Should General Motors Close Out Additional Brands?

General Motors is hemorrhaging cash and losing market share in the face of a stiff economic downturn and because of a fleet top heavy with trucks, SUVs, and large cars. The company has several bright shining lights in its portfolio, but clearly the most recent run up in gasoline prices has exposed the company’s weaknesses, even threatening its very survival.

I know that some people believe that GM’s demise is inevitable and at one time I would have disagreed sharply with that assessment. Though I don’t agree GM will eventually go out of business, I believe that bankruptcy is a distinct possibility, yet perhaps the best opportunity to help the company correct its many imbalances.

Bankruptcy and General Motors

Should GM file for bankruptcy, it would send a ripple effect through the entire U.S. economy. Suppliers would lose out, tens of thousands of people would lose their jobs, but GM could be in a better position to ditch several of its brands in the process. A recalibrated company would be in a much better position to regroup and eventually regain some of what has been lost.

Though I don’t know everything there is to know about bankruptcy law, a Chapter 11 filing would give GM time to reorganize its business, while a Chapter 7 filing would mean that the company is no longer in business (has ceased its operations completely) and is in the process of liquidation.

Closing Or Selling Off GM Brands

Should GM elect to file Chapter 11 bankruptcy, that would allow GM to take advantage of the opportunity to close or sell of several brands including:

Hummer — In today’s world of $4 gasoline the Hummer is not relevant. A Chinese or Indian company could buy the brand which would give them instant access to the US market, but I doubt Hummer could fetch anything more than a token amount of money for GM. If no buyer steps forth, killing the brand would make sense.

Saab — GM never learned how to manage its Swedish brand unlike Ford who has done a wonderful job in building up Volvo. Saab’s value is greatly diminished, suggesting that a fire sale price would be reasonable. My thinking is that the value of the brand is dead and that it could go the way of Studebaker, Plymouth, and Oldsmobile.

Pontiac, Buick, Saturn, GMC — These four brands are particularly vulnerable, though keeping Buick for at least the Chinese market makes perfect sense. Select Pontiac and Saturn cars could be sold as Chevrolets while GMC isn’t needed as the entire fleet mimics Chevy trucks.

This leaves just two brands for GM, Cadillac and Chevrolet, bookends in the automotive marketplace. Both brands would benefit tremendously by not having to compete with other GM makes and would receive the lion’s share of research, technology, and new product offerings.  Toyota has had success with Toyota and Lexus (though Scion hasn’t lived up to expectations), therefore GM could and probably should do the same thing. A possible third brand, perhaps Saturn, could soldier on, but not at the expense of Cadillac and Chevrolet.

General Motors, Chrysler, And Ford

A lot has changed since the year began, with high gas prices throwing the automotive industry into chaos. Every automaker should have anticipated that customer demand would gradually shift from big vehicles to virtually anything that can get at least 30 mpg by responding with the ability to build more fuel efficient vehicles, but they didn’t. Now, the financial crunch is on with General Motors and Chrysler expected to bleed through the most cash over the next year or two. Ford will likely lose billions more, but their product mix is slated to change at a faster pace then either of its rivals and by 2010 should have plenty of cars that get excellent gas mileage and are exactly what consumers want.