GM to drop Pontiac in 2010, cut thousands more jobs

A Pontiac Solstice Coupe is displayed at the LA Auto Show in Los Angeles in November. (Fred Prouser/Reuters)

General Motors Corp. said Monday it will phase out the Pontiac brand by the end of 2010 as the automaker unveiled another restructuring plan that includes cutting more jobs.

GM Canada said its hourly wage workforce is expected to decline from 10,300 in 2008 to 4,400 in 2014. The Canadian division said it will also make further cuts to its salaried staff.

GM said its 82-year-old Pontiac division is being eliminated as it concentrates on its Chevrolet, Cadillac, Buick and GMC brands.

The company also said it will complete its plans for the Saab, Saturn and Hummer brands by the end of 2009.

GM 3-month NYSE chart

GM said it will reduce its number of assembly, powertrain and stamping plants in the U.S. from 47 in 2008 to 34 by the end of 2010, and to 31 by 2012. The locations of the plants that will close were not revealed.

GM will also cut more of its U.S. hourly workers. The company said its U.S. blue collar workforce will decline from roughly 61,000 in 2008 to 40,000 in 2010, and level off at about 38,000 starting in 2011.

The latest job cuts are between 7,000 to 8,000 more positions than the company had spelled out in a February viability plan turned down by the U.S. government.

'Something had to go'

"We need to have a more stable, sustainable business model," GM president and CEO Fritz Henderson told reporters at a press conference.

The company said it is also speeding up consolidation of its North American dealer network.

In Canada, the number of GM dealerships will drop from 705 dealers in 2009 to between 395 to 425 dealers at the end of 2010, a reduction of 42 per cent.

Some milestones in Pontiac history

1926: The Oakland Automobile Co. rolls out the first Pontiac at the New York Auto show.

1929: The 500,000th Pontiac rolls off the line.

1932: The Oakland name is dropped in favour of Pontiac.

1957: The tail-finned Bonneville hits the market. It is Pontiac's first car with fuel injection.

1964: The famed GTO muscle car is introduced.

1967: The Firebird is unveiled.

GM said it expects to reduce its U.S. dealer network from 6,246 in 2008 to 3,605 by the end of 2010. That is 500 more dealers, and four years sooner, than the company laid out in the February restructuring plan.

Auto industry analyst Dennis DesRosiers applauded GM's move to cut the Pontiac brand.

"Fritz Henderson said it right: brands don't do well in a defensive role, they only do well in an offensive role, and GM doesn't have the money to be offensive with Pontiac. So something had to go."

Bond exchange

At the same time it laid out plans for production cuts, GM also spelled out how it will rework its balance sheet in a swap of shares for debt.

The company is offering its debt-holders 225 shares in exchange for each $1,000 US of old debt they hold in a bid to eliminate much of GM's $27 billion in unsecured debt.

The U.S. government could wind up holding about half of the company's stock in exchange for swapping half of the loans the Obama administration made to GM. The U.S. government has loaned about $15.4 billion to GM.

The automaker is also offering the United Auto Workers stock in exchange for at least half of the $20 billion that GM owes a union-run trust that is due to oversee retiree health-care expenses starting in 2010.

Together, the U.S. government and the UAW health-care trust could hold up to 89 per cent of the common shares of the recapitalized GM. Current shareholders would see their holdings cut to one per cent, while current debtholders would get about 9.1 per cent.

Henderson said the possibility of the company having to make a bankruptcy filing has been raised with the debt exchange offering. He reiterated his view that the company would prefer to stay out of the courts, but said if the restructuring cannot be done, they will go into creditor protection if necessary.

One analyst predicted GM will fall short of the 90 per cent of bondholders required to convert their debt into equity.

Kip Penniman Jr., an analyst with KDP Investment Advisors Inc., wrote in a research note that he believes "there is no chance that GM will get anywhere near that participation rate." He predicted GM is headed for a bankruptcy filing.

With files from The Associated Press