GMC, Pontiac Shut Down? Not Without Bankruptcy

When yesterday's stories broke on various news agencies that General Motors Corp. was considering axing its Pontiac and GMC brands as a way to avoid bankruptcy we smelled a rat.

Even worse, other reports claimed GM was moving up its timetable of closing 1,700 stores from five years to just a few weeks to meet the June 1 deadline. The legal, financial and practical obstacles make the idea laughable.

But we chased the story anyway and Associate Editor James Amend put together one of the more reasonable pieces addressing the reports.

The only way GM could shut down those brands today is through bankruptcy. The issue is the dealers. A manufacturer closing a brand would be in violation of the franchise agreement with its dealers. True, GM closed Oldsmobile, but it paid more than $1 billion to its dealers and spent years in court defending lawsuits from numerous dealers.

Shutting down Pontiac and GMC would be much more complicated because the auto maker and its dealers have exerted so much effort and money the last few years combining the two brands with Buick. In fact, more than 90% of the three franchises are grouped together now.

So what does GM do with Buick? Taking away two brands from its dealers would mean GM would have to provide some way for Buick dealers to stay in business by adding vehicles to the lineup, such as trucks and full size SUVs.

Chances of that happening? None.

Or GM would have to push the Buick franchises to Chevrolet and Cadillac dealers. That process would take years and hundreds, if not thousands, of court cases.

So what's left? GM tries to make Buick GMC (with a Pontiac vehicle) work as it said in its viability plan submitted in February. Or it declares bankruptcy and shuts the brands down, gets out from under its franchise agreements and picks certain Chevrolet and Cadillac dealers to take Buick franchises.

We'll know in a few weeks what the strategy is.