Saturn, Opel sales seal GM’s fate

Wednesday, June 17, 2009

Commentary

Saturn, Opel sales seal GM’s fate

Jamie Lincoln Kitman

With all the rubbernecking surrounding GM’s bankruptcy, you’d think that more time would have been spent considering the most critical part of the deal — what’s left. Which of GM’s famous brands are being kept, which are being thrown out and which are being sold?

The decision-makers have erred badly, succumbing to the same mix of internal power politics, protectionism and aversion to engineering risk that set GM on its downward spiral almost 50 years ago.

There’s a reason why finding buyers for the carmaker’s German Opel division and domestic Saturn brand has been easy: They’re the most promising divisions GM owns. Getting rid of them was dumb and pretty much seals the company’s fate.

For Americans — each one of us fractional shareholders in the new "GM Lite," thanks to the government’s 65 percent stake — the question is: Why are we letting them go? (The case for selling Hummer makes better sense.)

The underlying politics are clear. In a prepared statement, the United Auto Workers said that if GM is going to receive government assistance to facilitate its restructuring, it should be required to maintain the maximum number of jobs in the United States.

The union, which now owns 17.5 percent of the company, may think it is receiving its just due by opposing Opel’s inclusion in the new GM. Except that we have seen the limits of this strategy.

When Chrysler went hunting for federal loan guarantees in the late 1970s, it was prodded by the UAW and subsequently required by the government to sell all its European assets. That left it a local manufacturer, vulnerable to heavy suffering in domestic downturns and to a ham-handed takeover by Daimler, culminating in its bankruptcy.

For GM, junking Saturn represents an opportunity lost.

Creating the brand in the late 1980s gave the firm its only great post-Vietnam-era marketing success story. Saturn may not have been "a different kind of car," as its colorful advertisements had it, but it did attract a different kind of customer, one GM had lost to the likes of Toyota and Honda. Educated and reasonably affluent, these customers wanted to buy American again, yet a remarkable 87 percent didn’t know that Saturn was part of General Motors.

GM invested tens of billions in Saturn and lost plenty. The cars weren’t very good, but paradoxically, customers didn’t care, and they helped build a brand with a great reputation.

That Saturn lost money was a demerit, but the cause of its infirmity is a matter of record: Internal corporate politics and the hostility of GM’s existing domestic brands undercut it from the get-go, with other more powerful divisions, such as Chevrolet, making sure that Saturn was starved of the resources necessary to field a good enough or large enough lineup to meet the 500,000-cars-a-year sales target that would have made the division profitable.

"Chevrolet never understood why they weren’t given the money" Saturn got instead, one of its engineers, long since working for Honda, told me.

Nonetheless, Saturn parlayed the same model for 13 years (an eternity in automotive development circles) into a product consumers loved.

So committed were Saturn loyalists that tens of thousands of them ventured to the company’s modern factory in Spring Hill, Tenn., each summer to celebrate their astonishing good fortune with Saturn’s employees and their fellow owner-pilgrims.

For the billions of dollars GM invested, for Saturn’s well-regarded dealers and the priceless customer loyalty it established, as well as for its environmentally friendly profile (Saturn was the first GM division to sell its own hybrid), Penske can just say "Thanks!"

The $100 million to $200 million he’ll pay GM for the company is small potatoes compared with what GM has spent or what it is losing — a domestic brand that is seen as caring and green and not as bad as old GM.

Yet depressing as this loss is, the sale of Opel is worse, even catastrophic.

Unlike Saturn, which in recent years had been stripped of even the modest independent engineering capacity it once possessed, Opel is GM’s powerhouse engineering division. Purchased in 1929 to give the company a foothold in the German market, it has grown into one of GM’s best-selling and best-respected divisions.

Opel has designed and engineered GM’s best small and medium-size cars for decades, the sorts of machines a new and responsible GM ought to spend more time thinking about for this country.

Today, Opel is not only the progressive face of GM in Europe and Russia, it has been at the forefront of much of the firm’s best engineering in alternative — hybrid, hydrogen fuel cell and battery electric — power trains.

And following its sale, Opel’s engineering team will for the most part remain in Germany. America’s love affair with GM’s Corvettes, Cadillacs and SUVs notwithstanding, Opel and that team, forged in the crucible of the hyper-competitive European market, today constitutes the best, most exciting part of GM overall.

So why are we giving Opel away?

Extreme poverty never makes for the best long-range financial decision-making. What congressman really wants to go back home after having sat by while taxpayer dollars got packed off to Germany? (Just look at the hoops Barney Frank is jumping through to save about 90 GM jobs in Massachusetts.) What American union boss wants to see American jobs lost in favor of German ones?

Sadly, none of this is an excuse for not admitting the truth about GM: Its potential salvation is in Germany. And we — because after all, it’s our company now — let it get away.

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