GM to Reduce or Eliminate Four Brands for Government Aid

December 3, 2008
The Detroit Three will begin congressional hearings today, submitting their detailed restructuring plans to U.S. lawmakers. GM's plan, revealed in a press release issued yesterday, shows how seriously it is committed to a restructuring plan that will ensure profitability-and how grim their financial status truly is.
GM is requesting loans of up to $12 billion, with immediate access to $4 billion this month in order to survive until the end of the year. In addition, the company is seeking a $6 billion line of credit, "to provide liquidity should a severe market downturn persist." In order to access these loans, GM would have to achieve specific restructuring requirements.
The plan details several of these requirements, including focusing on four "core brands" for product development: Buick, Cadillac, Chevrolet and GMC. GM's other four brands sold in the U.S.-Hummer, Pontiac, Saab and Saturn-will be significantly reduced or let go altogether.
GM acknowledged that it was trying to rid itself of the Hummer brand back in June. Saab's fate was not completely unforeseen, as its sales are down by more than 30 percent for the year compared with last year-the only GM brand doing worse is Hummer, which is down by almost 50 percent. Pontiac will be reduced to a brand of niche vehicles, likely to be sporty models. Saturn has the most uncertain fate.
According to the release, Saturn dealers have a "unique relationship" with GM, which apparently means other alternatives outside of a complete shutdown or sale exist. GM executives have been mum about what those other alternatives might be, but one option could be spinning the brand off as its own entity.
The release also details GM's plans for future fuel efficient vehicles. By 2012, GM is aiming to have more than half of its lineup become flex-fuel capable and offer 15 hybrid models. GM will invest $2.9 billion in alternative fuels like hydrogen fuel cells, and advanced propulsion technologies estimated to improve fuel economy by anywhere from 12 to 120 percent. The Volt is also cited as being scheduled for production in 2010.
GM's plan calls for engagement of current lenders, bondholders and unions to negotiate "needed changes", as well as further reduction of executive pay. Labor agreements would also be under review, with changes to job security provisions, paid time-off and post-retirement health-care obligations cited as being necessary.
House Speaker Nancy Pelosi D-Calif., one of the biggest supporters of offering financial aid to the Detroit Three, said yesterday that if the plans submitted by the automakers fall short of congressional expectations, lawmakers could dictate how the restructuring of the companies should occur in law. Undoubtedly, GM's executives are holding their breath as hearings commence today.


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