Pontiacs reach finish in GM restructuring
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GM President and CEO Fritz Henderson listens to a conference call regarding the company's viability plan in Detroit yesterday.
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Pontiac, the legendary General Motors brand that began as "Chief of the Sixes" in the 1920s and went on to take a car-hungry nation "Wide Tracking" into automotive glory as GM's high-performance brand, will be dropped after the end of the 2010 model year.
The announcement came from GM officials yesterday as part of an update on their revisions to a restructuring plan designed to keep the Detroit automaker out of bankruptcy and help it qualify for further federal assistance. The plan also includes cutting 21,000 U.S. factory jobs by next year.
Locally, dealers took the news hard.
"I have an empty spot in my tummy," said Bob Arnold, who owns Arnold Pontiac in Houston, Pa. "My father sold his first Pontiac from this location in 1926, the year Pontiac was introduced.
"My son who's here is the fourth generation. We were in the process of passing the business onto him, but that's a dead issue now. What does he have now to look forward to?"
Mr. Arnold has about 20 employees, and he said many of those will have to go because of this announcement.
In the end, it was not simply GM's financial troubles that killed the brand -- or at least, that's not what most auto analysts and car enthusiasts say. What doomed Pontiac, they say, was GM's failure to capitalize on the brand's high-performance image.
Instead, it saddled the brand with too many models similar to other GM models, including compact sedans and minivans that had nothing in common with what Pontiac used to represent to American car buyers.
• Cut 21,000 U.S. salaried and hourly jobs by the end of 2010 and shutter 13 plants.
• Drop 2,600 dealers and focus on four brands -- Chevrolet, Cadillac, GMC and Buick -- while phasing out Pontiac, Hummer, Saturn and Saab.
• Present a debt-for-equity offer to holders of $27 billion in outstanding bonds. Ninety percent of those holders must accept the offer, GM said, or it will file for bankruptcy by June.
• Offer stock to the United Auto Workers for at least 50 percent of $20 billion GM must pay to a union-run trust fund assuming retiree health care expenses next year.
• Ask the government for $11.6 billion more, on top of the $15.4 billion it has been living on. Request that the U.S. Treasury accept more than 50 percent of its common stock in exchange for canceling about $10 billion of its government debt by June 1.
The death march for Pontiac started several decades ago when GM embarked on what turned out to be a disastrous plan to have models share the same bodies and engines without at least giving each line a distinct look and feel to separate one brand from another.
By the time GM finally learned its lesson and began again to produce distinctive Pontiac products, such as the G8 high-performance sedan and the Solstice roadster and coupe, it was too late.
"Just as the G8 reawakened our interest in 83-year-old Pontiac, the brand falls victim to bad times and old mistakes," said Daniel Pund, senior editor of Edmunds.com's Inside Line.
Meanwhile, Americans were becoming used to the two-tiered marketing strategy used by Asian companies -- that is, having companies with only two brands. Toyota, for instance, has the mass market Toyota and the upscale Lexus line while Nissan offers the upscale Infiniti for more well-heeled customers.
"The Asians have had that strategy from the beginning ... a volume and a luxury brand only for each nameplate," said independent automotive adviser Tom Libby, based in Michigan. "And they gained more and more market share, and now that has more presence and clout in the marketplace. The brands that don't fit into that two-brand structure, there's just no place for them anymore.
"GM really tried to hang on to this five- or six-brand approach, but they did not establish a distinct identity for each of their brands."
In the future, there will be four core brands at GM: Chevrolet, Buick, GMC trucks and Cadillac.
In addition to the announcement that Pontiac was being eliminated, General Motors also will the government to take more than half its stock in exchange for half of GM's government debt as part of a major restructuring that would leave current shareholders holding just 1 percent of the company. The automaker will offer 225 shares of common stock for every $1,000 in notes held by bondholders as part of a debt-for-equity swap that aims to retire most of GM's $27 billion in unsecured debt.
The company also plans to reduce its U.S. dealer count from 6,246 in 2008 to 3,605 by the end of 2010, a reduction of 42 percent.
"What local dealers do is service the community, the charities, the hospitals -- all sorts of things. All that will now be lost," Mr. Arnold said.
"And GM doesn't pay one bill here. We even have to pay GM $2 for each piece of sales literature we pass out. We get nothing for free from General Motors."
Gone, too, will be a brand with a storied history.
Pontiac traces its roots to 1893, when it was founded as the Pontiac Buggy Co. of Pontiac, Mich. The company that made horse-drawn carriages, morphed in to the Oakland Motor Car Co. in 1907 under founder Edward Murphy. Acquired by General Motors in 1909, Oakland introduced the first Pontiac vehicle in 1926. Dubbed the "Chief of the Sixes," the car was powered by a six-cylinder engine and made its debut at that year's New York auto show. Although the Pontiac was introduced as the junior "companion car" to the Oakland, it soon overtook the Oakland in popularity. Soon after, the Oakland ceased to exist.
In essence, Pontiac was to be part of a highly lucrative scheme cooked up by one of America's great marketing geniuses, GM president and chairman Alfred P. Sloan, who retired in 1956 after 33 years at the helm. He believed every car that the company made had to have a specific market and purpose.
Chevrolet was designed to "get them in the door" as a low-priced entry-level model. Oldsmobile (GM phased out the nameplate almost a decade ago) was the flamboyant, technologically advanced brand. Buick was the low-key, graciously equipped entry-level luxury model. Cadillac was, simply put, "The Standard of the World."
Pontiac -- which drew its name both from the Michigan city of its birth as well as from the legendary American Indian chief -- was to fill the slot between Chevy and Oldsmobile for the family on its way up, but not quite "there" yet.
In 1936, the brand took off with the introduction of the Silver Streaks -- wide bands of chrome down the hood that became its trademark until 1957 when they were dropped in an effort to change what some had seen as an "old man's car" into a more youthful, stylish automobile.
The brand has had a series of nameplates that have become legendary: Star Chief, Chieftain, Ventura and the LeMans. But the one that perhaps is most synonymous with Pontiac is the Bonneville.
It started out as a one-time convertible and grew into a regular series in 1958. It was the Motor Trend Car of the Year that year. In 1959, it became the top-of-the-line model featuring "Wide Track," another term long-identified with Pontiac.
But it was the 1960s when Pontiac cemented its reputation as a hot, flashy car. Soon, there were tri-colored interiors, two-toned steering wheels and chrome-laden pedals along with rugged-looking aluminum wheels on many Pontiacs.
In 1964, Pontiac introduced the Gran Turismo Omologato, or GTO. Nicknamed "GeeTO Tiger," it was the subject of songs, featured in movies and on television. This mid-sized car with an engine taken from the larger Bonneville came with dual-exhaust splitters, fire engine red fender liners, and chrome-laden, bucket-seated interiors. It remained in production for decades.
Pontiac had other hot cars: the Catalina 2 plus 2, the Grand Prix, the Firebird and the Firebird Trans Am, with its ram-air engine setup and fiery bird symbol on the hood.
By the 1980s, the brand seem to lose its way as GM's new strategy produced models that bore little resemblance to Pontiacs of old and looked far too much like other GM products.
In the 21st century, Pontiac, along with other GM brands, staged a comeback with cars like the reborn GTO, the Solstice and the G8, the high-performance sports sedan that, as fate would have it, was the last ever produced by the firm.
Pontiac's inventory stockpile is bigger than that of the rest of the GM brands, according to Edmunds.com's data.
"They still have a lot of inventory to get rid of before they can disband the brand," noted Edmunds.com analyst Jessica Caldwell. "Even if they stopped production of all Pontiacs, they have well over three months supply in stock at this time -- over 80,000 cars."
Consumers now will reap the benefits of the brand's demise -- as long as they can handle driving a car scheduled for extinction. "Pontiac owners can expect that General Motors will continue to honor both standard and extended warranties," said Edmunds.com's Senior Features Editor Joanne Helperin.
First Published April 28, 2009 12:00 am
