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Pontiac is officially dead


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RIP Pontiac. General Motors announced today that Pontiac will not live to see its 85th birthday.

GM’s original plans for Pontiac were for it to become a niche brand under its new viability plan. Now the cuts have gone deeper, and Pontiac is completely cut off. All fans of GM’s performance division can do now is hope for a revival sometime in the future.

This will be a quick death. GM announced “The Pontiac brand will be phased out by the end of 2010”, which is the equivalent of a fire sale in the automotive world. But Pontiac is not the only one to be hurried out the door. The revised plan moves up the “resolution” of Saab, Saturn, and Hummer to the end of 2009, “at the latest”.

There is no word about if any of Pontiac’s car will be absorbed into other lines. The only cars that are unique to Pontiac in the U.S. are the G8 and Vibe . Disposing of the G8 should be as easy a stopping the boats from Australia , but the Vibe, which is joint venture with Toyota, may be harder to untangle.

PRESS RELEASE

DETROIT — General Motors (NYSE: GM) today presented an updated Viability Plan that will speed the reinvention of GM’s U.S. operations into a leaner, more customer-focused, and more cost-competitive automaker.

The Viability Plan is included in an exchange offer whereby GM is offering certain bondholders shares of GM common stock and accrued interest in exchange for certain outstanding notes.

Revised Viability Plan goes further and faster

The Viability Plan announced today builds on the February 17 Viability Plan submitted to the U.S. Treasury.The revised Plan accelerates the timeline for a number of important actions and makes deeper cuts in several key areas of GM’s operations, with the objective to make us a leaner, faster, and more customer-focused organization going forward.

Significant changes include:

A focus on four core brands in the U.S. - Chevrolet, Cadillac, Buick and GMC - with fewer nameplates and a more competitive level of marketing support per brand.
A more aggressive restructuring of GM’s U.S. dealer organization to better focus dealer resources for improved sales and customer service.
Improved U.S. capacity utilization through accelerated idling and closures of powertrain, stamping, and assembly plants.
Lower structural costs, which GM North America (GMNA) projects will enable it to breakeven (on an adjusted EBIT basis) at a U.S. total industry volume of approximately 10 million vehicles, based on the pricing and share assumptions in the plan. This rate is substantially below the 15 to 17 million annual vehicle sales rates recorded from 1995 through 2007.
"We are taking tough but necessary actions that are critical to GM’s long-term viability," said Fritz Henderson, GM president and CEO. "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."

Fewer U.S. brands, nameplates, and dealers

As part of the revised Viability Plan and the need to move faster and further, GM in the U.S. will focus its resources on four core brands, Chevrolet Chevrolet , Cadillac Cadillac , Buick and GMC GMC . The Pontiac Pontiac brand will be phased out by the end of 2010. GM will offer a total of 34 nameplates in 2010, a reduction of 29 percent from 48 nameplates in 2008, reflecting both the reduction in brands and continued emphasis on fewer and stronger entries. This four-brand strategy will enable GM to better focus its new product development programs and provide more competitive levels of market support.

The revised plan moves up the resolution of Saab, Saturn, and Hummer to the end of 2009, at the latest. Updates on these brands will be provided as these initiatives progress.

Working with its dealers, 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 percent. This is a further reduction of 500 dealers, and four years sooner, than in the February 17 Plan. The goal is to accomplish this reduction in an orderly, cost-effective, and customer-focused way. This reduction in U.S. dealers will allow for a more competitive dealer network and higher sales effectiveness in all markets. More details on these initiatives will be provided in May.

Sales volume and market share projections

The Viability Plan anticipates improved financial results despite more conservative U.S. sales volume expectations going forward. The lower volume expectations are the result of managing the business with fewer nameplates and dealers, leaner inventories, and reduced market share. To address the inventory issue, GM on April 23 announced U.S. production schedule reductions of approximately 190,000 vehicles during the second and early third quarters of 2009.

The Viability Plan also reduces GM’s market share projections to adjust for the impact of the brand and dealer consolidation, as well as for the short-term impact of speculation regarding a GM bankruptcy. The plan assumes a 19.5 percent share in 2009, with share stabilizing in the 18.4 to 18.9 percent range in subsequent years.

"We have strong new product coming for our four core brands: the Chevrolet Camaro, Equinox, Cruze and Volt; Buick LaCrosse; GMC Terrain GMC Terrain ; and Cadillac SRX Cadillac SRX and CTS Sport Wagon and Coupe," said Henderson. "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."

Lower structural costs, lower breakeven point

The Viability Plan also lowers GMNA’s breakeven volume to a U.S. annual industry volume of 10 million total vehicles, based on the pricing and share assumptions in the plan. This lower breakeven point (at an adjusted EBIT level) 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 in its March 30 viability plan assessment.

GM will lower its breakeven point by cutting its structural costs faster and deeper than had previously been planned:

Manufacturing: Consistent with the mandate to accelerate restructuring, we plan to reduce the total number of assembly, powertrain, and stamping plants in the U.S. from 47 in 2008 to 34 by the end of 2010, a reduction of 28 percent, and to 31 by 2012. This would reflect the acceleration of six plant idling/closures from the February 17 plan, and one additional plant idling. Throughout this transition, GM will continue to implement its flexible global manufacturing strategy (GMS), which allows multiple body styles and architectures to be built in one plant. This enables GM to use its capital more efficiently, increase capacity utilization, and respond more quickly to market shifts.
Employment: U.S. hourly employment levels are projected to be reduced from about 61,000 in 2008 to 40,000 in 2010, a 34 percent reduction, and level off at about 38,000 starting in 2011. This further planned reduction of an additional 7,000 to 8,000 employees from the February 17 Plan is primarily the result of the previously discussed operational efficiencies, nameplate reductions, and plant closings. GM also anticipates a further decline in salaried and executive employment as it continues to assess its structure and execute the Viability Plan. More details will be announced as soon as they are finalized with the various stakeholders.
Labor costs: The Viability Plan assumes a reduction of U.S. hourly labor costs from $7.6 billion in 2008 to $5 billion in 2010, a 34 percent reduction. GM will continue to work with its UAW partners to accomplish this through a reduction in total U.S. hourly employment as well as through modifications in the collective bargaining agreement.
As a result of these and other actions, GMNA’s structural costs are projected to decline 25 percent, from $30.8 billion in 2008 to $23.2 billion in 2010, a further decline of $1.8 billion by 2010 versus the February 17 Plan.

Strengthening GM’s balance sheet

Another key element of GM’s restructuring will be taking the necessary actions to strengthen its balance sheet. GM today took an important step in improving its balance sheet by launching a bond exchange offer for approximately $27 billion of its unsecured public debt. If successful, the bond exchange would result in the conversion of a large majority of this debt to equity.

"A stronger balance sheet would free the company to invest in the products and technologies of the future," Henderson said. "It will also help provide stability and security to our customers, our dealers, our employees, and our suppliers."

Another important part of improving the balance sheet will be the ongoing discussions with the UAW to modify the terms of the Voluntary Employee Benefit Association (VEBA), and with the U.S. Treasury regarding possible conversion of its debt to equity. The current bond exchange offer is conditioned on the converting to equity of at least 50 percent of GM’s outstanding U.S. Treasury debt at June 1, 2009, and at least 50 percent of GM’s future financial obligations to the new VEBA. GM expects a debt reduction of at least $20 billion between the two actions.

In total, the U.S. Treasury debt conversion, VEBA modification and bond exchange could result in at least $44 billion in debt reduction.

Throughout the Plan, GM will continue to make significant investment in future products and new technologies, with an investment of $5.4 billion in 2009, and investments ranging from $5.3 to $6.7 billion from 2010 to 2014. Very importantly, development and testing of the Chevy 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.

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



19 comments:

Here’s some clarification for some recent comments...

The only safe brands are Chevrolet, Cadillac, GMC and Buick (then again, Pontiac was supposed to be safe as a niche brand). Saab, Saturn, and Hummer were already banished from the GM empire back in February in GM’s viability plan.

There was a Firebird rumor posted last week. It had been on my desk for a while, and I finally decided to release it to give Pontiac a little boost. But if you go back into the "rumors" section, you can see how skeptical I was.

The good thing about parts availability is that Pontiac has no independent cars. Even the cars that ride solo in the U.S. have a twin: the G8 has the Holden Commodore and the Vibe has the Toyota Matrix. So while the U.S. may not have the same cars parts rules as Germany, most parts will be produced/stocked for a while.

GM had a very large investment in Germany — Opel. Opel has many independent cars (they also do some rebadging of other GM cars), but some Opels were attempted to be sold here as Saturns, but not many people bought them, which was a shame because they are really good cars for the money. Also the lack of popularity in the U.S. may have delayed/stopped the Opel Insignia from coming over, and that’s the real tragedy. I’ve had one for an extended road test, and the Insignia is an exceptional sedan.

By the way, Saturn, from what I understand, is heading for the chopping block too. Buick is only safe because they are selling very well in China.

Pontiac got killed off because of the low sales. I agree, I hate to see Pontiac go. They finally started making cars that people wanted. The Solstice and G8 are great vehicles in my opinion. They are coming at the wrong time. As far as GMC goes, their sales are down but not as much as Pontiac. The Hummer brand is still intact only so GM can sell it. They are looking at saling Hummer to a company in India. Hopefully the economy gets better before a lot more branches of the American car companies are killed off. Ford was smart selling most of their other brands. They sold Rang Rover and Jaguar to make sure they could survive. Smart move.

And one more thing

I think a week ago there were rumors about bringing back the firebird.

do you guys remember

Ohh and I will but the G8 and solstice I always wanted as soon as possible and does anyone know if they will still provide parts and service for pontiac cars in the future

What about hummer how come that hasnt been killed off. Pontiac is a great company and actually the should think about trucks like the seirra and alot of the GMC lineup because I don see much GMC aside from the envoy which is stupid because the the model has been the same for almost a decade. How come GM doesnt stop the sierra I think they already have enough pickups like the silverado why did pontiac have to get cut off and maybe hummer is a cult icon but its gone know its history. The pontiac solstice is selling great and the G8 is in my opinion better than the bmw 3 series.
This was dumb of GM

Im glad Buick is around. I need a comfortable vehicle when im a senior.

this is truly a new phase for Topspeed....

as i was mentioned in the last discussion, i would like to share my opinion and be more clear concerning the American car industry in comparison with the German.

As the years have passed, the most influential and successful car company in my opinion is the VW GROUP....

VW has aqcuired SEAT, SKODA, LAMBO, BENTLY, BUGATTI, and its older partner AUDI...

these 7 companies have become more popular, and affected the car industry to a great extent.
VW invested heavily into their build quality, safety, and performance.

the FSI engine, the new Turbo FSI engine, the safety systems, and handling preferences that create such a stable car to drive.
The US industry lacked these key features in developing their cars....

Even now with the economic crisis, the VW group are still developing, researching, and exploring new ways of always releasing a better and more efficient product.

There is no excuse for what has happened for the US car industry but their own lack of initiative.

Drive a Tahoe, Yukon... first thing i noticed was the cheap plastic used for interior, then i noticed the noise of things and parts rattling and squeaking... Then it was raining, which made me notice lots of wheel spin, lack of control and no stability... and the brakes are just awful!!!
ABS was introduced ten years later in the US....
the FSI technology another 10 years later in the US...
forget stuff like dual clutch gearboxes...

What i also read was the mentioning fo the US having eco cars.... hehhe funny... buying Dawoo (asian manufacturer) and putting a Chevy badge doesnt solve your problem....

The Giant car manufactures of the US where sleeping and just doing the basics... now they feel how much it has affected them...

Ford, been the only one out of the Big US companies that has a division in Germany, which does its own models, and its own development and its own models is proof to how the US car industry lacks the creativity and initiative in bringing their cars to the 21st century.
Ford Focus, Fiesta, Mondeo.... all known to be some of the best cars sold in EU and entirely German built....
American cars, are built for the US only... and Middle East.. so thats a small market compared to the world...

Toyota and VW are the companies of the future...

FYI: to clear this up. In late 2008 GM, along with Chrysler, became and continues to be dependent on government loans from the United States, Canada, and the Canadian province of Ontario to avoid bankruptcy due primarily to falling sales (especially of sport utility vehicles and other large vehicles) resulting from the late 2000s recession, record oil prices peaking in the summer of 2008, and fierce competition. Today, GM announced that it would phase out the Pontiac brand by the end of 2010 and focus on four core brands in the U.S.: Chevrolet, Cadillac, Buick, and GMC. It also announced that the resolution (sale) of its Hummer, Saab, and Saturn brands would take place by the end of 2009 at the latest.GM had previously eliminated the Oldsmobile brand earlier in the decade for similar reasons.

This only gives us the hope that Pontiac line up will really be endured until the right time comes when the economy is ready for type of performance cars.

The Chevrolet Orlando will be the new Pontiac Vibe replacement after Pontiac’s phaseout, and might wear the Vibe name that lived as a Pontiac. vibe is Toyota’s Voltz and the mechanical counterpart of the Toyota Matrix and is based on the Toyota Corolla’s E-platform. So for Vibe or for G8 there is definitely a new name to cal them. Just wait until further developments are made to Pontiac’s line up. So it’s not death after all. But maybe a revolution for the Pontiac’s engine type and character.

The Pontiac line up was envisioned to be a performance car line up of GMC. So technically gas is the power charger for this engine type. The Pontiac G8 will cease production along with the Pontiac brand after the 2010 model year. It is widely rumored this G8 body shell would be reborn as the next-generation Chevrolet Impala. Must be more emission efficient this time with Chevy engine. We will see soon.

Since they have already mentioned that there is a possibility that they will revive Pontiac in the near future, then wouldn’t it be great if they will transform it to something more environmental friendly? I heard that Pontiac cars consume too much gasoline and that’s a bit disturbing for me.

Certainly. That’s the point of the viability plan. Let other things go easy and let those workable points be improved. Since , the stimulus money is fed by the American government, it means all American companies are subjected to the federal decision. So technically it’s not a one-company decision here. Loosing Pontiac would mean more for many, especially America’s auto industry.

I think American car companies are doing the right thing. Good thing that Buick is still there so I still have something to look forward to. But the problem is that they wouldn’t have to literally kill the line of Pontiac if only they did something earlier. But I’m sure that they would be able to survive the crisis.

Yup you got it right there man. Anyways, Pontiac’s demise in not complete, there could be some viable options and actions that will be made in the future. For The GMC, its something that they have to learn from in process. I think America is learning and doing something about it.

f you are going to read the press release, it says it all and just to summarize, GMC is trying to find ways to implement the viability plan along with Obama’s plan for restructuring. So for American car haters or lovers, its not really about Pontiac after all, its the reality that every automobile markers face in times of crisis where tough decision must be made.

Yeah, you’re right. It was definitely the most heated discussion ever made for Topspeed. Thanks to some car enthusiasts (which includes me because one of the replies specifically cited me) for making American cars look like trash yesterday. It seems that Gcut is up for another heated discussion with the graphics above. LOL. But you’re right. We are all stakeholders in the state of our economy but let’s also emphasize that despite that, there are still many car companies (Japanese, European and even Korean) that are surviving this economic crisis. So why can’t American car companies do the same?

I was reading the comments about Pontiac’s demise and Chrysler bankruptcy and wow I think personally that it was the most heated discussion ever made. Nonetheless, GMC have various reasons for this, aside from the fact that America is running under the stimulus economic package. Just today the stocks go down due to the H1N1 Virus (swine flu) scare. So it’s not really about the car’s performance or quality-its not about the company’s poor management either, its about the state of our economy and the rest of the stakeholders here.

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