GM to Phase Out Oldsmobile Division

D E T R O I T, Dec. 12, 2000 -- 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.”

The action ends the oldest American automaker, started by RansomE. Olds as the Olds Motor Vehicle Co. in Lansing in 1897.

Worldwide, only Mercedes-Benz is older.

Company OriginsAfter four years of selling cars to the wealthy, a fire in thefactory forced Olds to build the only model he had left, a tinyrunabout with a one-cylinder, 5-horsepower engine. The Curved Dashmodel sold for $650, a bargain for automobiles at the time, andshowed the pent-up demand for cars at a low price. By 1904, 12,500Curved Dashes had been sold.

In 1908, Olds’ company was absorbed into GM. It soon assumed itstraditional place as the middle-class, middle-age cars in GM’slineup — more expensive than Chevrolet and Pontiac, just a stepbelow Buick and Cadillac. It spawned a number of popular songs,including “In My Merry Oldsmobile” and “Rocket 88.”

Oldsmobile grew steadily over the years; in 1977, it became thefirst GM division outside of Chevrolet to sell more than a millioncars. Its high point was 1985, when it built 1,168,982 vehicles.

But since then, Oldsmobile has been in a slow downward spiral.Since the mid-1980s, buyers have moved from midsize cars thatOldsmobile was known for to minivans and sport utility vehicles.Imports and “transplants,” cars from import automakers built inthe United States, took larger shares of the midsize market.

Oldsmobile tried to follow the trends, adding a minivan and aSUV, but it had to share those vehicles with other divisions. GMhas also struggled to shed the image of Oldsmobile as a car forolder people — remember the ad line “Not Your Father’sOldsmobile?” — and dropped popular but plain models like theCutlass Ciera and the Eighty-Eight in favor of sleeker, moreluxurious cars like the Aurora and Intrigue.

But those models have not caught on. Oldsmobile sales totaled352,197 in 1999, and through November the brand had sold 265,878vehicles — a 18.5 percent decline.

Yet despite the hardships GM says it will continue to build and sell current models until the end of their product life cycle. The company plans for the 2002 Bravada sports utility vehicle to be the last model.

The Associated Press and ABCNEWS Radio contributed to this report.