For Saturn, The Time Is Now

The year 2007 will be crucial for GM's struggling Saturn. It's finally got the great new cars it needed—but buyers still need to be convinced

by David Kiley

General Motors' Saturn is on the verge of either proving itself as an invaluable brand for the company's financial future or becoming an example of how the automaker is incapable of managing a brand no matter how good a lineup of product it has in the showroom.

After 16 years in existence, why now? Because it finally has a lineup of vehicles that is not only as good a group of products as General Motors (GM) has ever lined up under a brand, but products that stack up very favorably against the likes of Nissan (NSANY) and a resurgent Hyundai, as well as, in some cases, Toyota (TM) and Honda (HMC). If the automaker has truly looked after manufacturing quality as well as they say to improve Saturn's J.D. Power ratings, then the X factor is whether the current team managing Saturn's sales and marketing can successfully go back to the future with its advertising and rekindle the engaging and memorable Saturn story that launched the brand in 1990.

The new Saturn products are that good. The Saturn Sky is as good a rendering of a sexy two-seater as the Mazda Miata, and as good as cars that cost $10,000-plus more (see BusinessWeek.com, 5/31/06, "Sky High"). The new Aura sedan, while an unproven newcomer, gives the Honda Accord a run for performance, fit, finish, and design from every angle (see BusinessWeek.com, 10/4/06, "Saturn's Awesome Aura"). The new Outlook, a seven-passenger crossover SUV that I drove this month, is so well executed that my notebook is virtually empty under the heading "Negatives" (see BusinessWeek.com, 11/30/06, "Saturn's Great New Outlook").

Niche Must Grow

The Vue compact SUV, which includes the Green Line hybrid, is not the best in segment. But it's close enough to even the newest redesigned Honda CR-V and Toyota RAV4 to merit close consideration by anyone shopping in the small SUV segment. It has the advantage over its Asian rivals of being offered in a hybrid version. That leaves just the Saturn Ion as the weak sister in the showroom. And that car goes away in 2007 to make way for the far superior Opel Astra, currently available in Europe, which will be rebadged and slightly repackaged for Saturn for next fall.

Saturn's sales, not surprisingly, are on the upswing. October sales were up 20% from the same month a year earlier, and November sales were up 24%. Those numbers, of course, were helped by the sales swoon that took place a year ago after GM, Ford (F), and DaimlerChrysler's (DCX) Chrysler division pulled ahead sales in the late summer with employee-pricing offers. On the year, Saturn is up just 3.5%. The brand sold 205,000 vehicles, spread across five models, in the first 11 months of this year. To put that in perspective, Toyota sold 331,000 Corollas alone so far this year. Hyundai sold 131,000 Sonata sedans—just one model—so far this year. So, as a whole brand division under GM, Saturn right now can, at best, be called a niche. Saturn is on track to sell about 220,000 this year, down from 280,000 in 2002.

But it has to be more than a niche to earn its keep. And with product as good as it has arriving now, that means Saturn must reclaim some of its "brand story," which has been lost in recent years as GM has grappled internally with Saturn's sentimental and grassroots past. Saturn was patterned after both Japanese styling and manufacturing techniques, giving workers greater involvement in the making of the cars. But the company never made a profit and, in 2004, GM folded Saturn into the rest of the company.