Fritz Henderson, General Motors CEO, expects GM to emerge as a more-competitive automaker. (Photo: General Motors)
General Motors will close half its dealerships nationwide by 2014 and cease Pontiac production next year, according to an “undated viability plan” offered Monday by GM to the U.S. Treasury Department.
The beleaguered auto giant will concentrate on four brands – Chevrolet, Cadillac, Buick and GMC – as it streamlines operations to become “a leaner, more customer-focused and more cost-competitive automaker,” the company said in a prepared statement.
The latest plan submitted to the government proposes deeper and more rapid cuts than the original plan presented Feb. 17, part of the terms of more than $15 billion in government loans designed to forestall bankruptcy during the ongoing worldwide financial crisis.
The February plan was rejected by the U.S. Auto Task Force as not aggressive enough. The new plan increases the number of dealerships to close and accelerates the closing or spinoff of Hummer and Saturn. The latest proposal also cancels the original plan’s goal of having Pontiac continue as a niche product.
“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.”
Henderson replaces former GM head Rich Wagoner, who was forced out of his position by the Auto Task Force after he disagreed with the panel’s stringent proposals for GM’s viability.
Analysts predicted the demise of Pontiac last week after information was leaked from inside sources at GM. GM dismissed the reports as “media speculation.”
Despite its reputation as GM’s "excitement" division, Pontiac was deemed the weakest among the brands in sales and market share. Pontiac’s market share fell to 1.9 percent this year, the lowest on record, and sales in March 2009 represent only about 11.3 percent of General Motors’ total.
March 2009 data compiled by Edmunds.com indicates that on average, Pontiac vehicles currently sell for 21.9 percent off sticker price compared with the industry average discount of 16.4 percent.
GM also announced Monday that it would offer company stock to debt holders to avoid bankruptcy, with GM hoping to convert as much as 90 percent of its huge debt into equity. The bond-exchange offer would cover about $27 billion of unsecured public debt.
GM warned debt holders that failure to achieve a significant stock conversion could result in the company seeking debt protection by declaring Chapter 11 bankruptcy.
The plan to phase out half of GM’s more than 6,200 dealerships is a more aggressive number than the 34 percent projection made in the Feb. 17 plan. The company expects to offer 34 vehicle models in 2010, down from 48 last year.
The company also will close more factories and reduce hourly workers to about 40,000, compared with more than 60,000 in 2008.
