And on Tuesday, when General Motors asked the federal government for more bailout money, it also announced a reorganization plan that included demoting Pontiac to a “focused niche brand,” signaling that its lineup of vehicles would shrink and that it would no longer be a separate division.
To industry analysts and Pontiac’s longtime fans, the downgrade provides a case study of the product missteps that helped put G.M. in its precarious state, and a reminder of the dangers in straying from a successful formula.
“When you deviate too far from it, that’s when you run into trouble as a brand and a company,” said Jack R. Nerad, executive editorial director at Kelley Blue Book, whose 1968 Firebird made him feel “as cool as I could be.”
More than any other G.M. brand, Pontiac stood for performance, speed and sex appeal. Its crosstown rivals followed with similar muscle cars, giving Detroit bragging rights over the cars that Japanese automakers were selling based on quality and reliability.
Though still G.M.’s third-best-selling division, behind Chevrolet and GMC, Pontiac’s sales peaked in 1984, when it sold almost 850,000 vehicles, roughly four times as many as it sold last year.
G.M.’s chief executive, Rick Wagoner, said the company’s decision to concentrate primarily on Cadillac, Chevrolet, Buick and GMC left the company with a “comprehensive portfolio.”
By many accounts, Pontiac started to falter when G.M. pursued a cost-saving strategy of providing the same cars to different divisions.
No kidding. It’s stunning that GM needs an economic catastrophe to admit to obvious truths.
This is the best thing for GM, and for Pontiac. Now, they can focus on cool cars, and maybe even recapture some of the muscle car glory of the brand’s past.
“I haven’t heard about what is in General Motors’ plan in detail, but it looks like it will be more maximum than minimum. In other words, it will be quite aggressive, and I don’t know whether this will include plant closings or elimination of brands,” said David Cole, head of the Institute for Automotive Research in Ann Arbor, Mich.
Meanwhile, Bob Lutz, who is slated to retire as GM’s vice president of product development, told the Automotive News that Saturn likely would not survive the restructuring plan.
“My personal favorite would be to see Saturn survive and prosper. But frankly, the reality is that that is probably not going to be the outcome,” Mr. Lutz said. Neither he, nor other GM officials could be reached for comment on Saturn’s future.
“We spent a huge bundle of money in giving Saturn an absolutely no-excuses product lineup, top to bottom. They had a better and fresher lineup than any GM division, and the sales just never materialized. So we have to act on that. It’s our duty,” Mr. Lutz told Automotive News.
Working against the idea of axing Saturn is the enormous amount of money that would have to be spent to settle with dealers and the potential lawsuits from them that would probably follow. That happened with Oldsmobile.
Rob Cochran of No. 1 Cochran in Monroeville and Robinson said he held out hope that Saturn would continue as a brand.
“I know that Saturn is … exploring a lot of options. The dealers met last month in New Orleans and there were three or four options on the table,” Mr. Cochran said. “We are waiting to see what those alternatives are.”
He added, “Mr. Lutz is famous — or depending on your viewpoint, infamous — for just winging it. He’s a great product person, but a challenge from a PR standpoint.”
Saab is expected to survive, as the Swedish government will likely invest billions to make sure Saab and Volvo remain viable, though details are not yet clear.
The auto bailout helped to keep GM and Chrysler on life support, but GM will make it clear in it’s plan to be filed this week with the government that more money will be needed in order to avert bankruptcy.
General Motors Corp. will offer the government the choice of giving it billions more in bailout money or seeing it file for bankruptcy when it presents a restructuring plan next week, according to a report published Saturday.
The online edition of The Wall Street Journal, citing unnamed sources, said the competing choices present a dilemma for the Obama administration, which may fear seeing the industrial icon carmaker fall into bankruptcy and cut more jobs if it’s refused more aid.
The government has already committed $13.4 billion to GM as part of a federally-funded bailout. The automaker is expected to include its call for more funds in a restructuring plan it’s required to submit to the Treasury Department by Tuesday, though the company isn’t expected to include a dollar amount, according to the Wall Street Journal report.
However, Treasury Department officials believe GM needs at least $5 billion more in loans to keep operating beyond the first quarter, according to the report.
The key will be the plan laid out by GM. Will it have real concessions from bondholders and the union?
The Detroit News is reporting the GM bondholers are driving a hard bargain and threatening to push GM into bankruptcy.
General Motors Corp. bondholders want more money in exchange for forgiving billions in debt and are threatening to push the struggling automaker into bankruptcy if they don’t get it, The Detroit News has learned.
GM has been negotiating with bondholders this week on a complicated debt exchange that would cut the automaker’s unsecured debt by two-thirds to $9.2 billion. To get there, bondholders would have to accept about 30 cents on the dollar, which is a requirement of the automaker’s $13.4 billion federal loan package.
But bondholders are demanding 50 cents on the dollar, which they say mirrors the value of concessions being negotiated with the United Auto Workers, said people familiar with the talks.
The demands illustrate the challenges GM is facing in its talks with bondholders and raise doubts about whether the company will succeed in cutting its debt and convincing the government it can repay the loans. If GM cannot reach a deal on concessions with bondholders, as well as with the UAW, the government could recall the $9.4 billion GM has already received and effectively force the automaker into bankruptcy.
Fiat SpA and Chrysler LLC on Tuesday confirmed the Italian auto maker will take at least a 35% stake in Chrysler as part of a deal to share technology and bring small cars developed by Fiat to the U.S.
The move is an attempt to revive two of the world’s storied auto makers and is likely to eventually give Fiat control of Chrysler’s operations, people familiar with the matter said. Under terms of the deal, Fiat has the option of increasing that to as much as 55%, these people said.
Fiat, the stronger of the two car makers, wouldn’t immediately put cash into Chrysler. Instead, it would obtain its stake mainly in exchange for covering the cost of retooling a Chrysler plant to produce one or more Fiat models to be sold in the U.S., these people said. Fiat would also provide engine and transmission technology to help Chrysler introduce new, fuel-efficient small cars.
The deal is the latest maneuver by Fiat’s chief, Sergio Marchionne, who has pulled the Italian company back from the brink collapse since taking over in 2004.
This might be a great combination. We’ll see how it plays out.
We are launching this car blog at a time of great turmoil and uncertainty in the auto business. With the economic crisis, the United States has had to bail out banks and auto companies just to prevent the economy fm collapsing.
Apart from this crisis, the auto industry is facing challenges rearding energy as well. Summer gas prices convinced many that our addiction to oil must be addressed, and looming climate change is also driving policy changes. Fortunately, significant progress has been made on hybrids, including plug-in hybrids, that might change the auto industry in ways not imagined just several years ago.
Yet even with all these problems, many of us still love cars. We’ll be addressing the tough issues facing the auto industry, but we’ll also bring you reviews and stories covering the great new vehicles being produced around the world.