GM to shed brands to get bail-out funds

28 November 2008

The Detroit Big Three; General Motors Corp, Chrysler LLC and Ford Motor Co., are preparing a cost saving plan to put before the Congress next week with which they hope to get $25 billion in emergency loans. Tightened liquidity conditions in the US have prevented consumers from getting auto loans leading to US auto sales hitting a 25-year low last month.

However, before the US economy crashed this year, the Big Three of Detroit were already losing money due to a shift in demand towards more fuel efficient vehicles while these carmakers mainly churned out sports utility vehicles and small trucks that were profitable in the '90s.

Last week the US Congress sent the chiefs of these companies back to Detroit for failing to show a restructuring plan that would enable them to attain profitability. The Congress has given them time till 5 December and new hearings will begin next week.

GM has said it may run out of cash to run operations by the end of the year, and its board has reviewed the possibility of bankruptcy.

One option the company is said to be considering is to restructure its brand portfolio by shedding Saturn, Saab, Hummer and Pontiac brands. By coming up with an effective restructuring plan GM hopes to receive $12 billion in federal funds to shore up its finances.

The brands will be shed or sold to add capital to its deteriorating cash reserves and reduce overlap. The company will retain its other brands including Chevrolet, GMC, Buick and Cadillac.