General Motors Corp. will jettison its Pontiac brand and enhance a plan to reduce its North American capacity to lower its breakeven point in the U.S.
The revised restructuring agenda also accelerates actions surrounding its Saab Automobile, Saturn and Hummer operations to the end of 2009 at the latest. GM is looking to sell or close all three operations. Initially, it had planned to operate Saturn through the ʼ11 model year. The Pontiac brand will be phased out by the end of 2010.
President and CEO Fritz Henderson says it was a “tough decision” to kill Pontiac, but the auto maker wasn’t convinced it had a viable plan for the marque going forward.
The moves will reduce the number of GM nameplates 29%, from 48 in 2008 to 34 in 2010.
The auto maker will cut its dealer ranks by another 500, taking its count from 6,246 in 2008 to 3,605 by the end of 2010, a 42% reduction that now will come four years earlier than the original reorganization plan GM announced on Feb. 17.
On the manufacturing front, GM will trim the number of assembly, powertain and stamping plants in the U.S. from 47 last year to 34 by the end of 2010 and 31 by 2012. That moves up the closing of six plants and adds an unidentified plant to the mix.
U.S. hourly employment will be reflected in the capacity cuts, falling from 61,000 in 2008 to 40,000 in 2010, a 34% decline. It will be trimmed further to 38,000 at the beginning of 2011. The latest plan reduces GM’s rolls by another 7,000-8,000 jobs from the Feb. 17 plan.
The auto maker says additional salaried and executive positions also will be cut.
The moves will allow GM to break even before interest and taxes with an industry volume in the U.S. of 10 million vehicles. The plan assumes a 19.5% share for GM in 2009 and a market penetration that settles in at the range of 18.4% to 18.9% in subsequent years. These are lower assumptions than GM made in its Feb. 17 plan.
It also assumes a reduction in U.S. hourly labor costs from $7.6 billion last year to $5 billion in 2010, a 34% decline.
GM says its North American structural costs will fall 25% to $23.2 billion in 2010, from $30.8 billion in 2008. That marks a $1.8 billion reduction from the Feb. 17 plan.
To strengthen its balance sheet, GM launched a bond exchange offer today in an effort to convert about $27 billion of its unsecured public debt into equity. The auto maker is offering to exchange 225 shares of common stock for every $1,000 of outstanding debt.
“A stronger balance sheet would free the company to invest in the products and technologies of the future,” Henderson says in a statement.
GM continues to negotiate with the United Auto Workers union over the terms of its Voluntary Employee Benefit Assn. funding that covers retire health-care costs. The bond offer is contingent on GM converting to equity at least 50% of its outstanding U.S. Treasury debt by June 1 and at least 50% of its VEBA obligations. GM expects a debt reduction of at least $20 billion via the two moves.
The auto maker says it still plans to maintain annual investment in new products, earmarking $5.4 billion in 2009 and $5.3 million-$6.7 million from 2010 to 2014.