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Monday, April 27, 2009

82 year old Franchise Declared Dead at Scene

General Motors announced that they will be phasing out the Pontiac franchise in 2010. The announcement came as part of a restructuring plan made by the automaker that will cut more jobs as the company attempts to stave off bankruptcy.

GM plans to cut back on their hourly workers as well planning to cut 20 000 jobs between now till 2010. Among other losses is the closure of 42% of all dealerships in Canada, which is dropping from 705 dealerships to 425 dealerships. The U.S market is going to lose 2641 dealerships by the end of 210. That is a loss of nearly 44% of the dealerships in the American market.

The GM president and CEO had this to say: "We need to have a more stable, sustainable business model." I believe this was a well planned out business moved, because Pontiac is not making the necessary profits needed to stay over the red line of bankruptcy. One of the top auto industry analysts,Dennis DesRosiers, agree, "Fritz Henderson (president of GM) said it right: brands don't do well in a defensive role, they only do well in an offensive role, and GM doesn't have the money to be offensive with Pontiac. So something had to go."

This is really the best thing to do in my opinion, because as the analyst says if you can't make a profit on something you own then you get rid of it. GM is doing this with Pontiac, and possibly with more franchises in the future. If this is to happen GM should still fare well as long as the maintain the services on these brands until they are finally removed from the market. This will ensure that they will maintain those customers, but at the same time, maybe begin to cut back on their expenses.