Pontiac is closed

Pontiac is closed

Pontiac is closed, When GM unveiled its plan for the future late yesterday, it was clear that Pontiac’s days are numbered. To face the future, GM chooses to scrap Pontiac, reduce the number of factories from 47 to 34, lay off 21,000 employees, and offer its creditors shares instead of money.

GM has apparently taken the criticism it received from the US government to heart. President Obama and his administration have felt that the restructuring plan previously presented by GM was not ambitious enough. When GM presented its revised plan for the future yesterday, it is clear that it is not a coward this time. There are extensive measures to be taken, and the most conspicuous is that Pontiac will be shut down. GM thus departs from its previous plans which meant that Pontiac would be kept as a small and extremely niche brand. The phasing out of Pontiac is to begin shortly and is expected to be completed by the end of next year. GM also reiterates its ambitions to sell or shut down Hummer, Saturn, and Saab.GM CEO Fritz Henderson hopes the Saab issue will be resolved by the end of 2009.

GM also announces that the number of factories will be reduced from today’s 47 to 34 by the end of 2010. The number of hourly employees in the US will be reduced by approximately 21,000 from 61,000 to 40,000. The costs for hourly employees are thus estimated to be reduced by as much as 34 percent. But it doesn’t end there. The number of dealers in the United States is to be cut in half, from the 2008 level when there were 6,246 GM dealers, to only 3,605 in 2010.

Even though GM is trimming its operations which reduces the cost of running the business, one big problem remains – debt. GM has large debts to various lenders, not least the US government. GM is now making an offer to the lenders to receive shares instead of money. GM is offering 225 GM shares for every $1,000 in loans the creditors have. If the deal goes through, the lenders will own about ten percent of the automaker. If not enough lenders, at least 90 percent, take up the offer by June 1 at the latest, GM threatens to file for bankruptcy, reports the Reuters news agency.

When the plan was presented, CEO Frits Henderson commented with words “We only want to do this once”. The measures are harsh, but according to Henderson, they are needed to ensure GM’s long-term survival. According to Henderson, the decision to let Pontiac go through with the requirements must have been extremely personal and difficult to understand.

Why Pontiac went out of business and went bankrupt?

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