The brand fallout is gaining momentum as troubled carmaker General Motors plans to phase out Pontiac by 2010 sell a majority stake to the US Treasury.
By Gareth Dean
The move comes as part of The General’s latest Viability Plan, which includes offering certain bondholders shares in some of the company’s common stock in exchange for outstanding notes to the tune of $27 billion. One of the major bondholders is the US Treasury, which could leverage its $15,4 billion in existing loans with another $11,6 billion in future loans to secure a majority share in GM once the transfer takes place – reportedly before June 1st.
This latest iteration of GM’s Viability Plan builds on the original version submitted to the U.S. Treasury back in February. It outlines plans to accelerate the timeline for a number of important actions and make deeper cuts in several key areas of the company’s operations. A great deal of emphasis is being placed on the company’s four core brands in the US – Chevrolet, Cadillac, Buick and GMC – and the shedding of almost half of GM’s dealerships. A part of this pare-down is the phasing out of the Pontiac brand by the end of 2010. The revised plan also grants GM’s ailing Saab, Saturn, and Hummer brands a stay of execution until the end of this year.
Pontiac was one of the easier GM brands to drop due to its relatively small lineup, comprising just six models, plus the fact that many Pontiac dealership franchises have already been consolidated with Buick and GMC. Although many consumers have fond memories of the Pontiac brand personified by such icons as the GTO, Trans-Am, Fiero, and more recently the G8, these models represent a musclecar segment of the industry that has seen its best days pass and holds little cachet with younger generations of motorists.
Despite assurances from the likes of GM chief financial officer Ray Young and US President Barack Obama that the government has no interest in the day-to-day running of General Motors, the Viability Plan would essentially entail just that. As a majority shareholder, the government would be able to appoint all of GM’s directors, veto shareholder actions and generally dictate how the company is run.
Although the ‘government-run’ route could help keep GM afloat, one can’t help but remember the last time a government took a majority share in a large car manufacturer…it was a company called British Leyland, and we all know how that turned out…
