EX GM Exec Lutz: Feds Told GM To Drop Pontiac Or No Bailout

[King T]

When General Motors shut down Pontiac, it left a lot of enthusiasts wondering why. It was primed with a lineup of powerful, rear-wheel drive models, and seemed like it had a bright future ahead of it. It turns out that GM killed it on government orders, according to former GM Vice Chairman Bob Lutz.P

Friend of Jalopnik and west coast editor for Autoweek Blake Rong had an interview with Lutz today, and from what Rong is putting out on his Twitter feed, it's full of plenty of bombshells. None bigger, though, than this one:

@brendan_mcaleer @seniagetep Lutz: "Feds said, 'we're giving you 60 billion dollars. Drop Pontiac or you won't get the cash.'"

If true, it's a big revelation of the scope of power that the government held over GM during the worst days of the recession. Power and threats like that are often spoken of, though rarely in such explicit terms. Even still, there's not much of an explanation yet as to the specific objections the Feds had about Pontiac. The division seemed to be heading in the right direction after years of wayward stumbling. The Pontiac G8 was receiving rave reviews, and a new GTO was in the pipeline.P


Lutz went on to tell Rong that Pontiac was intended to have an all rear-wheel-drive lineup, and that the new Pontiac G6 was supposed to share a platform with the fairly excellent Cadillac ATS.

It's amazing what could have been, and we may never know the exact internal discussions the government had when it decided to shutdown the storied brand. Something tells me Lutz knows more of the story.

UPDATE: It turns out Bob Lutz was speaking at an event at the Petersen Museum in Los Angeles, and expanded on his comments more in a Q&A. Lutz is asked about Pontiac around the 2:14:10 mark here:

Pasted below is a transcript of his words. I've bolded the most important parts:

The Feds basically wanted to get GM down to Cadillac and Chevrolet. They said, "you don't need all these brands. You need one prestige brand, and one mass-market brand." And we said "well we can't get rid of Buick because Buick is important in China, and if Buick becomes an orphan in the United States then the Chinese are no longer gonna be interested in it." And the Feds said "Fair enough, but everything else goes." We said well we'd also like to keep GMC. They said "well, GMC is basically just like Chevrolet," and we said "that may be true, there may be a lot of shared components, but GMC has an entirely different image, a different customer base, and people are willing to pay different prices for a GMC, and here's the profitability," and the Feds said "whoops, okay, keep GMC."

So now we had Buick, GMC, Cadillac, and Chevrolet, and then, I wanted, badly wanted, to keep Pontiac, because Pontiac was on its way back, and it had been mismanaged for a number of years, you know, with 'rebuild excitement,' and the excitement was only in the plastic body cladding, mechanically there was nothing about Pontiac in the 90s that would make your heart beat faster. And with the solstice and solstice coupe, and with the Pontiac G8, which was a great car. We were embarked on a strategy of making pontiac different from the rest of GM in that Pontiac wouldn't get any front wheel drive cars, they would all be rear-wheel drive, and the next G6, was going to use the architecture of the cadillac ATS, it was going to be a 3-series sized rear-wheel Pontiac, with basically the Cadillac ATS 'de-premiumized,' obviously, a lot of the cost taken out, but still fundamentally that architecture.

That was going to be the next G6, and I think we could've moved pontiac away from every other American volume brand and really started positioning it as attractive US alternative to some of the, and obviously at much lower prices than the european rear-wheel drive cars, but the Feds said "yeah, let's just, how much money have you made on pontiac in the last 10 years?" and the answer was "nothing." So, it goes. And, when the guy who is handing you the check for 53 billion dollars says I don't want pontiac, drop pontiac or you don't get the money, it doesn't take you very long to make up your mind.

But I think it is a shame, Pontiac was on its way back, and it was killed before it, before the plant could really sprout blossoms, you know, it was well on its way. So, I agree with you, I think Pontiac was a great, wonderful history, mismanaged for a number of years in the 80s and 90s and it was clearly on its way back, and we were starting to see a very good customer base in solstices and especially in the G8, which was favorably compared in a lot of road tests to the BMW 5-series, people would say dynamically the car is as good and it's more powerful and way cheaper, but that was too bad. but you can't go through Chapter 11 without some really harmful effects.

[trademaster]

Dropping Pontiac and Saturn was obviously the right move.

[King T]

Originally Posted by trademaster

Dropping Pontiac and Saturn was obviously the right move.

Agreed.

It's always funny though, the people that don't really know about the divisions always holler about "Pontiac should have been the one to stay, and GM should have killed off Buick and GMC".

[matt55]

Or , or just not have taken the "bailout" and started making better business choices.

[FenwickHockey65]

Even though the board had already voted to kill off Pontiac in 2008...

[ChrisBlair]

Read about Lutz and the Pontiac Solstice, and about how that car had to be brought to market for a fraction of what a normal new-car rollout cost, to make the business model work for corporate GM.

Lutz really was dragging Poncho forward and I'm sorry to have seen it go. The engineers were enthusiastic about the car, and they were made to feel like this was a special thing, a thing they were passionate about. The G6 was a good car too.

The Solstice was a great experiment and a successful one in most ways even if they didn't get it 100% right. It showed that GM could start thinking in other ways, and they made a really fun car. I loved my Sol GXP with the GMPP turbo upgrades. My elderly parents couldn't get in and out of it any more, so I got my 1SS.

[G-Oil Guy]

Originally Posted by matt55

Or , or just not have taken the "bailout" and started making better business choices.

and had they done that, they would have gone out of business and taken not only them but every parts manufacturer that depends on them out.

The simple fact is, and remains, all of the big three had to survive for the entire business model to survive (like ac delco etc). Chrysler and GM were in far worse shape than Ford and were the first to sign up.

Ford was able to get private investment based on their financial status being less horrible than the others. Chrysler and GM tried to get private financing but no one was willing to take that risk. Hence the government stepping in.

You can't fix 30 years of mismanagement without SIGNIFICANT investment. They couldn't secure it privately. oh well.

besides, if they had secured private financing, you can bet your bottom dollar that that investor would have demanded similar concessions based on logical thinking.

Besides, nothing is stopping GM from bringing back Pontiac branded cars as special one-offs sold through GMC dealerships. Like a special edition Trans-Am or GTO...of course it would probably not happen but it's still in the realm of possibility.

[Mr. Wyndham]

Originally Posted by FenwickHockey65

Even though the board had already voted to kill off Pontiac in 2008...

This really doesn't surprise me....Pontiac = Money lost....that wasn't a secret. When a priority of the reorganization was profitability and leaving the company more sustainable than it was...it had to go.

I don't like the spin the article had, though...because Lutz also went on record a year or so ago saying the only reason the stayed with the company through the bailout was because the Feds didn't exert control over product planning decisions.

Crappy situation....but it's over - and the company is doing well. As far as I'm concerned - that's all that matters, and I'm going to keep focusing on awesome Camaros.

[nester7929]

The Feds didn't kill Pontiac, the horrible mismanagement of GM did. Pontiac was an awesome performance brand that was reduced to badge engineering.

[DGthe3]

Originally Posted by matt55

Or , or just not have taken the "bailout" and started making better business choices.

If they didn't take the bailout, they wouldn't have had to worry about making any business decisions.

[Number 3]

There were plans of course, but in the end it was G3, G5 and Torrent that killed Pontiac, not government (BCG really). Even the G6 and G8 weren't near enough. The G8 was the chance and it bombed. And even Lutz's little hero car the Solstice had to compete against the Saturn Sky, arguably a better looking car. All the government did (BCG) was simply state the obvious.

My current CEO told us BCG came in and asked to be sold on why GM needed all the brands. Given the chance to do so.....................they couldn't. They were never really "told", they just couldn't justify it.

[trademaster]

Originally Posted by matt55

Or , or just not have taken the "bailout" and started making better business choices.

[Russo]

Originally Posted by G-Oil Guy

and had they done that, they would have gone out of business and taken not only them but every parts manufacturer that depends on them out.

The simple fact is, and remains, all of the big three had to survive for the entire business model to survive (like ac delco etc). Chrysler and GM were in far worse shape than Ford and were the first to sign up.

Ford was able to get private investment based on their financial status being less horrible than the others. Chrysler and GM tried to get private financing but no one was willing to take that risk. Hence the government stepping in.

You can't fix 30 years of mismanagement without SIGNIFICANT investment. They couldn't secure it privately. oh well.

besides, if they had secured private financing, you can bet your bottom dollar that that investor would have demanded similar concessions based on logical thinking.
Besides, nothing is stopping GM from bringing back Pontiac branded cars as special one-offs sold through GMC dealerships. Like a special edition Trans-Am or GTO...of course it would probably not happen but it's still in the realm of possibility.

you mean like Chrysler selling out to Fiat? and now they make better cars because of it...



you do realize that when GM took the taxpayers money, they kept all the same management that caused them to go bankrupt?

[G-Oil Guy]

Originally Posted by Russo

you mean like Chrysler selling out to Fiat? and now they make better cars because of it...



you do realize that when GM took the taxpayers money, they kept all the same management that caused them to go bankrupt?

The government facilitated the sale of Chrysler to Fiat. I don't think it was necessary but it happened none the less.

I'm not sure if the second part of that statement is sarcasm or not. I've never been a fan of Chryslers/Dodges so I'm not sure.

And as for GM, Yes they kept the existing management but I doubt it was the same management that started the trend of volume over quality in the late 70s/80s.

Even with the current management, they've done a complete 180 and are realizing that Americans will pay good money for cars that are quality built. They were able to prove to themselves that they could build quality cars at or around Toyota pricing (for Chevy), they revitalized Buick (mid professional), and completely revamped Caddy from the "For Grandpas only" crowd to younger professionals with money to burn. They focused GMC on "professional grade" and it's working. All of this while shedding Hummer, Saturn, and Pontiac.

Had the crash of 08 not happened, I still think we'd be in a Pontiac/Saturn/Hummer less environment, I just don't think they (GM) would be as far along in their revitalization as they are currently.

and this is not GM specific. Ford's line-up is great too. It's a great time to be an American car fan.

None of what's being debated here changes the fact that the economic meltdown of 2008 happened and it ran the very serious risk of killing one or more of the big 3 and all of the support chain that goes with it.

If you (royal you, not you specifically) don't want companies receiving government bailouts, don't let firms/companies (of any type) get so large that if they go down, we all go down. Trust busting was once a big function of the government that has disappeared in recent years.