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http://www.nytimes.com/2009/02/18/business/18brands.html?_r=1&hpDETROIT The brand that was once hailed as an important part of the future of General Motors now will be part of its past.
G.M. said Tuesday that it would phase out its Saturn brand by 2012. It does not plan to develop any more new vehicles for Saturn, which began 19 years ago as an effort to attract owners of small Japanese cars.
G.M. also said it was considering its options for the Pontiac division. The Pontiac name, part of the car business since 1932, could remain on some models, but may no longer be a separate division. G.M. said Pontiac would be a focused brand with fewer models.
The disclosures by G.M., contained in a viability plan submitted to the government, means that G.M. plans to cut its brands in half, to four: Chevrolet, Cadillac, Buick and GMC.
It said last fall that it would try to find buyers for Hummer and Saab. On Tuesday, it said it would decide on Hummers fate by March 31.
But is four the right number?
After all, most of its big competitors, including Toyota, Honda and Chrysler, build their businesses around three brands or fewer in the United States. Ford is moving to shed its foreign brands and plans to focus primarily on three Ford, Lincoln and Mercury.
A volume brand and a premium brand can get the job done. Toyota has proven that, said Karl Brauer, editor in chief of Edmunds.com, a Web site that offers car-buying advice. Cadillac, Chevy, done.
The more brands a carmaker has, the more it must spread money around to develop vehicles and market them.
As a result, every brand suffers, said A. Andrew Shapiro, a managing partner with the Casesa Shapiro Group. No particular brand or brands can achieve the share of voice that they need.
Its extensive brand lineup has long been G.M.s primary weapon. Founded in 1908 by William C. Durant, who brought together a collection of car companies, G.M. made the concept of a car for every purse and purpose its strategy during the 1920s for retaining buyers from their first car to their last.
Brands were a crucial element in G.M.s effort to thwart Ford, then the countrys biggest car company, whose founder joked that buyers could have any color they wanted, as long as it was black.
G.M.s strategy paid off during its best years, when it controlled more than half the American car market. But it held only 22 percent of United States auto sales last year, with more than half of its share coming from a single division, Chevrolet.
G.M. found out last decade just how expensive it could be to unwind a brand. It spent more than $1 billion to buy out dealers at Oldsmobile, which built its last cars in 2004.
Rick Wagoner, G.M.s chief executive, said the automaker had set aside money to buy out dealers, but declined to specify a figure. We have reserves in our plan to facilitate that, he said.
He cited the economic downturn as the reason G.M. was phasing out Saturn. Frankly, the opportunity for any brand, and for our volume as a whole, just looks radically different, he said. It is unfortunate and it seems like a cruel twist of fate at a time when Saturn is loaded up with a fantastic product portfolio.
In a letter sent Tuesday to Saturn dealers, G.M. said it would entertain a plan from Saturn dealers or other investors for a spinoff of the division to keep it operating. It said it would provide information to potential investors.
But it warned a spinoff would be a difficult and complex task, and some of the issues that must be resolved include product sourcing, capitalization and financing issues, G.M. said in the letter signed by Mark LeNeve, a G.M. vice president for North American sales, and Jill Lajdziak, the general manager of Saturn.
When Saturn was started in 1990, as a different kind of car, a different kind of car company aimed at owners of small Hondas and Toyotas, its small cars were immediate hits. But G.M. executives decided in the mid-1990s that they needed to support G.M.s other brands over Saturn, which by then had cost $5 billion.
G.M. did not add any new vehicles to the Saturn lineup for five years, despite pleas from dealers for bigger vehicles. Earlier this decade, G.M. decided to start selling vehicles from its Opel division, with some design changes, as Saturns in the United States.
Saturn sold 188,004 vehicles in 2008, down 21.7 percent from the previous year. Its best-selling vehicle was the Saturn Vue, a small sport utility vehicle.
Strict franchise laws protect dealers across the country from seeing their operations shut down without advance notice.
G.M. dealers said they were led to believe that the company was committed to the division.
G.M. is picking on Saturn, said Sherrill Freeborough, who owns Saturn dealerships in Grand Ledge and Okemos, Mich. I want G.M. to be successful but I dont think that always happens the other way around.
In 1992, when G.M. began discussing the end of Oldsmobile, the division sold 412,000 vehicles. Except for Chevrolet, none of G.M.s current brands sold that many vehicles last year.
Mr. Shapiro, the analyst, said G.M. should have rethought its divisions in the 1980s, when a number of new brands appeared in the United States, including Acura, Lexus and Infiniti, the Japanese luxury brands, and the Korean makers Hyundai and Kia.
There were always good short-term reasons for not doing something, Mr. Shapiro said.
Ed Dena, a Pontiac dealer in Dinuba, Calif., said he would eventually have to focus on his other G.M. brands, including Chevrolet, Buick and GMC. Of course were sad because Pontiac is an icon, he said. But right now, in this industry, nothing is a shock anymore.
Mary M. Chapman contributed reporting.
They're going to axe Pontiac & yet, keep GMC. Who thought that up?
But, it goes on.
http://www.nytimes.com/2009/02/18/business/18auto.html?_r=1&hpDETROIT The price tag for bailing out General Motors and Chrysler jumped by another $14 billion Tuesday, to $39 billion, with the two automakers saying they would need the additional aid from the federal government to remain solvent.
In return, the two companies also promised to make further drastic cuts to all parts of their operations, in the hope that they can eventually strike a balance between their bloated cost structures and a dismal market for new car sales.
G.M., for example, said it would cut 47,000 more of its 244,000 workers worldwide; close five more plants in North America, leaving it with 33; and cut its lineup of brands in half, to just four: Chevrolet, Cadillac, GMC and Buick.
The Pontiac brand will have a much smaller role, if any, in G.M.s future, and the company also said it would phase out its Saturn brand, which it once hoped would build small cars to counter the best of the Japanese brands.
G.M. also said it had made progress in discussions with the United Automobile Workers union and its bondholders to reduce its costs further.
The cash crisis will require fast action by the administrations new cabinet-level Presidential Task Force on Autos, which is overseeing the reorganization of G.M. and Chrysler.
The deteriorating finances of the two companies present the Obama administration with two options, neither of them appealing.
It can provide the money in the hopes that the companies will stabilize, and no longer have to keep pushing workers into a growing pool of people without jobs. But there are no guarantees, as the Treasury Department learned on Tuesday when the automakers filed updates on their restructuring plans, that they might not be forced to come back again with requests for more money.
But if the federal government balks at the automakers requests, that would mean the two companies probably would have no choice but to file for bankruptcy protection, because they are losing hundreds of millions of dollars each month.
And the car companies said on Tuesday that the cost of a bankruptcy reorganization, with the government providing financing to help it through that process, would be far greater than their latest loan requests. Without such help, the companies would have to liquidate, creating staggering new job losses.
In a statement, the administration said Tuesday night that its task force would be reviewing the carmakers reports in coming days, adding that more will be required from everyone involved creditors, suppliers, dealers, labor and auto executives themselves to ensure the viability of these companies going forward.
The third Detroit auto company, Ford Motor, has not received federal assistance and has no requests pending.
By March 31, the presidential task force is expected to rule on whether G.M. and Chrysler have restructured enough to be viable businesses for the long term.
Big questions remain, including whether G.M. and Chrysler, as well as Ford, will be able to cut their unionized labor costs to parity with foreign automakers, as was required in the original loan agreement from last December.
The companies have been in marathon negotiations with the United Automobile Workers on reducing costs, as well as determining how they will finance health care trusts for retired blue-collar workers and their surviving spouses.
G.M. is also pushing for a deal with its bondholders to help it reduce its debt to $9 billion, from $27 billion. The U.A.W. said on Tuesday it had reached understandings with the Detroit companies on modifications to their contracts. Ron Gettelfinger, the unions president, said discussions are continuing regarding how to fund the health care trusts at each of the companies.
Rick Wagoner, G.M.s chief executive, said there had been good progress in talks with both the union and bondholders.
On the concessions in the U.A.W. contract, he said, the things that have been negotiated really take a big bite out of what needed to accomplish.
G.M.s restructuring plan extends to its global operations. It will cut 47,000 jobs worldwide by the end of this year. It also said it would close 14 plants in North America by 2012 five more than were included in its Dec. 2 loan request.
Mr. Wagoner said on Tuesday that the revamping plan was comprehensive, responsive and achievable, and could help the company break even by 2010. Both G.M. and Chrysler said they expected to begin paying back their federal loans by 2012.
A bankruptcy filing, Mr. Wagoner said, would be a highly risky and costly process. G.M.s president, Frederick Henderson, said the company would require as much as $100 billion in debtor-in-possession financing from the federal government if it filed for Chapter 11. Chrysler said it would need $25 billion if that step were required.
G.M. and Chrysler admitted that their current federal loans would be exhausted by March 31.
G.M. said Tuesday that it had increased its overall loan request from the government to a total of $30 billion, up from $18 billion.
The company has received $13.4 billion so far from Treasury, and the most recent installment $4 billion was turned over to G.M. on Tuesday.
But G.M. said that loan would not last long. Company officials said they hoped to receive another $2 billion loan in March and $2.6 billion in April. Beyond that, G.M. is asking for another $12 billion by 2011 $7.5 billion in loans and $4.5 billion to pay off a credit facility that comes due.
Chrysler, which has received $4 billion in loans, also increased its overall request for funding. In December, it said it needed $3 billion more to survive 2009, but it raised that request to $5 billion.
The smallest of Detroits Big Three, Chrysler has drastically scaled back its operations since being acquired in 2007 by the private equity firm Cerberus Capital Management.
On Tuesday, Chrysler said it would cut another 3,000 jobs and discontinue three models the Dodge Durango, P.T. Cruiser and Chrysler Aspen.
Chrysler will be viable, said the companys chairman, Robert L. Nardelli. An orderly restructuring outside of bankruptcy, together with the completion of our stand-alone viability plan and enhanced by a strategic alliance with Fiat, is the best option for Chrysler employees, our unions, dealers, suppliers, customers, and certainly the taxpayers. The company is exploring a deal with Fiat to share products.
But Mr. Nardelli said Chrysler would have to consider liquidating itself in the event that it received no more federal aid.
G.M. executives sidestepped questions on Tuesday on whether they had been given any assurances by administration officials about additional loans. They fully understood we would be coming in with additional requests, said Ray Young, G.M.s chief financial officer.
But the possibility exists of a negative political reaction to the administrations pouring more taxpayers money into the companies, especially when they continue to operate at huge losses.
