General Motors on Monday confirmed it would axe Pontiac and focus on just four core brands in the US – Chevrolet, Cadillac, Buick and GMC – with fewer models and “a more competitive level of marketing support per brand”.
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Pontiac will be phased out by the end of next year by which time GM will offering 34 models, down 29% from 48 in 2008, the automaker said in a revised restructuring plan submitted to the US government.
The US dealer count will be slashed 42% from 6,246 in 2008 to 3,605 by the end of next year. GM noted this was a further reduction of 500 dealers, and four years sooner, than in the plan it submitted on 17 February.
GM said the number of assembly, powertrain, and stamping plants in the US would be cut 28% from 47 in 2008 to 34 by the end of 2010, and to 31 by 2012. This is an acceleration of six plant idling/closures from the 17 February plan, and one additional plant closure.
US hourly employment levels will be reduced about 34% from about 61,000 in 2008 to 40,000 in 2010, and are projected to level off at about 38,000 from 2011.
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By GlobalDataThis is a further reduction of 7,000 to 8,000 employees from the 17 February plan. The plan assumes a 34% reduction of US hourly labour costs from $7.6bn in 2008 to $5bn in 2010.
GM also expects a further decline in salaried and executive employment.
GM North America has forecast the consequent lower structural costs will enable it to break even (adjusted EBIT basis) at a total US industry volume of approximately 10m vehicles, substantially below the 15m to 17m annual sales rates recorded from 1995 through 2007.
“The revised plan accelerates the time line 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 organisation going forward,” the automaker said in a statement.
“We are taking tough but necessary actions that are critical to GM’s long-term viability,” said president and CEO Fritz Henderson.
GM said it planned to resolve the future of Saab, Saturn, and Hummer by the end of 2009.
The latest viability plan 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% share in 2009, with share stabilising in the 18.4% to 18.9% 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.”
GM on Monday launched a bond exchange offer for approximately $27bn of its unsecured public debt. If successful, the 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.”
GM said discussions with the UAW to modify the terms of the Voluntary Employee Benefit Association (VEBA), and with the US Treasury regarding possible conversion of its debt to equity were continuing.
“The current bond exchange offer is conditioned on the converting to equity of at least 50% of GM’s outstanding US treasury debt at 1 June, 2009, and at least 50% of GM’s future financial obligations to the new VEBA. GM expects a debt reduction of at least $20bn between the two actions,” the automaker said.
In total, the US treasury debt conversion, VEBA modification and bond exchange could result in at least $44bn in debt reduction.
GM added it would will continue to invest in future products and new technologies, with $5.4bn allocated in 2009, and investments ranging from $5.3 to $6.7bn from 2010 to 2014.
“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,” it said.
“The viability plan reflects the direction of President Obama and the US treasury that GM should go further and faster on our restructuring,” Henderson said.
