Pontiac runs out of gas

Apr 28, 2009 (Milwaukee Journal Sentinel - McClatchy-Tribune Information Services via COMTEX) -- GM | Quote | Chart | News | PowerRating -- Sue Sorensen, the general manager and co-owner of a car dealership in Muskego, isn't giving up, not after she and her family invested 86 years in a company that happens to have "Pontiac" in its name.

"We plan on staying around," Sorensen said Monday after General Motors Corp. confirmed that it will drop the Pontiac brand, eliminate 21,000 more factory jobs and ask the U.S. government to become its majority owner.

The dealership that was founded by Sorensen's grandfather, E.J. Salentine Buick/Pontiac, will survive without the Pontiac nameplate, she said, by selling Buicks while maintaining its wholesale parts and body shop operations.

"We have very good, loyal customers," Sorensen said. "We're not going to walk around with our heads hanging down."

News of Pontiac's demise came as GM announced a massive restructuring plan under which the government and United Auto Workers union would become the largest owners of the company.

The plan includes an offer to swap $27 billion in debt for GM stock. Should it be adopted, the restructuring would leave current shareholders with just 1 percent of the century-old company, which is fighting for its life.

GM is surviving on $15.4 billion in government loans and faces a June 1 deadline to restructure and get more government money. If the restructuring doesn't satisfy the government, the company could go into bankruptcy.

GM will ask the government to take more than 50 percent of its common stock in exchange for canceling half the government loans to the company as of June 1. The swap would cancel about $10 billion in government debt.

In addition, GM is offering to give the UAW stock for at least half of the $20 billion the company must pay into a union-run trust that will take over retiree health care expenses starting next year.

If both moves are successful, the government and UAW health care trust would own 89 percent of GM stock, with the government holding more than a 50 percent stake, CEO Fritz Henderson said in a news conference at GM's Detroit headquarters.

President Barack Obama's administration said in a statement that the debt exchange is an important step in GM's restructuring but that the administration has not made a final decision about taking stock for part of its loans.

But auto industry analyst David Whiston of Morningstar Inc. in Chicago said the plan essentially calls for taxpayers to help fund buyout packages for union workers as well as buyout payments to close dealerships.

Monday's restructuring marked a decision by GM to respond to the Obama administration's call for deeper cuts with a plan that cuts more jobs more quickly and, company executives said, would position GM to survive a prolonged period of sales much lower than the industry has seen in recent years.

GM's stock price closed up 35 cents Monday, at $2.04.

GM plans to tell dealers in May about plans to speed the elimination of thousands of dealerships across the country. The company had planned for a more gradual downsizing of its dealerships but now plans to shutter at least 2,800 stores nationwide by the end of 2010.

That downsizing carries ramifications well beyond Pontiac across Wisconsin, where one of every four car dealers sells GM cars or trucks. The state is home to 137 GM dealers, and if Wisconsin takes a hit proportional to what GM has in store nationally, 60 state dealers could be gone by the end of next year.

"Who would think that General Motors, a few years back, would be near bankruptcy?" said Don Hansen, president of the Auto Dealers Association of Mega Milwaukee. "I think they will emerge as a stronger company and continue to sell or manufacture cars."

Car buffs in southeast Wisconsin on Monday were mourning the loss of Pontiac -- a brand that a generation ago mated big engines with relatively small, stylish vehicle bodies to form muscle cars.

It was back when Detroit was the envy of the manufacturing world, and the price of gasoline was measured in pennies per gallon.

"They were affordable. They were fast. They were stylish," Colin Comer, author of the book "Million Dollar Muscle Cars" and owner of Colin's Classic Automobiles in Milwaukee, said of Pontiacs.

"It's unfortunate. It's sad. I'm a Pontiac guy," Comer said. He owns 15 of them.

Dave Rasmussen, president of the Original GTO Club of Milwaukee, bought a 1973 Valencia Gold GTO eight years ago that serves as a tribute to the GTO his brother had when he was in high school.

Rasmussen begged his parents to let him drive the GTO to the prom. His parents made him drive his father's 1972 Plymouth wagon instead.

"I think that's why Sue Ball never married me," Rasmussen joked. The GTO would have sealed the deal, he said.

"It was just the coolest thing around to be able to drive a Pontiac GTO when you were in high school."

In Milwaukee, the Pontiac brand has been synonymous with not only a vintage appeal but vintage marketing pitches, from Ponti, the singing Catalina whose hood went up and down to the jingle, to the "feuding Foster" commercials that featured former franchise owners John and Betty Foster.

The brand's sales peaked in 1978, one year after the Trans Am was featured with Burt Reynolds behind the wheel in "Smokey and the Bandit." So far this year, sales of all Pontiac cars are down 43 percent from the same period in 2008.

The decision to cut Pontiac is borne from the need to cut expenses further based on pressure from the Obama administration as well as industry forecasts that any recovery in the auto industry will be less robust and take longer than earlier forecasts, analysts say.

"It doesn't have that American iconic muscle car feel that it had back in the day," Whiston said. "When you're really a rinky-dink brand with a little bit over 2 percent share, you'd be better off focusing your efforts on Chevy, Buick and Cadillac."

GM had announced in December that it would deploy a niche-marketing strategy for Pontiac, but executives said Monday on a conference call that too many Pontiacs are sold to car-rental fleets to make such a strategy viable.

Nancy Weiss of West Bend owns a 1970 GTO Judge that she bought from her brother. She said she drove the car daily before she knew what a gem it was. She restored it. Now it's her good weather car.

She blames the economy more than anything else for the brand's demise. "I guess GM has to do something to stay afloat," Weis said.

Peter Stamm, president of the Waukesha Old Car Club, owns five Pontiacs, including a 1936 Deluxe 8 Coupe and a 1967 Firebird.

"It's always sad to see something go," he said. But, he said his vintage Pontiacs may increase in value as the brand fades. "It makes mine worth more," he said.

Journal Sentinel staff writer Sharif Durhams and The Associated Press contributed to this report.

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