Selling Saturn will cost GM

Posted by: David Welch on June 10, 2009

General Motors’ decision to sell Saturn to auto magnate Roger Penske doesn’t make much sense to me. If anyone can make a go of it, it’s Penske. But it has the acrid whiff of a bad deal from GM’s end.

Penske plans to use those Saturn retail stores to sell cars potentially made by manufacturers in Europe or Asia. While he may only select cars from one or two automakers, those companies will could be companies that don’t have a presence in the U.S. market already. For them, it makes great sense because they avoid the cost, risk and years of development time it takes to set up a successful retail network. Saturn, for all of the mistakes GM made over the years, has a great retail network. It is known for its no-haggle, no-pressure sales approach and customer service. Its customers loved it even when the Saturn cars weren’t so great.

Through Penske’s acquisition, someone like France’s PSA (parent of Peugeot and Citroen) or India’s Tata Motors or any number of players from China can get into the U.S. That basically removes the biggest natural barrier to entry, which is developing a sales chain. Longtime GM watcher Maryann N. Keller, who sits on the board of retailer Lithia Motors, points out that whoever Penske gets to supply cars will be in direct competition with GM. I made the same point in this blog entry when Saturn went on sale. For its part, GM will still build Saturn vehicles for the next year or so. If Penske wanted, he could even have GM build Saturn vehicles on contract beyond that.

Frankly, I’m not sure that Penske will succeed. Saturn’s brand is more damaged than many people think. The Saturn Aura was North American Car of the Year, but sales were weak because the brand didn’t draw showroom traffic. From the cold view of an economist, weak carmakers like Chrysler, Mitsubishi and poor brands like Saturn, Hummer, Saab and Volvo should be victims of the crisis. They can’t make money so they go away, leaving a stronger industry for the survivors. That’s what happens to weak players who didn’t justify their existence before the nasty downturn.

By keeping Saturn around, GM has preserved one more brand the market doesn’t need and opened the door for more competitors to come into its most vital market. This is a market, by the way, that is already hotly competitive. GM is struggling to remake some of its brands and beat back the notion that the company is a failed enterprise. Since GM was already in bankruptcy, they could have killed Saturn off with minimal cost. Instead, they sold it off. If Penske succeeds with another carmaker, the cost could be huge.

Reader Comments

asa

June 10, 2009 7:35 PM

The US has gone bonkers. Helping companies work 1 billion with 80 billion, paying people to get rid of a clunker and sign up for debt on a new one, bqankrupt GM buying other bankrupt company, neither on has any money is nutts. Giving a car company along with our tax money to FIAT,(they are gonna cream the good parts and dump the rest back on taxpayers) Alot of STUPID things going on. Please someone wakeup, we are gonna loose alot of money and be in big trouble. PLEASE!!! Stop this idiot bailout mess now.

ace

June 10, 2009 7:38 PM

The US has gone bonkers. Helping companies work 1 billion with 80 billion, paying people to get rid of a clunker and sign up for debt on a new one, bankrupt GM buying other bankrupt company, neither on has any money is nutts. Giving a car company along with our tax money to FIAT,(they are gonna cream the good parts and dump the rest back on taxpayers) Alot of STUPID things going on. Please someone wakeup, we are gonna loose alot of money and be in big trouble. PLEASE!!! Stop this idiot bailout mess now.

Will

June 11, 2009 12:14 AM

To the author, Are you nuts??

Killing Saturn off with minimal costs???
There are a lot of Saturn fans that love to save the brand. The fans and myself thrive on keeping the brand alive, they may not build the best cars, but their service and customer support has revolutionized the car industry. It even changed the way how cars should be sold while providing outstanding customer service. Their business model of selling cars is one of the best out there, and Penske will further add & expand on that excellence. Just look and research his past success in turning around weak companies.

Will

June 11, 2009 12:14 AM

To the author, Are you nuts??

Killing Saturn off with minimal costs???
There are a lot of Saturn fans that love to save the brand. The fans and myself thrive on keeping the brand alive, they may not build the best cars, but their service and customer support has revolutionized the car industry. It even changed the way how cars should be sold while providing outstanding customer service. Their business model of selling cars is one of the best out there, and Penske will further add & expand on that excellence. Just look and research his past success in turning around weak companies.

Detroiter

June 11, 2009 2:44 PM

Saturn had the best safety record of any car manufactured bar none for a decade. The best customer satisfaction of ant car maker bar none for it's entire lifetime to date. It's cars got the best agregate milage of any car company including Toyota and Volkswagon. So the real question is if Saturn is an unprofitable sales model why does the US Government want the rest of the American automakers to follow it's model? If americans prefer Ford F450 monster trucks to Saturn SC1 coupes that is what the market wants and no matter what the US Government wishes the American people preferred it doesn't change what Americans want. Freedom of choice, "the PURSUIT of happiness", does not mean that those choices don't come with consequences. If Americans want monster trucks they must pay with their labor if they cannot earn that level of income they must improve themselves or settle for what they can afford. Capiyalism is the offer to areward successful gambles and to punish failed gambles. We must allow the failure of the failures or the whole system is changed to socialism where no matter how hard you work nothing will change because your accomplishments will only fuel someone elses desires never your own. I like Saturn as a company and as a vehicle but if the market does not want to buy it then it should go away and open the field for the new company.
We are always talking about the "Big three" American automakers but we never seem to mention the other American automakers. Remember them? Peterbuilt, White freightliner, Mack. Hell even the Mecury marine people were in the automotive business for a while building the quad four engines for GM during the late 1980s and early 1990s. We have plenty of little businesses that don't grow because the bigger guy already has a hand on the market. I say let the Toyota, Hyundai, Kia transplants fight it out against the locals and see what we get. GM wasn't always there Pontiac and Chevrolet were competitors just like Chevrolet and Ford. These companies weren't always on the same side or even close. So many car companies have gone away and have we missed them? not really. Do you miss Packard? Tucker? Willys? AMC? Desoto? Stanley? Oldsmobile is just the latest one to go Saturn will be in good company if it can't keep up. The road belongs to the fittest and fit you must be if you want to be in business in the U S of A.

Big E

June 11, 2009 2:48 PM

To the Author: FYI, Saturn retailers, for their part, have always been among the leaders in sales per outlet. Saturn has outsold Buick and Cadillac for many years of our existence. In 2008, Saturn outsold Buick by over 52000 units nationwide with about 430 outlets versus 2700 Buick outlets. If you add up the average Buick/Pontiac/GMC dealership new car sales they average less than the monthly new car average for a Saturn facility. The Saturn network has a proven way of doing business. If GM had followed the manufacturing, sales, service and parts model throughout the corporation like Roger Smith had intended, perhaps they would not be in the state they are in right now. Instead, the old school GM management kowtowed to labor, the board, and continued on with their merry old ways of overproduction, incentives, labor concessions, price increases, waste, etc. Too bad that the typical US citizen, including the clueless media mainstream only knows the Roger Smith fictionally portrayed by the bloated blowhard Michael Moore.

thedetroiter

June 11, 2009 3:24 PM

Well I guess attempting to post a comment here was a waste of time. Over an hour and still being "reviewed" (censored). This wasn't even a volatile comment. well I tried and I give up enjoy your empty corner.

Jake

June 11, 2009 11:39 PM

I work for a Canadian Saturn retail facility and the Aura would have done just fine if it were not for the fact that GM wouldn't produce them in enough volume and models. While we struggled to get Hybrids, GM seemed to have no problem getting Hybrid Malibus out to the GM stores. Further, the Malibu came priced significantly lower than it's 'twin sibling' the Aura. We did OK but despite our better service, people are also influenced by sticker price and the GM folks didn't have to sell one the one-price process. Thanks GM for contributing to Saturn's 'success'.

KL in CA

June 14, 2009 3:53 AM

My 1995 Saturn SW2 station wagon went 240,000 miles before I needed to get the engine rebuilt. It was getting up to 35 mpg before, now it gets 36 mpg. Beat that; most new cars can't unless they're hybrids. Plus it's prettier. Plus I liked the buying experience--no dicker sticker and a wonderful salesman! (Bob Snyder in Vancouver WA, I'm still thanking you!) Saturn has way more promise to fulfill, I hope Penske's taking it on to fulfill that promise, not strip it for parts.

rooney

June 15, 2009 1:33 PM

do you guys think gm should change its name when it gets out of bankruptcy? i found an interesting article by a naming expert in which the author argues that gm should rename itself "electra." worth a read: http://onthebutton.wordpress.com/2009/06/15/gm_renaming/

Corporate Cars

June 30, 2009 7:51 PM


Hey Nice Stuff!
I think your blog is very interesting. It has very important mater to make a website popular.

S1L1SC

July 10, 2009 10:14 AM

Volvo a poor brand? What hole has your head been stuck in the last couple years? Volvo is a better brand than Jaguar, Land Rover, Saturn and many others, as it has a good reputation and a clear perception of what it should be - a brand that sells safe and reliable cars. This is something many other brands in the US market lack.

The Rancidator

September 27, 2009 6:35 PM

So, did you all read the posting? It wasn't about brand loyalty, et al. It was about the COMPETITION THE BRAND COULD GIVE GM. Is this perhaps the real reason why the US is in trouble? Maybe you can figure out what that means.

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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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