GM Under Government Pressure To Consider Shedding GMC - Sources
17 April 2009 - 1:15AM
Dow Jones News
General Motors Corp. (GM) is under pressure from the government
to consider shedding its GMC brand as the company races to
transform itself by June 1, people familiar with the discussions
said.
The brand, comprised mostly of pickup trucks and sport-utility
vehicles, was slated to remain a part of GM even if the company
restructured. However, the U.S. government is not convinced that
GMC has a viable future with the struggling auto maker, according
to people familiar with the talks. GM is already in the process of
shedding its Hummer, Saab and Saturn brands, which have been hurt
by slumping sales.
A spokesman for the auto maker on Thursday said the company's
strategy, which includes combining Buick, Pontiac and GMC into a
single sales network, remains unchanged. A decision on the GMC
brand's future has not yet been reached.
The future of GMC is being discussed this week as GM meets with
officials from President Barack Obama's automotive task force,
which is overseeing the company's restructuring, people familiar
with the talks said.
The move would be a major step beyond the downsizing GM had been
planning as part of a government-mandated downsizing of the
business.
The pressure to divest GMC shows just how far the government may
be willing to go to push GM into restructuring itself into a
profitable company. The Obama administration is now a player in the
auto maker since GM is asking the U.S. Department of Treasury for
access to low-interest loans to keep its company out of bankruptcy.
Bloomberg News first reported GM was considering axing GMC along
with the much smaller Pontiac brand
The White House last month shot down GM's recovery plan as
insufficient and gave the company until June 1 to come up with a
more satisfactory strategy or face bankruptcy.
"GM is continuing with its strategy to complete the channeling
of Buick, Pontiac and GMC," GM spokesman Tom Wilkinson said
Thursday.
GMC sales fell 25% in 2008 as the economic slump and volatile
gas prices drove down demand for pickup trucks and SUVs. The
company's overall sales fell 22%. GMC accounts for around 12% of
GM's sales, far larger share than the other brands GM plans to
shed. The GMC vehicles also tend to deliver higher profit
margins.
But as pressure mounts for GM to slash costs and deliver a more
fuel-efficient lineup, GMC has become a target. GM said on
Wednesday it has several potential buyers for its Saturn brand, and
the company said last month it's received interest in Hummer as
well.
-By Sharon Terlep; 248-204-5532; sharon.terlep@dowjones.com.