End of the road for Saturn as Penske walks away

Deal to save brand falls apart after auto retailer fails to find another car maker to manufacture vehicles once GM stops production.

General Motors Co. (GM-N0.75----%) is killing off its Saturn brand, ending a two-decade-old experiment that involved GM using “a different kind of company” to fight off competition from Japan-based auto makers.

Saturn Corp., the brainchild of GM chairman Roger Smith during the 1980s, was set to be sold to Penske Automotive Group Inc., (PAG-N19.18----%) but Penske walked away from the deal Wednesday.

“Today's disappointing news comes at a time when we'd hoped for a successful launch of the Saturn brand into a new chapter,” GM president Fritz Henderson said in a statement.

The deal fell apart because Penske was unable to find another auto maker to manufacture Saturn models after GM stops manufacturing them early next decade.

“Penske Automotive Group negotiated the terms and conditions of an agreement with another manufacturer, however that agreement was rejected by that manufacturer's board of directors,” Penske said in a statement late Wednesday. “Without that agreement, the company has determined that the risks and uncertainties related to the availability of future products prohibit the company from moving forward with this transaction.”

Penske, which is a major U.S. auto retailer and is the U.S. distributor of Mercedes-Benz's smart brand, had planned to take over Saturn's dealership and distribution network in the United States.

GM announced earlier this year that it would abandon the manufacturing and sale of Saturn vehicles as part of a major reduction in its brand portfolio.

It said it was closing Pontiac and seeking buyers for Saturn, Hummer and Saab. Saab and Hummer have been sold, although the deal to sell Hummer to a Chinese industrial company has not closed yet.

Saturn dealers in Canada, which were not part of the Penske deal, have been closing during the past few months.

The brand did little to stem the tide of market share losses that contributed to tens of billions of dollars in financial losses at GM this decade and its ultimate descent earlier this year into Chapter 11 bankruptcy protection after the credit crisis.

The first Saturn rolled off the assembly line in 1990. Sales peaked in 1994 at 286,000 cars annually and were in the 250,000 range for much of this decade.

“It's a national tragedy,” said David Aaker, a professor at the Haas School of Business at the University of California, Berkeley. In his book Building Strong Brands , Prof. Aaker discussed what made the Saturn brand so strong in the beginning. “It was the only organization in the U.S. that really had a quality culture to it,” he said. “A group of people committed to designing and building a quality car. It was unlike anything else any American car [maker] had done.”

Saturn's clustered dealer network allowed for a no-haggle, fixed pricing program, Prof. Aaker said. Since adjacent dealers weren't competing on price, they were able to deliver low-pressure sales tactics and focus on cultivating relationships with customers.

“The result was, they created an incredibly loyal customer base,” Prof. Aaker said. “It was like Harley-Davidson level loyalty, for a car that really didn't look all that different.”

A hundred people started the organization under the slogan, “A different kind of company,” separating themselves from GM and losing job security in the process, Prof. Aaker said. “The culture there was just so strong, and they were blessed with some really fine leaders at the beginning, which was indispensable.”

Consumer pride was also important to the brand.

“But then [GM] made the decision not to invest in the car for 10 years,” he said, and from that point on, it was just a matter of time before the brand was phased out.

The loss of Saturn is a blow to a loyal group attracted to the company's no-pressure sales approach and solid customer service. Gwen Wolansky, an Edmonton resident, bought her Saturn last year after negotiating with other companies.

“I found the Saturn dealer much more relaxing to deal with,” Ms. Wolansky said, adding it was the best deal financially and her cousin and friends spoke well of their Saturns. “No one's said anything bad about them.”

When Ms. Wolansky posted her concerns about paint chipping on a customer forum, she was surprised to hear directly from the company, which provided a contact to help with the paint issue. With the failure of Saturn, she's worried the problem might not get addressed.

“Now there's no incentive for them to keep you as a customer, so who knows,” she said.

Source;
http://www.theglobeandmail.com/globe-investor/end-of-the-road-for-saturn-as-penske-walks-away/article1307636/

More Sad News for GM Fans; General Motors pulls away from Opel

Now that official word has come down that General Motors is abandoning its Saab and Saturn brands, the company announced today that it will also spin off a quarter to half of its stake in its European brand Opel (and it’s British twin, Vauxhall). Opel is a prominent car brand in Europe, and one of the largest carmakers in Germany.

Ironically, until the current financial crisis hit, Opel was one of GM’s more successful operations and it helped support the money-losing North American factories. As recently as a year ago, the automotive giant was pinning its hopes on better integrating its worldwide operations, and selling Opel-designed products in the United States, such as the Saturn Astra. Now that plan may be off the table.

In the meantime, Saturn has asked its dealers for two more months to develop a plan to restructure and look for investors and suppliers as an independent company, once GM quits providing cars for it in 2012. In the end, there’s no reason an independent Opel couldn’t be the manufacturer to build cars for Saturn. We’re just saying…

Source;
http://blogs.consumerreports.org/cars/2009/02/gm-pulls-away-from-opel.html

Saturn targeted for extinction in GM's plan for survival

Sad times for Saturn dealers, my heart goes out to the families of those working there.
Jim Mateja
February 19, 2009

Roger Smith's dream is officially a nightmare.

The General Motors chairman came up with an idea in the mid-'80s to create a division called Saturn to compete directly with Japanese imports by selling small, low-priced, high-mileage cars.
The first Saturn, the SL, bowed with a 1991 model.

Smith spent $3 billion to develop Saturn. And it did create a halo with no-haggle sales and the flower left on the driver's seat after the car was serviced. It did well early on as evidenced by a 17-day supply of cars at some dealerships in an industry where 60 days is considered normal. It beat expectations by posting a profit by 1993.

But Saturn never realized its potential.

There are those who would attribute that to a lack of love—too few models updated too infrequently.

Saturn also may have suffered from the fact that Smith served as GM chairman when the automaker's market share fell to 30 percent from 40 percent, opening the door wider to Toyota and Honda with their small cars first and leading to their successful luxury divisions.

Smith retired in mid-1990 before the first Saturn came out. No small wonder that GM now plans to sell or fold the division by 2011, ironically after it finally has a strong product mix.

Thank Bob Lutz, who joined GM in 2001, for Saturn's lineup: a high-mileage compact Astra, a nifty Sky roadster, the Outlook crossover with the crucial three rows of seats, the Vue sport-utility vehicle in gas or hybrid flavors, and the Aura sedan, which beat out the Toyota Camry for 2006 North American Car of the Year.

When Lutz announced plans this month to retire at year-end, he said he wanted the division to live long and prosper. But he told Automotive News, a trade publication, that he held out little hope.

"We spent a huge bundle of money in giving Saturn an absolutely no-excuses product lineup top to bottom, [but] the sales just never materialized," he said of a division whose sales slipped nearly 22 percent last year, to about 188,000 units.

Even Lutz professes to be stumped by why Saturn hasn't done well, but he says it's obvious why it no longer has a future with GM.

"We don't have the time or the resources to take 10 years to figure it out and turn it around," he said.

The ailing automaker, which has received $13.4 billion in government loans and is seeking $16.6 billion more, plans to phase out Saturn unless a deal is reached to spin off its distribution network.

With a franchise agreement that sets dealers up as an independent distribution network, it will be easier and cheaper to drop Saturn than the $1 billion it cost GM to kill Oldsmobile in 2004.

There's still talk that the franchise agreement would make the distribution network attractive to a buyer.

"With the rest of the world in a precarious economic state, unless someone from China takes a look, no one is going to be standing in line," said Joe Phillippi, principal of AutoTrends. Jim Hossack, vice president of AutoPacific, is even more realistic.

"Saturn gets its engines, transmission and body stampings from GM, and is so intertwined with GM it couldn't be sold because no one would buy it. Either it gets spun off or it dies of old age like Plymouth did at Chrysler.

"Old age at 18? Well, yes, especially when your only cheerleader is retiring."

Source;
http://www.chicagotribune.com/business/autocorner/chi-thu-saturn-mateja-0219-feb19,0,4757890,print.column