subaru and Seat.

  9. How can you end the company that gave us so many classic cars. To this day, Pontiac is one of the few cars that doesn't look like every other car. However, if you want to successfully market any car in the U.S., it has to be available with FWD. RWD stinks in snow and AWD uses too much gas...

  10. GM, just go into bankruptcy already

  11. The only brand that sticks worldwide when you say GM America is Chevy as in Chevrolet as in Corvette and Camaro, maybe even Suburban... the only Pontiac we know of is TransAm ( the other Camaro ) as in K.I.T.T. as in has gone terribly bad over the years.
    Besides Chevy ( sportscars, large-mid sedans, compacts/hatch ) keep Cadillac ( prestige ) GMC ( trucks/SUV ) and lose the others.
    With just these 3 badges they all got the segment of cars/trucks fully covered.

  12. I still dont see why they would keep GMC. All of their vehicles are duplicates of Chevy models. Can someone explain this to me?

    Mismanagement, mismanagement, mismanagement......... thats all I see and have seen from GM.

  13. Well, under the current plan they were gonna go the way of Olds sooner or later anyway, and there's no Trans-Am to look forward to. I still think the G8 is one of the best sport sedan bargains ever, and everyone I've ever talked to who has one loves it; if it would've come 5 years ago it would be a best seller; right car, wrong time. If this is true I shall start mourning preparations.

    Man, first no future 'Cuda, then no possible 4-4-2, and now no hope for a second coming of a Trans-Am or GTO.

    I agree with DavidSilverM3 that keeping GMC is a waste, anyone who says they have a niche is talking bologna. The only way it would work is if they make Chevy a car-only brand and GMC would be the truck brand, but I think "Chevy Trucks" has a much bigger following/presence among Americans.

  14. GM should have advertised well with interesting comercial. A few days agi I saw an Acura MDX commercial and it was very interesting and grabbed my attention. American car company's car commercials are like 550 HP!! 20%APR!!! $2,000 cash back!! 18 miles per gallon!!

  15. Here's something pertaining to this, which I had posted on another blog, and I wanted to place it here, and below:

    "I will miss Pontiac greatly, I loved the brand as a kid, too. Being an historian/hobbiest, it's a no-brainer that Pontiac ruled the 60s! It eventually lost it's way, particularly in the 90s and early 2000s, with that cladding. It was recently referred to as a "Damaged Brand". Also, with Buick, prior to the China market boom and the introduction of the Enclave in the USDM, it was regarded as stodgy and even neglected, and we almost thought that this would be the one getting the axe. Cadillac, though far from being even thought of as being cut, was also regarded as stodgy and staid, prior to the introduction of the "Art & Science" design theme and the Escalade SUV
    (with the exception of the, afterthought rushed to market, 1st generation Escalade), all turned Cadillac from stodgy and AARP crowd to hip and trendy with some attitude, the polar opposite of before!

    We'll know more next week as of this posting, but, if the G8 in particular is moved to another division given a different cosmetic identity, then this would soften the blow of the loss of Pontiac. Same with the Solstice, but that may be less likely - the G8 is the most important offering in my book, and I'm certain many others feel the same. Again, the G8 has potential to be a 4-door compliment to the new Camaro more than it would fit into Buick - the Chinese market Park Avenue, on the larger version of Zeta, would fit more into the Buick portfolio in the USDM. I hope the GM brass is reading this, and other posts here and elsewhere, as well as this, and taking heed!"

  16. OK, bye Pontiac.

  17. I'm wondering if the G8 will continue, albeit morphed into a Chevrolet?

  18. Chevrolet and Cadillac. That should be all.

    Toyota and Lexus.
    Nissan and Infiniti.

    You don't need more than two names, one for the normal cars, and another for your luxury brands...

  19. The curtain falls on one of the most iconic American performance divisions. RIP, Pontiac. Hopefully you will be ressurected when the economy improves again.

  20. GM should replace the Chevrolet Impala with the G8. The Solstice could also go the Chevy - and the rest can go.

  21. Typical GM school of thought and business practice:
    Have a vehicle, line of division with shortcomings, take a bit of time to vastly improve it and get it right and even superior, then - KILL IT!

  22. Send the g8 to chevy redesign to body as a 2door and call it a chevelle

  23. Sorry to see GM killing off Pontiac. As a lifelong GM owner, I've purchased my last GM vehicle. Sadly though, GM has had no idea of how to manage its brands and give them the identity to thrive. Wholesale incompetence has left them with a hodgepodge of brands that have little to no identity even in the states, let alone worldwide.

    No love left in me for GM. Force the fu**ers into chapter 7. Kill 'em off totally. Someone with some actual competence can come in, pick up the pieces, and make a car company that GM could be...and once was.

  24. keep the g8 send it to chevy, build another body as a 2door and call it chevelle, also take the solstice and build a mini cooper competitor for it.

  25. jack j. says
    keep the g8 send it to chevy, build another body as a 2door and call it chevelle, also take the solstice and build a mini cooper competitor for it.

    whoa now...that makes WAAAAAY too much sense.

  26. Here's what GM needs to do in order to keep it's head above the water:
    1. Get rid of both GMC and Saturn, GMC trucks ARE Chevy trucks with different badges. Saturn is failing and its original mission is no longer relevant to the current state of GM. All of the capital spent on these two brands would allow GM's profitable divisions some more room to develop.
    2. Keep Chevy the way it is (Apple Pie American) so that the buyers who always go American have something to identify with
    3. Only sell Buick in foriegn markets where it is doing well, such as China where it is actually considered cool to own a Buick
    4. Cadillac is just fine the way it is just make sure that it stays upmarket with the lux Euros.
    5. Position Pontiac as a rare and limited brand consisting of only performance oriented vehicles. This "new" Pontiac should fill the small niche between Chevy and Cadillac. This Pontiac should appeal to buyers looking for performance without the price tag, the typical buyer should range from males in college all the way to empty nest middle aged men. The brand should sell such few cars that one would actually be considered cool if they had a Pontiac. Also, if GM develops new performance equipment, that equipment should be tested on this brand first. This Pontiac should only sell cars, NO trucks, minivans, crossovers, or Toyota Matrix's should be sold under this brand. Nameplates such as Trans Am, GTO, G8, and Solstice should be brought back. The nameplates should be arranged in this order from highest price and performance to lowest: GTO, G8, Tran Am, and Solstice. The biggest thing to get right is that these vehicles cannot be energy inefficient, i.e. the Solstice should get 200 hp and 29 mpg from a four cylinder engine. Why so efficient? Since the brand will not be mass producing vehicles, stringent efficiency must be obtained in order to appeal to buyers.
    This is what I believe the surest way to stay above the water but also to stay American.

  27. TKD: I think GM has more than accomplished making Pontiac "rare and limited" - though presumably not the way you meant it. Either way, it's far too late.

    The Trans Am and GTO nameplates have history on their side, but not in a way that resonates with the average 20-something driver. All that is ancient history; instead, they've grown up racing Subaru WRXs and Mitsu Evos on computer screens. Their brand loyalties and aspirations lie elsewhere.

  28. GM has made many decissions not only in the U.S. that are rather puzzling to GM fans.
    Take the Holden Commodore sold in the U.S. as the G8. The decission to sell the Commodore a Pontiac didn't make sense to me, the Commodore is exported to many countries around the world.
    But in every other market it is sold as a Chevy.
    GM would have been better off selling it as a Chevy, it would also open up the Commodore Ute to be sold as the new elcamino.
    Saturn should have gone ages ago and Pontiac should be selling Opel vehicles this would make more sense to me.
    If GM had showed some fore thought they wouldn't be in the trouble they are now.
    RIP Pontiac from your fans Downunder

  29. @TDK: I agree with you completely.

    @adamk: I'm 19 and I own an 86 Trans Am. I strongly believe Pontiac could be easily restored to it's former glory.

    Take the basic Firebird for example. All GM would have to do is take the Camaro and give it an new futuristic body and slap the Firebird logo on it, and BAM, instant success.

    In addition Pontiac should make some FWD cars - keep the Firebirds RWD - but make some new ones FWD.

  30. First Oldsmobile now Pontiac, geezus. Should have dumped Buick, Saturn and the GMC brand. This is why I own a toyota, atleast I will be able to get parts for it 15 yrs from now.

  31. If you ask me Gm has their heads up you know what! If your going to thin down GM, why not start with the basterd child first, and cut Buik, come on who do you know that drives a Buick other than your grandparents, Pontiac finley brings back a V8 RWD car and they get thy axe for their eforts. Sounds to me that BMW caint handle the compition, seeing that the G8 GXP smooked their 5 series!

  32. Folks, do something to help out GM and Save Pontiac. GM needs all the help it can get.
    Log on to the URL: on your web address bar and find out how to save the last Pontiac, the G6. The G6 is destined for Fleet rental this Fall.
    Your chance to Save Pontiac and Make Money by getting people to lease the Pontiac G6s'. Create a huge Sales Surge to combat the Imports and make GM notice and change it's mind on Pontiac.
    In Canada the Pontiac G6's 4 and 6 cylinders gets better gas mileage than any of the imports in it's class.
    Energuide Canada, a Government Agency Fuel Guide shows that the Pontiac G6 4- cylinder/6sp auto gets better gas mileage than the smaller Honda Civic, Toyota Corolla, Mazda 3 or Nissan Sentra. The G6 V6 has more horsepower, torque and better gas mileage than a BMW3, Audi A4, Lexus IS250, Mercedes Benz 230, Volvo S60 and Acura TSX. Figure this one out; yet people are buying these imports like crazy.
    Create a hyperlink with this web URL: in your e-mails and pass it on to as many people as possible.
    Invite lots of people to the site and launch People Power to create Sales Surge for the Pontiac G6. Join all the Social Sites like MySpace, Facebook, Twitter, etc.
    It can't get any more simple than that. If you love Pontiac, just do it.
    Pontiac is suppose to have a lease on life until December 31, 2010. Hope it is not too little, too late.

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