GM will wind down Saturn after savior Penske bows out

GM will wind down Saturn after savior Penske bows out

Bid collapses as retailer fails to find source for vehicles


Lindsay Chappell
Automotive News | September 30, 2009 – 4:32 pm EST

 

DETROIT — General Motors Co. said it will begin to phase out Saturn — the car company conceived more than 25 years ago to fend off imports — after bidder Penske Automotive Inc. failed to secure a source of vehicles to keep the brand afloat.

Penske had been negotiating with France’s Renault SA to acquire autos for Saturn once a production agreement with GM had expired. Those talks collapsed, scuttling the Saturn acquisition by the dealership group and its CEO, Roger Penske.

"Mr. Penske is clearly a very clever man," said Paul Melville, a partner at Grant Thornton corporate advisory and restructuring services. "If he has pursued a deal with Renault and if it’s too difficult to make that happen, it’s dead."

Renault acknowledged that it had been in talks with Penske to supply cars, parts and technology for Saturn. "The conditions for an agreement have not been found," Renault said in a statement.

The collapsed deal puts Saturn in the same camp as Pontiac – brands that GM plans to phase out over the next 13 months.

GM is also in the process of selling a controlling stake in its European Opel unit as well as Saab and Hummer. As part of its U.S.-steered bailout and bankruptcy reorganization, the automaker will focus on Buick, GMC, Cadillac and Chevrolet.

‘Winding down’

“We will be winding down the Saturn brand and dealership network,” GM said in a statement Wednesday.

Penske, in its statement, didn’t identify Renault but did say the board of its potential partner rejected the deal.

“The risks and uncertainties related to the availability of future products prohibit” Penske Automotive from moving ahead with the deal.

GM and Penske Automotive announced a preliminary agreement on Saturn in June after the automaker’s bankruptcy filing.

GM emerged from court protection in July and said it aimed to finalize the agreement with Penske in the third quarter in a deal intended to preserve more than 350 franchises and 13,000 jobs.

Also in July, Renault said it had been approached by Roger Penske about supplying vehicles to Saturn. Earlier reports suggested that Penske Automotive might buy vehicles from Renault’s Korean unit, Renault Samsung Motors, for Saturn.

Notifying dealers

GM said it will determine and communicate to dealers how it plans to wind down Saturn and dealership network “shortly.”

The process will continue through October 2010, under a plan already approved by its dealers. Saturn retailers were to have signed a new agreement with Penske, and many were expected to close in the weeks ahead.

Saturn customers and owners will continue to be able to purchase and have their vehicles serviced at Saturn retailers during the wind-down, GM said. Once the process is complete, Saturn owners will be able to have their vehicles serviced at other GM dealerships.

GMAC Financial Services said in a statement that it will continue to provide financing options to Saturn dealers and customers during the wind-down.

‘Different’

The brand was created by former Chairman Roger Smith in 1983 to show that an American automaker could beat the Japanese in making small cars on U.S. soil. Saturn found a strong following after its 1990 debut by billing itself as "a different kind of car company" and inviting thousands of owners to tour the Tennessee factory built specifically for the brand.

But Saturn sales peaked in 1994, and an attempted turnaround earlier this decade sputtered despite investment by GM to overhaul the product lineup.

Detroit industrial hero Roger Penske, 72, had proposed stepping into the unprecedented role of taking over a doomed brand without owning a single auto plant.

Doom with a Vue

GM had agreed to continue selling Penske three Saturn models — the Aura, Vue and Outlook — for two more years. After that, Penske would have to put together a portfolio of new products from wherever he could source them.

GM said it would immediately begin the process of shutting down production at a plant in Michigan that builds the Outlook SUV and a plant in Mexico that builds the Vue small SUV.

The automaker also has halted plans to resume production of the Aura sedan at a Kansas plant. Production was scheduled to resume in mid-October.

The white-haired Penske is a familiar face in U.S. racing circles. Penske’s firm also rescued Detroit Diesel Corp. two decades ago after GM decided to sell off that business. It also acquired and restored motor speedways around the country.

Penske Automotive is the nation’s second-largest automotive retailer, with new-vehicle retail sales of 171,872 units in 2008, according to the Automotive News Data Center. It also distributes the Smart ForTwo, made by Mercedes-Benz, in the United States.

John Pitre, general manager of Saturn of Bakersfield in California, said, “If Roger didn’t think it would work, then it won’t work.”

Jamie LaReau, Richard Truett, Chrissie Thompson and Reuters contributed to this report.

History of Saturn
1983 GM Chairman Roger Smith unveils the Saturn small-car project.
1985 GM and the UAW agree on a separate Saturn labor pact; GM selects Spring Hill, Tenn., as the site for Saturn production, engineering and management.
1987 Auto dealers and Saturn managers design a retail plan that awards exclusive large markets.
1988 Saturn begins recruiting 3,000 workers from GM plants around the country.
1990 Saturn goes on sale with compact S-series sedans and coupes.
1991 Saturn leads industry in new-car sales per outlet.
1994 Saturn says it posted an operating profit for the previous year. Thousands of owners flock to the Saturn Homecoming in Spring Hill and tour the factory. Annual sales peak at 286,000 cars.
1997 Exports to Japan begin.
1999 Saturn introduces a mid-sized sedan, the L series, built in Delaware.
2002 Spring Hill begins production of the Vue crossover, using a Honda V-6 engine.
2006 Saturn introduces the full-sized Outlook crossover, on a platform shared with Chevrolet and Buick. Saturn introduces Sky roadster, twin of the Pontiac Solstice.
2007 Production of the Vue moves to Mexico.
2008 Opel Astra hatchbacks are imported from Belgium as the Saturn Astra. Sales slide to 188,004. A cash-drained GM tells Congress it intends to abandon the Saturn brand.
2009 The number of Saturn franchises drops to 350 from 435 a year earlier. Roger Penske agrees to buy Saturn by 4th quarter.
Sept. 30, 2009 Penske drops his bid for Saturn.

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