Pontiac fades into history; Talent agency merger

KPCC business analyst Mark Lacter talks about General Motors' decision to do away with the Pontiac brand and the impact GM's troubles may have on the California economy. Mark also explains why the merger between two of Hollywood's biggest talent agencies is a big deal.

Steve Julian: On Tuesdays we talk about the latest business stories with Mark Lacter. So, it's not even out of business yet, Mark, but – remember Pontiac?

Mark Lacter: Steve, I was looking at Pontiac sales in the L.A. area, and it just kind of takes your breath away. For the first two months of 2009 – and those are the latest figures available – there were a total of 73 new registrations for Pontiacs. Seventy-three sales in an area with a population of 10 million people.

Julian: Wow.

Lacter: During those same two months, just to give you an idea, 3,700 Hondas were sold. That's not even great by Honda standards, but at least it shows they're doing some business.

Julian: Well you know, Pontiac had some pretty strong roots here.

Lacter: That's right – remember that GM assembled Firebirds at the old Van Nuys plant until 1992. Now, the plunge in sales is bad enough, but it gets complicated because dealerships borrowed money to buy cars for their inventory.

And those cars are just sitting on the lots. The concern is that if GM and Chrysler file for bankruptcy, the banks extending that credit could call in those loans or at the least refuse to extend any more financing.

Julian: So, if there is a Chapter 11 filing...

Lacter: ... the value of the vehicles plummets. Now, there has been talk that the Obama administration might allow dealerships to apply for small business loans, but taxpayers are still gonna wind up footing at least part of the bill, most likely. For now, GM plans to expedite the closing of more than 2,600 of its dealerships. That represents one out of 10 car dealerships in the U.S.

And it gives you an idea of why there's so much concern about the automakers filing for bankruptcy – there are just so many players involved in this thing. And it's a real problem for California's economy because new car sales generate more than $82 billion a year – that's almost 20 percent of total retail sales in the state, not to mention, of course, all the folks who work on those car lots and who presumably would be out of a job.

Julian: Hm. Two of Hollywood's biggest talent agencies are merging, and what kind of changes could this lead to?

Lacter: You know, this is gonna be an interesting combination of two very different Hollywood cultures. On one side you have William Morris, a very big operation – some would actually say lumbering. It's been around since 1898 when it first represented vaudeville acts. And on the other side, Endeavor is smaller, hipper, much younger – only 14 years old.

It was founded by Ari Emanuel – he's the brother of Rahm Emanuel, the White House chief of staff. Ari has been considered the archetype to the character on HBO's "Entourage" program. The internal politics on this is gonna be pretty bloody. Already you have lots of top-name agents announcing plans to leave.

Julian: Why do we care?

Lacter: Steve, these big talent agencies have become major players in determining what gets on TV and what movies get made. A big part of the business now involves packaging the actors, writers, and directors that they represent. So if you're a studio boss and you really want Ben Stiller for something, you might also end up with other people who are represented by William Morris or whomever.

Julian: So you're saying that the more people being represented, the better?

Lacter: Pretty much, and that's why we'll probably see more mergers of these talent agencies. The other reason bigger is better is hat the industry has become so interconnected. You know, it's not just the movie anymore – it's the movie, and maybe the video game, and the marketing tie-in with the toy company, also throw in an online component as well.

Each of these areas requires a particular expertise that you would find in a large talent agency. Of course, the first order of business, Steve, is consolidating the operations of William Morris and Endeavor – lots of egos to massage, so that will probably take some time.

Julian: In Hollywood?

Lacter: (laughs) Shocking.

Julian: Thanks Mark.

Lacter: Thanks Steve.

Julian: Mark Lacter is a contributing writer for Los Angeles Magazine and writes a business blog at LAObserved.com.