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Published: 4/28/2009

GM to cut 21,000 jobs, shut down 13 factories

BY LARRY P. VELLEQUETTE
BLADE BUSINESS WRITER

But in times like these, he said, he recalls the difficulties his grandfather and father endured selling cars since 1936, and the advice they gave him.

"If you can just make it through this and keep a smile on your face and keep working every day, it'll turn around," Mr. McNeill said. "Just keep going and hope you get through everything. Everybody's going through the same thing we are."

General Motors Corp. announced yesterday that it intends to kill its Pontiac brand no later than next year after decades as the domestic automaker's premier performance brand.

The triangular crest that once graced such notable cars as the GTO, the Grand Prix, and the Firebird will soon be consigned to the same historical scrap heap as Plymouth's schooner and Studebaker's spoked wheel.

That was part of GM's latest announced package of cuts intended to return the automaker to profitability and - if possible - to avoid bankruptcy.

GM said yesterday it would also trim 21,000 workers from its payroll, close 13 factories that were operating at the end of 2008, eliminate more than 40 percent of its dealers, and convert about 89 percent of its $27 billion in debt into company stock. The automaker also said it would expedite decisions on the fate of its other troubled brands, Saturn, Saab, and Hummer.

This is the third restructuring plan filed by GM since December, and if it succeeds, the government and the United Auto Workers would own most of the company.

"The objective here is not to survive, the objective is to develop an operating plan that helps us win," said Fritz Henderson, GM's president and chief executive officer. "It's a difficult period; it's a challenging period, it's a very painful period."

GM lost $30.9 billion in 2008.

The fallout spread nationwide.

Analysts said northwest Ohio's two GM factories, the Toledo Powertrain plant on Alexis Road and the Defiance Powertrain foundry, with a total of 2,800 employees, are probably no safer than any other GM factory right now, given the depth and breadth of GM's cuts.

"Nobody is safe," said Aaron Bragman, senior analyst with IHS Global Insight's automotive group. Toledo Powertrain has repeatedly won honors in a prestigious annual industry study as the most productive transmission plant among all automakers in North America.

But Mr. Bragman said: "No amount of awards, no amount of products is going to make anybody safe right now. It's going to be that whatever fits into [GM's] new business model will be kept. I don't think anybody is safe anywhere, quite frankly. Right now, the company is staring down the barrel of bankruptcy."

But the biggest local impact of GM's announcement yesterday is likely to come from the dealers, including some where families have sold the automobiles for generations. Northwest Ohio and southeast Michigan have 18 dealerships.

"It really shocked me," said Robb Brown, owner of the Brown Automotive Group, Sylvania Township. His family's Pontiac dealership on Central Avenue dates to 1926 and is believed to be the oldest continuously operating Pontiac dealer in the United States.

"I'm surprised they're getting rid of a brand that sold 246,000 cars last year," he said. "Some of this stuff seems illogical to me."

The United States has just 39 stand-alone Pontiac dealerships like Mr. Brown's. The remainder also sell other GM vehicles, such as those from Buick, GMC, Chevrolet, or Cadillac.

"On a personal level, [the Pontiac dealership] is something my grandfather got started in 1926. You think back to the business conditions that we all survived," Mr. Brown said. "Pontiac's got a pretty distinct niche, and yet it's the one that is being killed off. You take the revenue of 250,000 vehicles times an average price tag of $25,000, and that's revenue that they're never going to get back."

The automaker is living 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 protection. The firm is asking for an additional $11.6 billion in loans from the government.

The company said it also will ask the government to take 50 percent of its common stock in exchange for canceling half the government loans to the company as of June 1.

In addition, GM is offering the United Auto Workers stock for at least 50 percent of the $20 billion the company must pay into a union-run trust that will take over retiree health-care expenses starting next year.

The company plans to exchange stock for much of its $27 billion in debt, which Mr. Henderson said must be reduced by $24 billion.

One analyst said the bond holders would get only about 5 cents on each $1 they are owed, and the UAW would get 50 to 60 cents on each $1 owed.

A committee representing GM bond holders has rejected the company's debt-exchange offer, saying it favors the union and pushes the automaker closer to a bankruptcy filing.

Said Mr. Henderson: "If the tender [offer] doesn't work, we will file into bankruptcy."

Dave Green, president of United Auto Workers Local 1714 in Lords-

town, Ohio, said yesterday GM has had too many product lines for years and needs to streamline its operations. He said GM is on the right track and will pay back its government loans.

Lordstown, near Youngstown, is home to a major GM assembly plant that makes the Pontiac G5, as well as another compact model, the Chevrolet Cobalt.

John Yark, who owns a Pontiac dealership in Whitehouse, noted the elimination of the Pontiac brand and a few years ago of the Oldsmobile brand.

"There's going to be a lot of sacrifice made by everybody to end up with a GM and Chrysler in the future that are viable," he said.

Changes in the domestic auto market within the last 30 years have been breathtaking, he said.

"I've been in this thing since I graduated from college in 1979. At that point, GM was more worried about the government breaking them up because they were too dominant. Now look where we are."

Information from The Blade's news services was used in this report.

Contact Larry P. Vellequette at:

lvellequette@theblade.com

or 419-724-6091.



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