General Motors on Monday confirmed rumors regarding the future of its Pontiac division, indicating the storied brand will be eliminated by the end of 2010 at the latest. The company said it will also sell or shut down Saab, Saturn, and Hummer by the end of 2009 or sooner. Furthermore, the company will eliminate 13 manufacturing plants (28 percent) by late 2010, while simultaneously slashing its dealer network by nearly half --from 6,246 in 2008 to 3,605, a reduction of 42 percent.
GM says it intends to focus on its four core brands: Chevrolet, Cadillac, Buick, and GMC. CEO Fritz Henderson said speculation about the elimination of Buck and GMC is illogical given the profitability of these divisions. Henderson indicated GM will offer a total of 34 models in 2010, a reduction of 29 percent from 48 on sale in 2008
Regarding Pontiac, some models will disappear sooner than others. GM will kill the G8 sedan by the end of 2009, while the Vibe -- which is manufactured alongside the Toyota Matrix -- will live on until the end of 2010. Henderson indicated GM is in talks with Toyota over selling its stake in Vibe/Matrix manufacturing.
GM's new viability strategy also outlines a plan to file for bankruptcy, should lenders fail to agree to a debt-for-equity swap before the government's imposed June 1 deadline. GM says that if it files for bankruptcy -- which is looking likely at this point -- it will ask the courts to sell its assets to a new operating company, presumably the "?good GM' discussed just a few weeks ago. GM's remaining 'bad' assets would be liquidated.
U.S. hourly employment levels are projected to be reduced from about 61,000 workers in 2008 to 40,000 in 2010, a 34 percent reduction, leveling off at about 38,000 in 2011. This represents a further planned reduction of an additional 7,000 to 8,000 employees compared to the original February 17 viability plan.
In all, the new plan includes a reduction of U.S. hourly labor costs from $7.6 billion in 2008 to $5 billion in 2010, a 34 percent reduction. GM says it will continue to work with the UAW to accomplish this through a reduction in total U.S. hourly employment as well as through modifications in the collective bargaining agreement.
GM says its break-even point for U.S. sales will be 10 million vehicles per year -- substantially below the 15 to 17 million annual vehicle sales rates recorded from 1995 through 2007. GM North America's structural costs are projected to decline 25 percent, from $30.8 billion in 2008 to $23.2 billion in 2010 -- $1.8 billion better than the February 17 Plan.
Monday's announcement also includes a bond exchange offer for approximately $27 billion of its unsecured public debt. GM's aim is to convert most of this debt to equity. The company is also in talks with the Voluntary Employee Benefit Association (VEBA) and U.S. Treasury to swap debt for equity. This would effectively make the U.S. government a major shareholder -- perhaps the largest -- in General Motors. GM expects a debt reduction of at least $20 billion as a result of its bond exchange efforts.