Archive for April, 2009

Pontiac brand to be gone by 2011: GMs press release

Monday, April 27th, 2009

GM logo2009-04-27

Updated Viability Plan Speeds, Deepens Restructuring of U.S. Operations

GM Accelerates its Reinvention as a Leaner, More Viable Company


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, Cadillac, Buick and GMC. The 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; and 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.”

# # #

About GM – General Motors Corp. (NYSE: GM), one of the world’s largest automakers, was founded in 1908, and today manufactures cars and trucks in 34 countries. With its global headquarters in Detroit, GM employs 243,000 people in every major region of the world, and sells and services vehicles in some 140 countries. In 2008, GM sold 8.35 million cars and trucks globally under the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, Hummer, Opel, Pontiac, Saab, Saturn, Vauxhall and Wuling. GM’s largest national market is the United States, followed by China, Brazil, the United Kingdom, Canada, Russia and Germany. GM’s OnStar subsidiary is the industry leader in vehicle safety, security and information services. More information on GM can be found at www.gm.com.

Reaction to GM ditching the Pontiac brand

Sunday, April 26th, 2009

This week GM may unveil their plans to kill off the Pontiac brand.  Enthusiasts of Pontiac’s products are finding this news hard to swallow.  The headlines are screaming these foul words:

  • PONTIAC MAY DRIVE INTO THE SUNSET
  • PONTIAC RUNNING ON EMPTY
  • PONTIAC HEADED FOR JUNK YARD
  • END OF THE LINE FOR PONTIAC

At the very least, GM is expected to close some plants, giving salaried workers mandatory time off, idling other plants for a while, and finding different ways to curb employee compensations.

GTO emblem 6.5 Litre

The GTO enthusiasts are weighing in with their opinions.  These are folks that have a Pontiac or two or three in their garages.  Most enjoy the hobby of auto restoration or drag racing which tends to be a family sport:

1964 GTO drag racer

Vintage photo of Mike Blodgett Sr. with his 1964 GTO that raced in the Stock Eliminator class

Jamie says, “Folks, take your goats [GTOs] out today to commemorate this great GM division.  It’s beautiful here on the east coast!   Been out all morning with my ’70, and it’s bringing out the best out in people:  Strangers at red lights telling me about their  GTO’s from the past through open windows; and pedestrians with thumbs up.  Connecting with people from all walks of life.  There is something about a goat that brings people together.  Rumble! Rumble!!”

Jim points to the recent political climate that led to GM receiving government bailout funds, “Just look how the country voted and we will all pay for it starting now. The mighty that had the balls to produce GTOs seems to have all been castrated.”

a gathering of GTO fans

A gathering of GTOs at an Indianapolis, Indiana car club meeting/picnic

Scott, a manager of a Pontiac store in Minneapolis says, “E-mail General Motors. We need to fight for what we  want. This economic mess was not caused by the domestic automobile business.  It was caused by our Politicians both Democrat and Republican.  They made policies that are killing freedoms of  all Americans. Politicians made the lending policies that put people in  homes and vehicles they could not afford and then ignored the fact those people could never pay for those luxuries. It scares me that now politicians are  telling us what we are going to drive. What’s next, our clothing and homes? Will we all wear the same clothing and live in the same homes?  This is the beginning of communism!!”

Primo, a member of the UltimateGTO.com email list, also sees Pontiac’s demise as a political issue rather than an issue of consumer’s lack of demand to buy a car product, “If we could all just see the whole picture, not just blame everyone that does not share your view, this mess can still be righted. I see it as a mess we created by sending back all those politicians that keep digging us deeper and deeper.  First we lose Olds, Plymouth, now our Pontiac.  We need to let them hear our view and then when time comes around if they don’t respond, that would be the time to rid of them. So let’s all stop the blame game and get to doing something about it.”

UltimateGTO.com logo image

Logo of UltimateGTO.com website shows the “arrowhead” marker light of a 1968 GTO

Sean Mattingly, who runs the largest enthusiast-based website for the Pontiac GTO fans says, “I heard a report on CBS Radio News tonight about the passing of Pontiac.  I noticed every news story mentions the GTO as one of PMD’s great accomplishments.  All this attention to the classic GTO is allright.”

Sean continues with some thoughts on the Australian import GTO which was re-introduced for a run in 2004 through 2006.  The car was favored by performance car fans, but largely panned by the public for the car’s simple looks.  “I just returned from a radio promotion where we’re setting up a weekend sale for all the auto dealers in town.  They’re bringing in their best cars for the weekend.  Anyway, I sigh when I see the beautiful RETRO-styled Dodge Challengers.  People are drawn to them, tuff lookin cars.  Also, when the RETRO-styled Shelby KR Mustang rolls in, spectators are chasing it to get a better look.  Why oh why didn’t Pontiac listen to us enthusiasts about 6 years ago when we told them (over and over again) that we wanted a RETRO-styled GTO.  We know the car could have been a big hit ahead of the RETRO-Camaro.  It might have saved the friggin division from getting its head cut off.  GM’s Bob Lutz poo-pooed our ideas, calling us “hardliners”.  He’s gone now.  GM boss Rick Wagoner didn’t believe.  He’s gone now.”

GTO marketing

Pontiac TV ads portrayed the re-born GTO as being mysterious and powerful

Darwin would have liked for GM to have given the Pontiac brand more marketing.  He says, “I met Bob Lutz during the celebration of the 100th anniversary of GM.  I was part of a caravan of Corvettes representing every year of manufacture. (53-08) One car from each year.  We were invited to the 100th celebration at GM headquarters in Detroit.  I had the 63 split window.  At the celebration I met Bob and told him that even though I was driving the 63 vette I am a Pontiac GTO person first.  I told him that I was very disappointed that the new GTO had failed and that it was never given a chance to succeed. I asked if the GTO would ever come back and he said that the Camaro would fill the void.  I told him that the Camaro is a nice retro vehicle but it will never be a GTO. I reminded him that GTO enthusiasts have been hung out to dry.  It would have been nice if all the marks had been invited to the celebration.  We visited most of the large museums on our travels to Detroit and every one had a GTO on display.  Even the Ford Museum had a 65 GTO as you enter the museum.”

2004 GTO Yellow Jacket

2004 Pontiac GTO owned by Warren in Kansas

The re-introduction of a 2004-2006 GTO has pretty much been smoothed over in the enthusiast community since then.  Classic car clubs have since opened their ranks to include the newer GTOs.  However, classic GTO restorer Craig George opens up the scab to underscore GM’s lack of commitment to the enthusiast community’s wants, “Sean, I remember editing the thousands of comments about the 2004 GTO styling that poured into your website. The GTO faithful were both articulate and passionate about their distaste for the bland looks and outrage that the most famous American musclecar would now be arriving from Australia, covered with sea salt!  As an investment, I considered taking delivery of a 2004 red over black 6 speed coupe. The paint had so much orange peel, however, that I insisted that the dealership make a attempt to smooth it out. No amount of claying and polishing would bring out the shine one would expect on a new, bright red car.  I am just as glad now as I was then that I ultimately refused delivery. The 2004-2006 GTO’s will become marginally collectible in the future. Sadly, their value will be as an example of the folly and hubris of GM’s business management and their resounding failure in the opening years of this century. Their legacy certainly will not be one for crafting a modernized tribute to the original American musclecar!”

Greg, a fan of several different models of Pontiacs says, “I guess like a bad marriage that went sour years ago and dragged on for too long, we can just say goodbye to our beloved brand of choice. It appears my dream of ever buying a brand new Firebird will never come true. In the early 80′s I had a ’68 Lemans Convertible for my daily driver and used to be appalled by the lack of respect it got from my friends. They would refer to it as my ‘LuhMannz’ with the same disdain you would inflect when you mentioned an Escort or a Chevette, because at that time that’s what the LeMans had become – a little 4 cylinder sh*tbox.  This is when I knew things were going really wrong with Pontiac.  In today’s world you aren’t judged on what you’ve done in the past, it’s ‘what have you done for me lately?’. Sad but true.  When you consider the stylish Aztec, or the desecration of the GTO; the answer to that question is, ‘Not a whole hell of a lot.’  RIP PMD”

Al George points out GM slowness in bringing products to market at the right time, “Regarding your comment about GM hubris, I remember talking with a dealer in the ’60′s about the need for American manufacturers to develop small economical and fuel efficient cars such as were coming out of Japan and
Germany. I remember his response: “Aw, ‘mericans ain’t gonna buy them little bitty cars!” Within two years our highways were infested with Beetles. And within the last couple of years Detroit exec’s have been whining that they couldn’t get even a hybrid – let alone a fully electric – vehicle to market before 2012 or 2015, depending on which testimony you heard before the Senate or House. I’m old enough to vividly
remember Pearl Harbour, Dec 7, 1941. By February, 1942, Detroit had completely retooled, using technology we would now consider primative, and were producing tanks, half tracks, jeeps, convoy trucks, aircraft engines and all sorts of military essentials. And because the Japanese had cut our supply lines to rubber plantations in Southeast Asia, Goodyear, Firestone, and Goodrich in three or four months completed
development of a process to recycle old tires and to make synthetic rubber, on which our armies rolled to victory in the next three and a half years.  All theses overpaid Detroit whimps are telling me is that they’re not the men their fathers and grandfathers were.”

This week’s “Picture Of The Week” on the main page of http://UltimateGTO.com features a computer keyboard with a finger poised over a “Pontiac Delete” key.

Picture of the Week for 4/26/09

(The author of this article, Sean Mattingly, grants permission to re-publish this article in print form, on blogs, in newspapers, stored electronically, whatever)