GM Restructuring Plan, Take 20

1978-grand-prix_pr.thumbnail.jpgBy now you’ve heard that GM has released a new restructuring plan–this one assuming total US vehicle sales of 10 million a year (that means GM’s projects and plans are finally catching up to how badly the auto market is contracting), and one assuming an ambitious debt to equity plan for its bond-holders (which means it’s still a long shot, IMO, and which means Treasury would have a car company to go with its insurance company).

And of course, Pontiac, along with Hummer, Saab, and Saturn, will be killed. I learned to drive on a Pontiac V8 Grand Prix with an 8-track that played Journey, Boston, and Pink Floyd.

And of course, tons more job losses.

That said, today’s plan finally gets around to cutting the number of dealers that GM will need to cut to turn itself around–they’re talking of closing 2,600 of their 6,200 dealers across the country (did I say tons more job losses?). 

On a conference call with GM CEO Ray Young, I asked how they were going to pull this off–was the government going to help them get out of their contracts? As a later questioner noted, the elimination of the Oldsmobile dealers was a very costly process. Young basically said that GM now could use the Oldsmobile process as a lesson in how not to do things. 

That said, Young wasn’t prepared to explain how GM plans to get out of 2,600 dealer contracts without billions in costs. The government is not going to help–so this is still an area where bankruptcy would offer an advantage to GM over this restructuring. Young said the impacted dealers would be approached over the month of May, and dealers would be wound down over 2009 and 2010. One of the reasons for the big factory idling, he explaned, was to help dealers sell down stock before they closed up shop (which means dealers may be able to pay off their debt before closing their business.

I also asked about Bob Corker’s biggest worry, the Spring Hill plant (See Bob, I’m looking out for you!) As of right now, the Spring Hill plant would be treated like any other plant (it currently assembles the Chevy Traverse, not Saturns). But I thought Young was noncommital about what will happen as GM picks factories to close (note, my impression is Corker’s probably secretly hoping that GM’s failed business model doesn’t force bankruptcy, bc it’ll mean he keeps the GM jobs in his state). 

So that’s what it is–another, perhaps more realistic plan, but still one that doesn’t help them out of their dealer problems. And one that kills another brand in the process

46 replies
  1. Stephen says:

    I feel very fortunate to have spent my early teen years during summer holidays with my aunt and uncle and their two sons in Southfield Michigan during the sixties. My eldest cousin schemed a 65 GTO ( goat ) from his parents and when I turned 18 I conned a 67 GTO from my Mom and Dad. Motown Music, Woodward Ave. at night, and Big Boys. It was all magic.

  2. scribe says:

    Learned to drive on a Catalina, otherwise known as a rolling living room.
    Followed that up with the first car, a ‘62 Olds.

    Shed a tear. Move on.

    • Hmmm says:

      Learned to drive on a Catalina, otherwise known as a rolling living room.

      Same here. Dad and Grandpa both drove Pontiacs. All gone now.

  3. HotFlash says:

    There will be, for a couple of years, anyway, some highly skilled former auto engineers, designers, production workers, dealers, sales folks, mechanics, bodyshop guys and car jockeys kicking around.

    Do people *need* cars? Maybe, maybe not. But they need transportation, and so do their goods. So long as there is *some* demand there will be *some* money to make this happen, one way or another. So, there will be some kind of market.

    And can anyone tell me why only 3 companies in the entire US can make cars — um, 2.5, um, 2, whatever? And why are they all the same? I would pay for a frame that can be repaired indefinitely, or a chassis that can be upgraded/changed as my needs do, that would accept various engines — gas, natural gas, hybrid, methane.

    Note: in my days at a Chrylser dealership it was axiomatic that the guys were concerned about colour and styling, the women wanted handling, good mileage and reliability. Most of our dealer trades and special orders were to get guys the colour they wanted.

    Marcy, I know you have a project lined up, but why don’t you and Rayne build cars? I know they’d be better than anything the world has ever seen, and I don’t see that the Big Three are in any shape to ‘Tucker” anyone these days. It’s a dream, yeah I know…

    • bobschacht says:

      NPR had a story up a few days ago about new energy companies starting up in the Detroit area to take advantage of all the experienced engineers available. I think it was something like manufacturing wind turbines or some such. There was another report about two brothers, in exactly the same manufacturing(?) business, both with good growth prospects selling to foreign countries, who were tooling up in the Detroit area because of all the engineering expertise. I sure hope that Detroit can be re-born as an industrial power house.

      Bob in HI

      • PierceNichols says:

        I think Detroit is going to be a cool city in a decade. There’s also a huge influx of artists taking advantage of the fact that you can score a house for $100 there.

  4. JohnLopresti says:

    I made my young women friends turn off the radio. It was too distracting. I had to concentrate on learning to attend to all the actions of driving. Then again, it was a Ford stationwagon, not a muscleCar in my early years driving. Eventually I got to listening to the radio after I got my chops, though the band folks thought I should have learned how to be as niftily syncopated as Stevie Wonder on the electronic keyboard. Take it farther, seemed to be a better model of musical construction. Maybe someday later in life there will be a muscle car for me, or, better yet, a performance car which is understated like the old hand-me-down MB of my personal yore, just quiet perfection and appurtenances. But the Ford pickup now is too fuzzy in the interior. What is it with Americans that they think comfort fits with barn cleaning, that plumbing tools belong in some cargo space not in the cab, that rainboots cannot touch the door-to-door suburb carpets because they will create stains and the floor and seat essentially get unmentionable from real outdoor work applications, I asked rhetorically, Steely Dan on the radio, never heard Journey ever, and can hum Guillaume de Machaut ditties as if waiting for the pipe organ, but that is another unimpressive overly-ornate form of expression. Give Americans their cars, their independent spirit.

    • bobschacht says:

      On Car Talk last weekend, I think, there was a song lamenting the passing of the bench seats. You can’t say, “Honey, move closer” (or equivalent) any more, now that everything but trucks have bucket seats.

      Bob in HI

      • bmaz says:

        Bench seats? Honey move closer? Bob, my wife is closer to demanding a whole separate compartment. And I have half a mind to give her one (stereo stays in mine though).

  5. tbsa says:

    I thought Pontiac and Saturn were two of the more successful lines for GM. I want to know why these car companies have to cut these jobs but the banks haven’t had to cut loose even one of the assholes who helped produce the collapse of the banks. This will be devastating to alot of communities in terms of job loss.

  6. Margaret says:

    It makes no sense to me that GM is going to drop Pontiac and keep Buick. A lot of the production costs associated with those brands are because they are brand specific, that is that a Pontiac transmission won’t fit on a GM, GMC, Chevrolet, etc but it will fit on a Buick. They dropped the Oldsmobile brand earlier and now there will only be the “B” in “B.O.P.”, (Buick, Olds, Pontiac). Seems like they could save more money by standardizing company wide rather than keeping them brand specific but dropping one of those brands.

  7. joanneleon says:

    Saturn and Pontiac? Pontiac, admittedly, is not what it used to be but it seems like the Saturn line has the most efficient cars and I see a ton of them on the road. Plus, their owners seem to be really loyal. I know of two families who only buy Saturns.

    Keeping Buick and Cadillac? I’d ditch Buick and give Cadillac an expanded line, and quit trying to make these muscly Cadillacs and go back to what that car line used to be.

    Keeping Chevy and GMC? Seems to me they could be combined.

    If I were GM, I’d keep Cadillac, combine Chevy and GMC, and keep Saturn. I’m not sure about Pontiac, but if they kept it, I would bring back some of the old Pontiac models in a retro style but more efficient and hybrid models of them.

    Most of all, if they are going to break the unions by doing this, I would never buy a GM product for the rest of my life.

  8. obsessed says:

    Geez – it seemed like Saturn was the only sensible car those morons ever built. Certainly the only one I ever considered buying.

    Well, actually, when I was 10 years old I wanted to buy a Corvette.

  9. KayInMaine says:

    They’re going to kill the Saturn? Why!!! My 2002 Saturn currently has over 179,000 miles on it. I have to add oil (and now radiator fluid! LOL) but she’s still going strong and gets great mileage too. Dammit.

  10. phastphil says:

    Bring back the Packard, Hudson and Studebaker!
    I wonder what manufacturer is going to buy up the Saturn plant? It’s pretty new and up to date. Or will GM use it for the brands they keep.

  11. obsessed says:

    Most of all, if they are going to break the unions by doing this, I would never buy a GM product for the rest of my life.

    The usually cynical Chris Bowers, founder of OKADA (Obama Kool-Aid Drinkers Anonymous), seems the new developments – says UAD will actually have 39% ownership stake in the new GM.

  12. obsessed says:

    Bring back the Packard, Hudson and Studebaker!

    How about Ford Falcon and Plymouth Valiant – those suckers are still running today … actually I haven’t seen any Valiants for a while, but in CA (where cars last longer because no snow), there are still a fair number of ‘62 Falcons puttering around.

  13. obsessed says:

    They should re-issue the Jim Rockford model of the Pontiac Firebird. Handled great and got at least 5 mpg (on the highway – less in town)

  14. Pade says:

    I loved my 1967 Firebird convertable. It was my second car. Big mistake though – I didn’t get power steering and it was a job to drive. It also had an issue with starting in cold weather. It was predeeded by a Corvair convertable and followed by a Camaro hard top. Those were the good old days.

  15. behindthefall says:

    No tears for SAAB??? My old free-wheeling wonder, 70 mph downhill on the interstate, foot off the gas, adjusting speed by opening and closing the rear vent windows? 40 mph under the right conditions. Lots of education in the fine art of auto mechanics. Strip, clean, and replace a carburetor in a white sweater and tie before a date. Pop in fresh brake pads before taking the groceries into the house. Pull the engine to replace the clutch plate every 30k miles. _That_ SAAB? I’m heartbroken.

    • behindthefall says:

      (I meant “40 mpg”, not “40 mph”, of course. And that on I-95 — I wasn’t driving.)

  16. Loo Hoo. says:

    My friends got to drive before I did. British green Valiant and a pink and black Rambler station wagon!

    Who made the Rambler?

  17. pseudonymousinnc says:

    From the WSJ, on the global repercussions:

    GM is looking for an outside investor to purchase up to a controlling stake in GM Europe, which is mainly composed of the German Opel and British Vauxhall operations. Fiat SpA, the Italian auto maker working to seal an alliance with Chrysler LLC, is among those interested in potentially taking a stake in the two operations.

    Fiat? Really? Now, Fiat has more in common with the Vauxhall-Opel range than Chrysler, but that seems like a leap: it also has platform-sharing stuff with Ford to address. And that says nothing about Holden, which will presumably be affected by the shuttering of Pontiac.

  18. areg says:

    GM: tons of resources, but poor strategy and a lack of vision (not to mention high healthcare costs) Like anything else in life, if you don’t what you are or what you stand for, then eventually you’ll fall. Saab went downhill when they abandoned the hatchback – and became almost as pricey as an Audi or BMW, but not as fun to drive. Pontiac has bragged about driving excitement since the beginning of time, but except for the soon to expire G8 and GTO, the companies has been chock full of duds. And Saturn? Until they started bringing rebadged Opels to the states, I wouldn’t have even considered them – a car company known for dent-resistant panels and a no-haggle pricing policy is not enough to sell cars. Long story short, it was clear that some of these brands would have to go, but a shame to see how inconsistently they were managed until the end. At least Cadillac lives on and is will continue to produce desirable vehicles for enthusiasts.

  19. Teddy Partridge says:

    Never should have sunk the fixed costs into the Saturn experiment when Opels were available across the pond. Not keeping Pontiac as a niche car is a mistake, too.

    I might have to figure out how to get ahold of a Saturn Sky before they are all gone. They look hot.

  20. VictorLaszlo says:

    Hey, don’t be lumping Pink Floyd in with those saccharine “rock-esque” posers Journey and Boston.

  21. hackworth1 says:

    Buick is a favorite marque of the Chinese. Therefore, Saturn must get the axe, while Buick can stay. Have you seen the Buick Logo? It’s f**king awesome. /s

  22. shootthatarrow says:

    In 1950 Americans were able to shop dealers who still sold Kaisers and Frazers,Packards,Hudsons,Nash or Studebaker as well as DeSotos from Chrysler and Oldsmobiles from General Motors.

    By 1960 Kaiser-Frazer,Packard,Hudson and Nash were gone. DeSoto was on the ropes and gone by 1962 and Studebaker was entering a final death spiral that would render Studebaker gone by 1967.

    By 1970 Americans could still buy a Rambler,AMX,Javelin or Ambassador from American Motors. That was about it for anything American made other that what GM,Ford or Chrysler felt like building and selling. Just around the corner was the Chevy Vega,Ford Pinto and AMC Gremlin. Great small cars? Not these. However VW,Datsun(Nissan now),Toyota and soon Honda were rising stars in North American car market.

    By 1980 Chrysler was on the ropes. The K car showed up and Chrysler used the anemic K car platform to produce up through early 1990’s different models from Dodge Caravans and Daytonas to Chrysler LeBaron convertibles and Chrysler Lasers(remember that one?)to even a last hurrah version of the Chrysler Imperial.

    Now with 2010 just around the corner Pontiac is on the way out following Olds. Saab was an interesting cult/niche car GM ruined by blanding it down to GM blandness. Saturn was something of a GM freak–sort of a Corvair redux minus the funky handling but fully outside GM corporate dogma which made it a GM orphan–now a discard.Hummer was all about gross consumerism run amok and some strange American “hoo hah” misdirection.

    Toyota,Nissan and Honda are doing OK these days. We have Subaru,Hyundai and Mitsubishi. VW,BMW,Mercedes and Audi are still in the game.

    China is eyeing up the North American car market. Sixty years a long time in some ways–in other ways not very long in car making/selling time.

    I never owned a Pontiac Firebird or Grand Prix–always wanted a 63-68 GP or any 1960’s Bonneville–they were real American overpowered boats.

    A high school friend had a 1964 Bonneville with the 421 V-8,leather interior and the eight lug alloy Poncho wheels. Still remember that Poncho-it was a real Pontiac–even had a red color headlight high beam Chief Pontiac indicator in the instrument panel.

  23. JohnLopresti says:

    out there where the huskies grow, what league is that.
    The issue is vinyl and those poor naugas who give their hyde for seat covers.

  24. ColinEscherich says:

    While GM is suffering from a lot of self-inflicted wounds (plus the economic meltdown), I haven’t seen anyone yet mention another factor, either in the press or on the blogs. This is the loss of upward mobility for most Americans.

    GM’s sales strategy was very dependent on its customers’ upward mobility. The lowest rung on the ladder was Chevrolet. As GM’s cheapest brand, it would be a choice for your first new car. As your lot in life improved, you’d likely buy a Pontiac, then an Olds, then a Buick. If your business grew large, or you made it to the executive suite, you’d buy a Cadillac. As people grew richer, GM could keep their business by trading them up to the next most expensive brand. (Chrysler used a similar approach with Plymouth, Dodge, De Soto, Chrysler and Imperial; Ford didn’t take the trade-up strategy quite so far, with only three lines of cars.)

    This was very lucrative – I once read somewhere that the cost to build a Cadillac was only about $100 more than a Chevy, but the Caddy was much more profitable. With middle-class incomes becoming stagnant starting in the 1970s, the trade-up strategy was one of many things that began unraveling for GM.

  25. pseudonymousinnc says:

    I don’t get the decision to keep the Buick brand going

    Buick is huge in China. And Buick worldwide is more profitable per-unit than Pontiac. There’s a line from a comment in this thread that rings true, even though it was two and a half years ago:

    It’s pretty obvious that GM (and a little less so, Ford) brass and accountants are looking at China and salivating… [o]nly sports cars and large commercial grade trucks will likely remain in North America.

    Although that was before the downturn, I can honestly see a day when the American auto industry looks like Britain’s, with all mass production under foreign ownership, and domestic-owned production limited to niches like Jaguar, Land Rover, Aston Martin and Bentley, except the US version will be GTOs and Vipers and pickups and Jeeps.

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