GM Says It May Kill Off One of Its Brands

[Klaus]

GM Says It May Kill Off One of Its Brands


DETROIT (Reuters) - General Motors Corp., which issued a shock profit warning last week and has been losing market share, may phase out one of its weaker car brands if sales fail to meet projections, company Vice Chairman Bob Lutz said on Wednesday.

GM's Buick and Pontiac are both "damaged brands" due to lack of investment over the years, and GM is working to correct that with an array of new vehicles coming to market, Lutz told a Morgan Stanley automotive conference in New York.

But if some of its brands fail to meet sales projections, "then we would have to take a look at a phase-out. I hope we don't have to do that. What we've got to do is keep the brands we've got."

Financial analysts have said for years that the world's largest automaker has too many brands to support, even with the gradual phase-out of the Oldsmobile brand a few years ago, particularly with its weaker U.S. sales.

Sales for both Pontiac and Buick have lagged in recent years. But GM is in the midst of a $3 billion investment in new vehicles for Buick, and Pontiac showrooms and they will have four new vehicles this year, including the Solstice roadster, Torrent SUV and the G6 mid-size coupe.

GM, which last week cut its earnings outlook for 2005 by as much as 80 percent, posted a 6 percent drop in U.S. sales for the first two months of the year. GM's U.S. market share fell to about 25 percent, far below its share of 27.5 percent for all of 2004.

Analysts said last week that GM's March sales could fall as much as 10 percent in March, while foreign automakers such as Toyota Motor Corp., Hyundai Motor Co. Ltd. and Nissan Motor Co. Ltd. would continue to gain U.S. market share.

Lutz said GM will post relatively flat U.S. sales for March, however, performing much better than expected.

"I think we're going to be just about even, our best guess at this point. Either a percent over or a percent under," he said. "It is a substantially better month than January or February, and it looks like the whole industry is up."


"A HUGE ALBATROSS"

No details about an expected restructuring at GM, the largest private U.S. provider of health care, have emerged since it roiled markets with its warning last week.

But the company, which has about $300 billion in outstanding debt, said on Wednesday it was in talks to sell a stake in its GMAC Commercial Mortgage unit after potential investors expressed interest in the unit.

And Lutz and Gary Cowger, GM's president for North America, spoke of possible demands for a cut in mounting health care benefits for the company's hourly union employees in remarks on the sidelines of the New York auto show on Wednesday.

An elimination of any one of GM's brands would likely mean plant closings and a shrinking of GM's hourly work force.

"An across-the-board competitive health care plan for salaried and hourly employees could literally save us billions," Cowger said. Health care costs, added Lutz, are "a huge albatross hanging over American industry today."

Lutz particularly acknowledged that the automaker, which will struggle to make a profit this year, faces challenges. But he said GM was "taking the necessary step to right this ship."

"Sure, we face short-term challenges, and this is not going to be a banner year," he said. "It's a difficult period of adjustment. But we will get through it."

He said some of GM's new cars, such as its Chevrolet Cobalt small car and the Pontiac G6 mid-size car, will post their best sales to date in March, and told the Morgan Stanley conference "I don't know where all the gloom and doom is coming from."

He quoted one car reviewer who said, referring to GM's troubles, that the quality of the Cobalt convinced him that "the Titanic may yet turn fast enough to miss the iceberg."

[Klaus]

GM Says It May Kill Off One of Its Brands


DETROIT (Reuters) - General Motors Corp., which issued a shock profit warning last week and has been losing market share, may phase out one of its weaker car brands if sales fail to meet projections, company Vice Chairman Bob Lutz said on Wednesday.

GM's Buick and Pontiac are both "damaged brands" due to lack of investment over the years, and GM is working to correct that with an array of new vehicles coming to market, Lutz told a Morgan Stanley automotive conference in New York.

But if some of its brands fail to meet sales projections, "then we would have to take a look at a phase-out. I hope we don't have to do that. What we've got to do is keep the brands we've got."

Financial analysts have said for years that the world's largest automaker has too many brands to support, even with the gradual phase-out of the Oldsmobile brand a few years ago, particularly with its weaker U.S. sales.

Sales for both Pontiac and Buick have lagged in recent years. But GM is in the midst of a $3 billion investment in new vehicles for Buick, and Pontiac showrooms and they will have four new vehicles this year, including the Solstice roadster, Torrent SUV and the G6 mid-size coupe.

GM, which last week cut its earnings outlook for 2005 by as much as 80 percent, posted a 6 percent drop in U.S. sales for the first two months of the year. GM's U.S. market share fell to about 25 percent, far below its share of 27.5 percent for all of 2004.

Analysts said last week that GM's March sales could fall as much as 10 percent in March, while foreign automakers such as Toyota Motor Corp., Hyundai Motor Co. Ltd. and Nissan Motor Co. Ltd. would continue to gain U.S. market share.

Lutz said GM will post relatively flat U.S. sales for March, however, performing much better than expected.

"I think we're going to be just about even, our best guess at this point. Either a percent over or a percent under," he said. "It is a substantially better month than January or February, and it looks like the whole industry is up."


"A HUGE ALBATROSS"

No details about an expected restructuring at GM, the largest private U.S. provider of health care, have emerged since it roiled markets with its warning last week.

But the company, which has about $300 billion in outstanding debt, said on Wednesday it was in talks to sell a stake in its GMAC Commercial Mortgage unit after potential investors expressed interest in the unit.

And Lutz and Gary Cowger, GM's president for North America, spoke of possible demands for a cut in mounting health care benefits for the company's hourly union employees in remarks on the sidelines of the New York auto show on Wednesday.

An elimination of any one of GM's brands would likely mean plant closings and a shrinking of GM's hourly work force.

"An across-the-board competitive health care plan for salaried and hourly employees could literally save us billions," Cowger said. Health care costs, added Lutz, are "a huge albatross hanging over American industry today."

Lutz particularly acknowledged that the automaker, which will struggle to make a profit this year, faces challenges. But he said GM was "taking the necessary step to right this ship."

"Sure, we face short-term challenges, and this is not going to be a banner year," he said. "It's a difficult period of adjustment. But we will get through it."

He said some of GM's new cars, such as its Chevrolet Cobalt small car and the Pontiac G6 mid-size car, will post their best sales to date in March, and told the Morgan Stanley conference "I don't know where all the gloom and doom is coming from."

He quoted one car reviewer who said, referring to GM's troubles, that the quality of the Cobalt convinced him that "the Titanic may yet turn fast enough to miss the iceberg."

[PARAGON]

There is rumblings that Saturn could be on the chopping block. We don't have to worry about the Hummer line because that would cost GM way more than anything else considering they required dealers to build multi-million dollar stand-alone dealerships.

[PARAGON]

<table>
<H2>GM rushes introduction of high-profit big SUVs </H2>


BY JAMIE BUTTERS and MARK PHELAN
<SPAN
style="FONT-SIZE: xx-small; FONT-FAMILY: Arial,Helvetica,sans-serif">FREE PRESS
BUSINESS WRITERS</SPAN>


March 24, 2005</P>





NEW YORK -- In an ambitious move, General Motors Corp. will speed up the
launch of its new full-size SUVs, bringing them to market as early as Jan. 1, GM
Vice Chairman Bob Lutz said Wednesday at the New York International Auto Show.





New versions of highly profitable models like the Chevrolet Tahoe and
Cadillac Escalade will now hit showrooms more than a month earlier than GM
originally had planned. Making such a move so late in a vehicle's development
process is a rare and significant effort brought on by the company's weakening
finances, largely attributable to fast-rising health-care costs and loss of
market share.





Lutz said even advancing the timeline by a couple of months "would have a
dramatic effect on our earnings picture."





Another way the company can improve its bottom line would be scaling back the
health-care benefits negotiated by the UAW. White-collar employees get
"excellent" benefits, Lutz said, and the company could save millions of dollars
if hourly workers accepted the same coverage.





As for market share, Lutz discussed several new models intended to reverse or
at least halt the loss of customers to rivals. If those efforts fail, he said,
he could not rule out eliminating one of the automaker's "damaged brands," such
as Pontiac or Buick.





"Over time, if one of the troubled brands ... that's been undernourished for
many years, if it fails to turn around, then we'd have to look at a phase-out,"
Lutz said in response to questions at Morgan Stanley's Global Automotive
Conference in New York.





Lutz said he hoped GM wouldn't have to phase out one of its weaker brands at
a time when competitors like BMW AG and Toyota Motor Corp. are adding brands.
"That's what we're trying to correct with an exciting array of new products," he
said.





But he added that he and GM Chairman and CEO Rick Wagoner are determined to
invest money wisely.





"Rick is always saying: 'Let's not squander all our resources on trying to
overcome negative momentum. Let's put the resources where we've got positive
momentum, which is basically ... Cadillac, Hummer and GMC,' " Lutz said.





At the auto show, Lutz said his goal is to start building the next generation
of full-size SUVs late this year to go on sale Jan. 1, the first day possible
for a 2007 model. Besides the Escalade and Tahoe, the full-size SUV line
includes the GMC Yukon Denali and Chevy Suburban.





The company has killed some niche vehicles in order to concentrate its
resources on high-profit SUVs.





Lutz said the company is focusing on its "real priorities," listing crossover
vehicles and midsize SUVs after the full-size SUVs.





The full-size SUVs and pickups will be built on a basic design, or platform,
called the GMT900, the replacement for the GMT800, which has accounted for as
many as 1.85 million annual vehicle sales but is now showing its age against new
offerings from competitors.





Lutz's comments about earlier production suggest that plants in Janesville,
Wis., and Arlington, Texas, would be the first to begin production of the new
GMT900 vehicles.





GM had planned to show the first of those models -- the Escalade -- at the
North American International Auto Show in Detroit next January, according to
published reports. Now it plans to start selling them even before that show.





"This late in the game, that is very ambitious," said Michael Robinet,
managing director of CSM Worldwide in Farmington Hills.





He added that it makes sense for GM to try to get its most profitable
vehicles out as soon as possible. "In this competitive full-size SUV market,
anything they can do to accelerate the launch is good," he said.





Last week, GM said it would lose close to $1 billion in the first three
months of this year and cut its earnings outlook for the year by $1.7 billion.
The stock plummeted to 10-year lows.





On Wednesday, Lutz was clearly exasperated by speculation that the company is
working on a full-blown restructuring -- like the sweeping plant-closing and
job-cutting efforts of Ford Motor Co. and the Chrysler Group in recent years.
Rather, he sought to categorize the company's problems as essentially a failure
of marketing: pulling ahead sales with huge discounts and unprofitable fleet
sales.





The current situation at GM is not nearly as bad as the crises he experienced
at what was then Chrysler Corp., because GM is a stronger company overall, he
said, citing profitable operations in Asia, particularly China.





"This is the third or fourth time I've seen this movie, and it gets less
scary each time," he said.





Responding to reports criticizing weak sales of new GM cars like the Pontiac
G6 sedan, Lutz said the company should have set more realistic expectations. G6
sales will improve as dealers get a full range of engine offerings, such as a
more affordable 4-cylinder version.





Lutz rattled off other exciting vehicles GM has coming, such as the Hummer
H3, the coupe version of the G6, the Pontiac Solstice and the Chevrolet HHR.





Lutz also blamed the news media for not telling consumers how good GM's cars
had become and "perpetuating the myth of foreign supremacy."





Earlier in the day, Gary Cowger, the president of GM's North American
operations, acknowledged a litany of problems that have plagued GM and others,
such as rising health-care costs, huge pension obligations and growing
competition.





"But we're not going to dwell on those or use them as excuses. What we're
going to do is concentrate on how we're going to overcome," he said.</P></table>

[HGW]

I am big fan of the Hummer but not GM.

They are getting their ass kicked because of butt ugly, no risk vehicles. Theor truck designs suck compared to Ford and Dodge.

I tell everyone that someone was asleep when the H2 idea came up in the boardroom or else it would have never came out.

They make no money on the H2 but at least it is exciting.