GM to Forge Ahead Without Key Brands

By Kendra Marr
Washington Post Staff Writer
Tuesday, April 28, 2009; A16

For generations of American drivers, a car brand was more than a collection of statistics describing performance, safety and design. It was an affair of the imagination.

Yesterday, General Motors traded imagination for reality, saying it will dump Pontiac along with Hummer, Saturn and Saab -- and placed its future in the hands of Chevrolet, Cadillac, Buick and GMC.

"It's a pretty sad day," said Jack R. Nerad, executive editorial director at Kelley Blue Book, a leading provider of information on new- and used-vehicles. His first Pontiac was a used 1968 Firebird, one of the most beloved compact muscle cars.

"It was visceral," he said. "It was something, it appealed to your emotions. That's what they were selling. At one point the slogan was 'We build excitement.' "

Yet the excitement faded when GM began introducing vehicles like the Trans Sport minivan, effectively killing Pontiac's sex appeal.

In striving to create "a car for every purse and purpose" -- a company strategy -- GM aimed to sell you your first car (a low-end Chevrolet) and your last (a pricey Cadillac). Instead, analysts said it created too many similar vehicles under too many brands.

The Pontiac Sunfire, Sunbird and Phoenix looked a lot like models sold under Oldsmobile and Chevrolet.

GM, which has received $15.4 billion in federal loans, has lost market share to leaner foreign rivals. Now it must make deep cuts to win additional government aid and survive.

Four brands could be the magic number.

Toyota and Honda have carved out a significant chunk of the U.S. market selling three or fewer brands. Recently Chrysler cut its lineup to three, and Ford is also working to reduce its count.

Fewer brands could mean more money for Detroit's automakers to develop and market their vehicles against a growing number of U.S. competitors, analysts said. Before, those funds were spread too thin.

At its peak in 1986, Pontiac sold 841,441 cars -- three times as many as last year. The brand had begun to flounder in a marketplace asking for cleaner, greener vehicles. GM has not announced its plans for Pontiac; dealers will be in talks with the automaker today.

"Pontiac had a long reputation of being performance-oriented, fuel-thirsty and a little on the excessive side," Nerad said. "I don't know how that would play with the political side of fuel-friendly, environment-friendly vehicles."

Likewise, Hummer had become a drag on GM. Introduced in 2000, the sport-utility vehicle couldn't weather the sudden spike in gas prices in recent years. GM is expecting three final bids for the sale of that brand and is aiming to decide about its fate before the end of this month.

Saturn was supposed to be a "different kind of car, a different kind of car company" when it launched in 1990. The brand would make small, fuel-efficient cars -- built by workers unburdened by the United Auto Workers' contract -- to compete with the rising popularity of small Japanese cars.

But Saturn eventually adopted the union contract, and GM failed to add new vehicles to the brand for five years.

"They kept product from us for so many years, and when we finally did get product, there was no marketing funds to market them the right way," said Carl Galeana, owner of some of the first one of the first Saturn dealerships. "A lot of people didn't understand what Saturn was and meant anymore. GM was too big to handle all the brands that they had. They weren't able to manage all brands properly."

Private-equity firm Black Oak Partners has recently emerged as a possible buyer for Saturn. GM has said it is committed to running Saturn through 2011, the end of its model lifecycle.

Saab, another small-car division, is in the Swedish equivalent of Chapter 11 reorganization after running out of cash earlier this year. It sold half as many vehicles last year, 21,368, as it did in 2004. GM said there are a number of parties interested in that unit.

When GM killed Oldsmobile in 2004, it spent $1 billion to buy out the brand.

Dealers know offers won't be as sweet this time around. Fearing the worst, many have been lobbying state legislatures for months to enhance franchise laws to protect their investments.

But if the Obama administration rejects GM's new restructuring plan, the company could be pushed into bankruptcy. Dealerships would then be at the mercy of the court.

"Through this whole process, not everyone is going to win," said Michael Robinet, vice president for global vehicle forecasts at CSM Worldwide.

GM is already hard at work fortifying Chevrolet, Cadillac, Buick and GMC.

"Pontiac looked like a more youthful brand," Robinet said. "GM is doing its best to put more youthful offerings in Chevrolet."

In the past, the company developed distinct European brands, like Opel. Now Chevrolet and Buick will be the new global platforms. Buick is already one of the most popular car brands in China.

Daniel Jobe, the third-generation owner of Capitol Cadillac in Greenbelt, said the company is evolving. This year his family celebrates its 75th anniversary selling the vehicles.

"There was a time when General Motors' formula was the proper formula," he said. "Of course over the last 100 years of the corporation, things change."

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