GM to shut down Pontiac; Possibly GMC

General Motors Corp. is readying plans to shed its Pontiac brand, shutter more factories and launch a bond exchange aimed at eliminating billions in debt, people familiar with the matter said Friday.



The auto maker, facing a June 1 federal deadline to dramatically restructure or go bankrupt, is preparing early next week to detail the progress it has made on the stepped-up recovery plan demanded by the Obama administration. GM is expected to announce plans to eliminate or sell its poorly performing Pontiac brand, according to several people who have been briefed on the plan.

Previously, GM said it would keep one or two Pontiac models as a niche brand. But the Obama administration is pressuring GM to go further in downsizing its money-losing operations.

The GMC brand of trucks and sport-utility vehicles also could be in danger. The Obama auto task force, noting that GMC sells models similar to Chevrolet’s, has pressed GM to make a convincing case the brand should survive. Many GM dealers sell GMC, Pontiac and Buick vehicles at the same site.

The auto maker also is scrambling to complete an offer for a public debt swap intended to eliminate $27 billion in unsecured debt. GM has been unable to strike a deal with an ad hoc committee representing bondholders, but federal regulations require that GM must make the offering by Monday to have the swap complete by the June 1 deadline.

GM Chief Financial Officer Ray Young said this week the company doesn’t plan on making a $1 billion debt payment due June 1 and is relying on either a successful debt-for-equity exchange or bankruptcy-court protection to slash its outstanding debt.

People familiar with the matter said the company will launch the exchange with or without approval from the bondholders group.

President Barack Obama’s auto task force shot down a restructuring plan GM submitted in February as too slow and limited.

As part of the update, GM is expected to announce plans to shut down more plants, which come in addition temporary plant shutdowns this summer that will cut the auto maker’s output by 25%. If GM can’t satisfy the administration that the plan will work, the company won’t get additional federal loans and be forced to file for bankruptcy protection.

GM Chief Executive Fritz Henderson has said an out-of-court restructuring remains the preferred route, but has acknowledged bankruptcy remains a “probable” scenario.

The preparations come as GM, surviving on government loans, received an additional $2 billion from the U.S. Treasury on Friday to meet capital needs. GM has received $15.4 billion since December and has said it will likely need more than $2 billion in additional funds to last through the second quarter.

“We appreciate President Obama’s and his administration’s ongoing support of GM and the domestic U.S. auto industry as we undertake the difficult but necessary actions to reinvent our company,” the company said in a statement Friday.


~ by Travis on 04/24/2009.

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