Officially Official: GM kills Pontiac *UPDATED with LIVE webcast embed*
by Chris Paukert on Apr 27th 2009 at 8:50AM 
Rumors from late last week have come home to roost, and as part of its restructuring efforts, General Motors has just announced that Pontiac will be "phased out by the end of 2010." GM will continue to build its accelerated viability plan around four brands: Chevrolet, Cadillac, Buick, and GMC.
As part of its latest announcement, GM also announced that it plans to have "the resolution" of Saab, Saturn, and Hummer by the end of 2009 "at the latest." In total, GM plans to end up with just 34 nameplates for 2010, as compared to 48 for 2008 – a reduction of some 29%. Further, as part of its viability plan tendered to President Obama's Auto Task Force, the automaker's revised viability plan projects that GM's total market share will dip to 18.4 to 18.9% – the plan is banking on a 19.5 percent share for this year.
A media conference call is scheduled for later this morning and we will have more details and analysis following that, but for now, the official press release after the jump.
*UPDATE: LIVE WEBCAST of GM press conference embedded after the jump...
[Source: General Motors]
PRESS RELEASE:
FOR RELEASE: 2009-04-27
GM Accelerates its Reinvention as a Leaner, More Viable Company
Updated Viability Plan Speeds, Deepens Restructuring of U.S. Operations
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. http://media.gm.com/servlet/GatewayServlet?target=http://image.emerald.gm.com/gmnews/viewpressreldetail.do?domain=2&docid=52168. 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.
Forward-Looking Statements - In this press release and in related comments by our management, our use of the words "plan," "expect," "anticipate," "ensure," "promote," "believe," "improve," "intend," "enable," "continue," "will," "may," "would," "could," "should," "project," "positioned" or similar expressions is intended to identify forward-looking statements that represent our current judgment about possible future events. We believe these judgments are reasonable, but these statements are not guarantees of any events or financial results, and our actual results may differ materially due to a variety of important factors. Among other items, such factors might include: our ability to comply with the requirements of our credit agreement with the U.S. Treasury; our ability to execute the restructuring plans that we have disclosed, our ability to maintain adequate liquidity and financing sources and an appropriate level of debt; the ability of our foreign subsidiaries to restructure and receive financial support from their local governments or other sources; our ability to restore consumers' confidence in our viability and to continue to attract customers, particularly for our new products; our ability to sell, spin-off or phase out some of our brands, to manage the distribution channels for our products, and to complete other planned asset sales; and the overall strength and stability of general economic conditions and of the automotive industry, both in the U.S. and globally.
Our most recent reports on SEC Forms 10-K, 10-Q and 8-K provide information about these and other factors, which may be revised or supplemented in future reports to the SEC on those forms.
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Reader Comments (Page 1 of 10)
Carlos 8:55AM (4/27/2009)
What does this mean for deals on new cars? Are they going to be having huge sales on G8s and Solstice?
Reply
Mr.Oak 9:12AM (4/27/2009)
I so want GM to hand the solstice over to the Corvette engineers. It could become a terror in it's market segment. Think baby Z06.
Fregal 9:18AM (4/27/2009)
I'm sure you could buy a G3 for cheap...
BigWill 10:27AM (4/27/2009)
The G3 and G5 were "done" before they even went on sale.
Matt 3:52PM (4/27/2009)
Pontiac, you will be loved.
R.I.P. :(
Tool 1:06PM (4/27/2009)
It still makes zero sense to go to market with three separate distribution channels: 1) Chevrolet; 2) Cadillac and 3) Buick-GMC.
There is an argument to be made that the "New GM" should only have Chevrolet and Cadillac. I still think that is the play.
To have a third channel Buick-GMC of what are largely re-badged and slightly upmarket Chevrolet products still doesn't go far enough IMO. The big question is would GM really lose GMC customers if GMC was shuttered? And could some of the Buick product eventually be Cadillac? Other than CTS, Cadillac really doesn't have big hits. To make it a true Lexus/MB/BMW competitor it could add a strong offering in the high $20s/low $30s instead of letting Buick carry the load.
I know that we are all armchair quarterbacks here, but I still think that GM would be much more successful with a hyper-focused portfolio where you don't have a bunch of rebadged offerings that compete against each other (Think Chevy Equinox and GMC Terrain).
TT 1:47PM (4/27/2009)
@ Mr.Oak: Kinda like the Solstice that Mallett Cars stuffed a 400hp LS2 in? Oh yeah, and with a full GM warranty.
Flamespoke 1:50PM (4/27/2009)
"To have a third channel Buick-GMC of what are largely re-badged and slightly upmarket Chevrolet products still doesn't go far enough IMO."
Chevy and Buick currently don't share any platforms except for the Enclave. The new buicks look nothing like Chevy's or Caddys.
You can't just have people jump from a 20K Chevy to a 35K + Cadillac. You need buick as a near luxury brand.
PJ 2:46PM (4/27/2009)
Tool, I agree. I have a hard time believing that "GMC" carries as much emotional cachet as "Chevy Truck," and they don't have a single brand-exclusive product.
Keeping Buick around made more sense in the late-'90s/early-'00s, when GM wasn't sure how consumer response to the "new Cadillac" would shake out. But at this point, they're spending big bucks to reshape Buick in Cadillac's image--or at least, a slightly softer, more noncommittal version of it--with "edgier" cars like the Enclave and '10 LaCrosse.
I assume GM already knows this and is counting on cutting the B-P-G dealer network entirely as part of the Ch.11 proceedings.
Tool 2:45PM (4/27/2009)
@Flamespoke
"You can't just have people jump from a 20K Chevy to a 35K + Cadillac. You need buick as a near luxury brand. "
1. I understand the idea of a step-up brand and that Buick could fill that role. But that idea out-moded. Especially if you consider that Toyota is quite successful with Lexus and that there is plenty of price overlap between the two brands.
2. Of course, consumers aren't going to jump from a 20K Chevy to a 35K + Cadillac. Nor would they go from a 20K Toyota to a 35K + Lexus, etc. Considering that a top-shelf Malibu is $28K, a jump to a new Cadillac nameplate that is positioning at $32K would make sense.
3. IMO the real problem is the third distribution channel. Why does GM think it needs to go to market with 3 different channels? This is what they have now.
lern2read fgt 3:40PM (4/27/2009)
Tool, you're 100% right. GM has way too many branches and it's creating way too much internal competition. They need to narrow it down to 2 or 3 main manufacturers. Kill Hummer completely. Kill Pontiac (done). Kill Saab (done). Merge Buick with Cadillac, they probably already share the same chassis', engines, etc. Merge GMC with Chevy, oh wait, GMC is the same exact thing as Chevy. And either turn Saturn into an independent thing or kill it, there is no reason to re-badge the Chevy Malibu as the Saturn Aura.
They need to take a look at Toyota and realize that they're doing things way wrong. Toyota's lineup is nearly flawless (lacks a true sports car). Scion is an entry level company, targeting youth's and hoping they move on to a Toyota. Toyota basically covers every type of vehicle needed, from entry level sedan (Corolla) to full size pickup (Tundra). And then Lexus, the luxury brand.
By having so many brands and vehicles, it's hurting the company. They were just shoving the Terrain in our faces at the NYAS. WTF does GM need ANOTHER SUV for? I guess the Trailblazer, Equinox, Suburban, Traverse, Tahoe, Acadia, Yukon, Envoy, Vue, Outlook, H2, H3, Escalade, ESV, SRX, and Enclave just didn't offer enough variety. 16 different SUVs, offered by one company. They need to narrow it down to 6, at most. Mid-size (Trailblazer or Equinox), Luxury Mid-size (SRX), Full size (Tahoe or Suburban), Luxury full size (Escalade), and maybe a crossover (similar to the Toyota Venza).
David 12:15AM (4/28/2009)
I'm waiting for a new Pontiac G8GT to go OTD for $26k, then I'll jump big time. No worries about warranty as Government Motors will cover. Woohoo... Thanks Obama (and company) for completely screwing the pooch! A Pontiac based on the G8 platform would have made for a really sweet niche brand. Maybe it will still happen is some way... Stranger things have happened!
tekd 7:42PM (4/27/2009)
I don't know if G3's can get any cheaper...only one out of ever nineteen dealers sold one last month...all the G3's just sit on lots even with huge discounts.
But I suppose if it was like...$5000 it could kinda be worth it if you want to buy someone you really hate a car.
MGBYG 7:47PM (4/27/2009)
Chevy = Toyota or Nissan or Honda or VW
Cadillac = Lexus or Infinity or Acura or Audi
Doesn't always work:
Chrysler-Dodge-Jeep are harder to break down to 2 though, and Fiat has a bunch of brands, while Kia/Hyundai are not staggered.
But the Japanese and German's seem to be doing better than most, worldwide.
Enigmatic 9:22PM (4/27/2009)
Well, there's the argument that Buick is a strong player in China so that's why they keep them around. I think GMC has to go, but a Chevy/Buick/Cadillac would work great provided that Cadillac can have more than one competitive vehicle (CTS).
Mirko 8:56AM (4/27/2009)
So, what happens to the G8? Maybe it could live on as a Chevy?
Reply
Mattias 9:00AM (4/27/2009)
It already does:
http://www.chevrolet.co.za/content_data/LAAM/ZA/en/GBPZA/001/models/1F/index.html
Luis 9:08AM (4/27/2009)
See, if people actually BOUGHT the G8 and Solstice, maybe GM wouldn't be in as much trouble.
EU_reader 9:09AM (4/27/2009)
34 nameplates is still a bit much I believe. Some brands should be consolidated in one or two niche nameplates, max.
And doe they really need GMC for the trucks?
Rich 9:21AM (4/27/2009)
GMC is the right badge for trucks. Take all the trucks and SUVs from Chevrolet, Cadillac, Buick and GMC; and Saturn and Saab. Then consolidate them, and make them all GMCs. There. All fixed.