Pontiac Gone, GM Deepens Restructuring Plans

Edmunds' Inside Line wasn't kidding; Pontiac has indeed been cut as originally reported. The official announcement came today, along with a host of other more drastic restructuring measures that have been taken. It's not pretty, not pretty at all. Like I've said before, I thought this painful realigning was what government intervention was supposed to stave off? Guess not. Looks like General Motors is heading right toward Chapter 11.

GM has included the cuts and changes as part of a update on the "Viability Plan" produced for the U.S Treasury on February 17th. A lot has changed since then, as evidenced by these new cuts. GM says it's an "accelerated timeline

deeper cuts in several key areas  of GM's operations".

That includes cutting Pontiac for good; it will be phased out by the end of 2010. GM will offer a total of 34 nameplates in 2010 down 29 percent from 48 in 2008. While choice is good, that works out to be a good thing; it's better to have one strong entry then 3 weak models. GM recognizes this; that number is down due to brand cutting and elimination of overlapping models.

In addition, Saturn who GM once planned to stop supporting in 2012, has now been given until the end of the year to achieve a "resolution". Saturn better find a suitor soon; “If a sale of Saturn does not occur, we intend to phase out the Saturn brand by the end of 2009.” says the release. That also goes for Saab and Hummer. The corporation will provide updates on each of those brands as things progress.

Cuts are coming to every area of GM's business. That goes for dealers as well; 6,246 in 2008 vs. 3,605 by the end of 2010. That is huge; a reduction of a startling 42 percent. Think this isn't going to have an impact? Wait, there's more.

The plan is toreduce the total number of assembly, powertrain, and stamping plants in the U.S. from 47 in 2008 to 34 by the end of 2010, a reduction of 28 percent, and to 31 by 2012.

GM has also made a bond exchange offer for it's unsecured public debt. It would convert a large majority of GM's debt into equity. GM expects nearly $44 billion in debt reduction if the offer is accepted. In addition, GM is asking the U.S Treasury to convert it's debt (the loans) into equity as well. The scary result? 50% U.S government Ownership, 39% UAW VEBA ownership, 10% bondholders and 1% shareholders. That's right, 1%.

This is an outrage! I'm fully convinced the government should have let them go into a pre-packaged bankruptcy. Ridiculous. This is socialism, the U.S government was never ever supposed to take ownership of a private company, especially in an industry like this. Loans are one thing; equity stake and ownership? Entirely another.

A very sad thing to see a once great company like GM fall, and so hard. It has no prestige left and right now has shown itself to be hopelessly organized to fail. Look at everything that is having to be cut just in order to achieve a break even point. The company obviously was extremely bloated, wasteful and inefficient.

So while the cuts are very sad, they will be what the company needs to survive. The 4 U.S brand strategy is the way to go when looking at the market; GM can focus it's efforts on these brands and can begin to claw it's way back again. In the long run, the company will be leaner and much more competitive as a result of these cuts. Just look at the reductions in yearly overhead as well as long term debt; given revenue levels they will have to reach profitability once the economy begins to recover. Before they were just like the U.S government is now; big, bloated, inefficient, and wasteful. The list goes on. Now, they can compete like every other car company.

So that's the good news. But government ownership? Like I said, an outrage. The government needs to get out of this as quickly as possible. The sooner they do, the better it will be for all of us. Be careful Ford, be very careful!