GM to Phase Out Oldsmobile Division

D E T R O I T, Dec. 12 -- The nation’s oldest auto brand is near the end of its road.

General Motors will phase out itsOldsmobile division over the next several years and reduce salariedemployment by 10 percent in North America and Europe next year.

The moves, along with production cuts in Europe and NorthAmerica, will lead to a special pre-tax charge of $1.5 billion to$2.5 billion in the fourth quarter. GM also said that its fourth-quarter earnings will be lower than estimates.

“We stretched to find profitable ways to furtherstrengthen the Oldsmobile product line, including developingproducts with our global alliance partners, but in the currentenvironment there was no workable solution,” GM president and CEORick Wagoner said today.

Troubled HistoryIn recent years, GM has denied repeated rumors about plans toend Oldsmobile. The automaker has defended its brand-managementsystem as the best way to capture sales in a mature U.S. market forcars and trucks.

But, Wagoner today acknowledged that the brand has been in trouble for some time. “Over the years it’s truly been one of the crown jewels in General Motors’ empire. however Oldsmobile has been under increasing pressure for more than a decade as demographics and segmentation of the market have changed.”

In the past, a GM division was like a company within a company,handling its own manufacturing and engineering. Today, thedivisions, which the exception of Saturn, are just marketing andsales arms, peddling vehicles from one engineering center.

Oldsmobile has been struggling as GM attempted to recast thedivision as an alternative to near-luxury import cars. Novembersales were down 28 percent, despite an incentive program that letsbuyers forgo a down payment, monthly loan payments and interestcharges for one year on all Oldsmobile models.

GM executive Ron Zarellas said that bidding a slow farewell to the 103-year-old brand was by no means easy, but became a necessary to curb losses. “We as leaders have an obligation to act in the best interest of the entire enterprise. That means making tough decisions.”