The decision by General Motors to axe its iconic Pontiac brand will have big ramifications for GM’s Australian subsidiary Holden, which built vehicles under the Pontiac brand in Australia.
GM announced in Detroit overnight that it would phase out the loss-making Pontiac brand, cut 21,000 jobs and attempt to swap $38 billion worth of bonds for equity.
This is really GM’s last ditch survival bid. Chief executive Fritz Henderson has warned that if the bond/equity swap fails, the company would be forced to file for bankruptcy protection.
“It’s not impossible, but bankruptcy is now more probable.”
Even if its parent company manages to avoid bankruptcy, GM Holden will be hit hard by this new restructuring plan as it has been exporting Commodores badged as the Pontiac G8 to the United States since early 2008.
“Our decision on Pontiac would result in the phase out of the G8 from the Australian operation,” Henderson confirmed last night.
“It is actually in many ways a very fine car, but we’re just not able to put the marketing resources behind it and we would work within the US to sell down the inventory and phase out production, and we would anticipate that by the end of this year.”
Holden built 119,000 Commodores last year; around 36,000 were Pontiac G8s bound for America.
But while some automotive websites have claimed the loss of the Pontiac exports could cost Holden as much as $1 billion, a company spokesman says the impact will be minimal and the company’s viability is in no way under threat.
Holden’s executive director of corporate affairs, Jason Laird, says Holden had been slowly running down production of the G8 due to Pontiac’s poor performance.
“The impact will be quite minimal, but we need to work through that with our supplier base,” he told ABC radio.
“We’ve got quite a knack of finding new export opportunities and we’ll start looking for new opportunities immediately.”
Laird pointed to Holden’s plan to introduce production of a four-cylinder vehicle alongside its flagship Commodore model as proof the company is committed to making cars in Australia.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
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