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The Pontiac brand may be going away, but General Motors (MTLQQ, news, msgs) is hoping its customer base won't.
By the end of 2010, GM will have shut down Pontiac while hoping to retain the 83-year-old brand's domestic market share, which was 2% in the first half of this year.
Other than GM, "Nobody's going to miss Pontiac," says industry analyst James Harbour, the founder of the Harbour Report and the author of the autobiography "Factory Man." "There was nothing unique about it," Harbour says. "It competed with Saturn, Chevrolet and the low end of the Buick line, and all the cars it had were derivative off a Chevrolet base."
Adds Jesse Toprak, market analyst for Edmunds.com: "Pontiac was GM's performance-, sports-oriented brand, but it was never compelling enough, never good enough. For the most part, it was just a redundant brand. It had some exciting products that would come up and create buzz, but then they would go away.
"GM can do the math," Toprak said. "They decided they would be better off without it."
GM's plan, well-known by now, is to support four core brands -- Chevrolet, Cadillac, Buick and GMC -- and 34 nameplates, down from 48 today. Slimming down narrows the cost and focus for development, manufacturing and marketing.
Most experts see that as the sort of strategy GM should have adopted years ago, on the theory that a company with 20% of the market shouldn't try to operate as it did in 1962, when it had 51% of the market. GM had become so ossified that the government had to intervene to enforce this line of thought
For the new GM, the loss of Pontiac is a major adjustment. Pontiac sold 88,794 cars in the first half of 2009, according to Edmunds.com. GM wants to drop Pontiac, Saturn, Hummer and Saab, which combined have 3% of the market, while retaining an 18% to 19% share of the overall vehicle market.
"GM has to retain every tenth of a point of market share," says independent auto analyst Tom Libby. "They had 50%, they are now around 19%, and they are on the way to 17%. They have to stop the share decline."
As for retaining Pontiac buyers, "I would say there is no way they can retain 100%, but they can retain 40% to 70%," Libby says.
It is not clear that GM has devised a clear plan regarding Pontiac. Marketing chief Bob Lutz recently said GM would keep the powerful, Australian-made rear-wheel-drive Pontiac G8 sports sedan in its lineup by rebranding it as the Chevrolet Caprice, a former favorite of police departments the country over.
A day later, CEO Fritz Henderson said plans to discontinue the car remain in effect. In a subsequent blog post, Lutz said that "upon further review," the car will be scrapped.
Another area of concern is a recent report by Merrill Lynch analyst John Murphy suggesting GM will lose more market share than it anticipates.
"We believe that GM's 18%-19% market share target is optimistic, and a more realistic range is 15%-16%," Murphy wrote. The projection was based on his comparative analysis of the percentage of new models in each automaker's sales, an area where GM ranks low.
However, GM spokesman Tom Wilkinson questions the metric's relevance. "We take a fairly dim view of that report," he says. "I don't think any legitimate statistician would look at that and reach the same conclusion."
Libby says GM is least likely to retain Pontiac customers who prefer performance vehicles like the G8 and the Solstice. Those buyers "will likely look at European products as well as Asian products with high performance," he says.
]By contrast, owners of Pontiac SUVs, the G6 and the Grand Am will likely stay with GM, he says, because the purchases are not performance-oriented and buyers "are most likely connected to GM in some way."
Among GM brands, "Chevy is first in line" to gain Pontiac share, Toprak said. "Then come lesser brands, some Buick and some Cadillac. If GM is proactive in trying to keep those people and offers loyalty programs, the percentage will be high, over 50%."
In the worst-case scenario for GM, he says, Pontiac buyers will flee to Ford (F, news, msgs) because they feel "frustrated with the failure of old GM (and) they juxtapose that with the stability of Ford and its compelling lineup of cars."
The 2004 shutdown of Oldsmobile proves it can be done. "When they discontinued Oldsmobile, they were retaining most Olds owners, who were trading for another GM product," says Libby.
But Toprak says Olds shut down in an easier time, before GM's financial difficulties were so acute.
No more GM Products for me unless I get a used AWD Vibe for a daily driver. Other than that I'm looking at Ford, or Dodge. Fed up with GM and their bullshit.
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I loved GM products and always gravitated towards pontiac over most of the GM brands... but sorry I'm not reducing myself to a chevy now just to stay with GM. I don't like anything that chevy makes right now other then the vette and the camaro and it's not practical for me and I can't afford it.
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