Like HowStuffWorks on Facebook!

How Pontiac Works


Pontiac Strategy in the 2000s

By 2005, Pontiac was desperate for cash, posting a $10.6 billion loss that year, most all of it sustained by North American Operations (NAO). More ominously, GM faced enormous near-term health-care and pension costs not only for its own still-sizable workforce but also the employees at Delphi, the money-losing parts unit spun off in 1999 as a quasi-independent concern.

Yet years of withering sales, market share, and stock price had left GM hard-pressed to borrow needed funds, banks having cut its credit rating to undesirable "junk" status.

Fortunately, 2001 had ushered in new managers determined to do whatever was needed to restore GM's health. Company veteran G. Richard "Rick" Wagoner, Jr., took over from Ron Zarrella (who returned to Bausch & Lomb to be CEO). Wagoner soon moved up to chairman, then took charge of the floundering NAO unit. In a surprise early days move, he persuaded former Chrysler Corporation president Bob Lutz out of retirement to be GM "product czar," charged with spearheading smash-hit new models -- and avoiding another Aztek.

Lutz immediately began dismantling brand management and its bloated, confusing bureaucracy, while putting new emphasis on stand-out styling and scrutinizing the competition with the eye of a "car guy." As part of streamlining product development, he aimed for closer links between Detroit and GM's overseas branches to avoid profit-sapping duplication, increase manufacturing flexibility, and quicken GM's responsiveness in the super-competitive twenty-first-century market. Lutz was rewarded for his efforts by being named vice chairman in early 2005.

Wagoner, meantime, made some wrenching decisions under pressure from restive shareholders and an increasingly impatient GM board. Among the toughest were phasing out Olds­mobile after 2004; selling stakes in once-promising "alliance" partners Fiat, Isuzu, Subaru, and Suzuki; seeking more concessions from the United Auto Workers and other unions; and planning a "right size" dealer body in which Buicks would be sold through many Pontiac-GMC outlets. But the drama had just begun.

In early 2006, GM said it would lay off some 30,000 workers and close a dozen North American plants by 2010. A few weeks later, the company announced it had found a buyer for a 51-percent share of its profitable financing arm, General Motors Acceptance Corporation (GMAC), another divestiture to pad cash reserves against looming disaster.

Yet even with all this, some financial gurus gave only 50/50 odds that GM could avoid filing for bankruptcy within five years. For a company that once ruled the U.S. auto industry with a giant's strength, this was a stunning state of affairs.

Pontiac's turn of the century record mirrored the deepening crisis. Calendar-year sales, which began wobbling in the 1990s, headed south once the boom economy ended, plunging from more than 616,000 cars and trucks in 1999 to just under 438,000 in 2005. Most of the losses naturally came on the car side, which dropped more than 28 percent in those six years from 552,000 units to some 395,000.

What happened? Like most GM brands, Pontiac had lost focus. As Business Week noted in 2003, "Pontiac's recent history has been based on a fabrication. It markets itself as GM's excitement division while offering a lineup of glammed-up Chevrolets and Buicks that fool no one with their faux sportiness."

Bob Lutz swept in vowing to change all that, ordering an end to silliness like plastic cladding and fast-tracking new, "gotta have" models. "We want to make Pontiac an affordable, American BMW," he told BW (understandable, perhaps, as he once worked at the German automaker). But the magazine was skeptical, predicting "it could be years before enough new cars arrive to make a difference."

Business Week was right, and real change wasn't evident until 2005. But that proved a watershed Pontiac year, bringing the curtain down on Sunfire, Bonneville, Grand Am, and Aztek. At the same time, a genuine sports car arrived, something John DeLorean had lobbied for back in the mid-1960s.

For more on the amazing Pontiac, old and new, see:

For more on the amazing Pontiac, old and new, see:

  • Pontiac New Car Reviews and Prices
  • Pontiac Used Car Reviews and Prices

More to Explore