General Motors Corp. said bankruptcy jitters and a global sales slump created a "revenue implosion" that led to nearly a $6 billion loss in the first quarter.
The auto maker burned through $10.2 billion as revenue plunged 47%, the latest sign GM is running out of options as it races to meet a June 1 restructuring deadline set by the White House. The company is surviving on $15.4 billion in federal loans and has said it needs another $11.6 billion to stay afloat.
Steve Whitaker sells cars so it shouldn’t be a surprise that the man likes muscle cars and other collector automobiles from the 1960s and 1970s.
But there was a bittersweet reaction to the General Motors decision last week to retire its Pontiac division othat has been in production since 1926. And that means a big business change for Whitaker, president of Whitaker Buick, Pontiac and GMC in Forest Lake.
Whitaker says he doesn’t relish the loss of Pontiac from his showroom floor at the end of the 2010 model year, but is a pragmatist when it comes to understanding what the troubled General Motors needs to do to survive.
“The 1960s were the goldlen years [for muscle cars],” he said. There are still fond memories of the Pontiac GTO, the Dodge Charger and the Plymouth Challenger — all muscle cars of the 60s.
“I love old cars,” Whitaker said. “This is not the time to be sentimental.”
The announcement by GM last week did not come as a surprise to Whitaker, who, at 48, has grown up in the auto business and relocated a St. Paul dealership to the Novak GM Center site in March of 2006. During a time that is challenging for auto manufacturers and dealers, such moves must be made to help improve the GM brand for now and the future, he said.
Come the end of 2010, the current five models of Pontiacs — ranging from the top end G8 to the compact Vibe — will no longer be made.
The end of Pontiac will happen in the same way that Oldsmobile was eliminated in 2005, he said.
“We’ll lose the brand but warranties will continue,” Whitaker said. “Parts and service will be available. That will not be an issue.”
The end of the Pontiac line is one of several moves that GM is making in its efforts to survive, he said. Whitaker’s dealership will continue with its models of Buick and GMC vehicles. GM will also continue to make Chevrolets and Cadillacs.
While General Motors is not selling the Pontiac name, it is shedding three other divisions. Hummer, Saturn and the Swedish-founded Saab divisions are all coming to an end. GM is working to find buyers for the three, Whitaker said last week.
Regarding Pontiac, Whitaker says customers will find no change in the service and parts need that they may have. And there could come a day in the future when GM brings the line back, he adds.
Car buyers who may think the Forest Lake dealership will shrink in inventory because of the move are dead wrong, Whitaker says.
As GM retools, Whitaker says new models within the Buick and GMC lines are in the works and should be ready by the time Pontiac is retired.
“We’ll lose a few models, but we’ll gain a few models,” Whitaker said. “We’ll get additional models to replace what is lost. Models come and go all the time.”
The decision, he said, is just one of many facing GM. GM may yet neet bankruptcy, but the public must understand that it would be a reorganization and not a liquidation. The company will continue to operate, he points out.
“We have to get the GM model corrected so we can move forward and thrive.”
Whitaker remains confident that his Forest Lake dealership will continue to operate well into the future.
As part of its restructuring that includes plant closings and employee layoffs, the company has said as many as 1000 dealerships may be closed or go out of business.
Whitaker hopes his dealership will be insulated from such a decision. Most of the closings will be of dealerships that are not profitable and those in tough metro markets where dealerships are more numerous.
“Our business was up in a down year,” he said of 2008 sales totals. “We are keeping pace with last year. It was a bad year for some dealerships.”
General Motors is expected to announce plans for dealership closings by the end of the month. Whitaker is confident, but not over confident.
“I’m also knocking on wood,” he said. “GM can announce they are doing anything they want. We plan on being around. We plan on being a survivor.”
The strength of Whitaker’s dealership here comes at a time when Forest Lake dealers have been ravaged by the tough economic times.
Forest Lake Ford, Forest Lake Chrysler and Forest Mitsubishi have all gone out in the last 15 months, leaving Whitaker’s company and Wally McCarthy’s Chevrolet Cadillac as the only new car dealers west of the freeway.
“It doesn’t do anyone any good to have two vacant car dealerships,” Whitaker says. “Vacant real estate doesn’t look good.”
The close proximity to other dealers was one of the reason Whitaker bought the Novak business and moved here.
“Car dealers have always been in a cluster,” he said. “It encourages people to come and browse. Our business is so competitive. People will drive 50 miles to save $50.”
Whitaker remains an optimist that GM will emerge from this crisis as a stronger and more efficient company. The company is being carefully monitored by the federal government as part of the loans made by the feds to help keep the company afloat during tough economic times.
GM has good products and Whitaker says dealerships like his have built solid reputations with quality sales and service.
JD Power has rated Buick tops in the country for quality in 2009 and the GM product is ahead of Toyota and Honda, he said.
Consumers have never had more incentives to buy cars than today, he adds. Credit is available and low-interest loans and rebates add up to good deals for consumers, he said.
The money for car loans is out there,” he said.
Add in the new federal provision that allows a tax deduction for the sales tax and the GM Value Protection Plan and consumers have two more reasons to buy, he says.
One area does need to improve, he says. Banks as a rule need to loosen the purse strings to make capital available for car, boat and RV dealers for the purchase of inventory. While money is available for consumers with good credit ratings, some businesses that need capital infusion to acquire inventory are being hurt, he said.
Whitaker says he is pleased that the federal government had the insight to intervene and take steps to help preserve one of the few manufacturing industires that remain in the country.
With one in 10 American jobs tied to the auto industry, it’s simply too valuable an industry to let collapse, Whitaker said. It’s worth saving, he adds.