Saturn, Pontiac owners reject GM
June 22, 2011
Saturn, Pontiac owners reject GM
Automaker struggles to retain buyers loyal to defunct brands
/ The Detroit News
Nearly two-thirds of Pontiac owners and almost three-fourths of Saturn drivers defected from General Motors Co. to other automakers when they bought new vehicles last year.
The Detroit automaker jettisoned Pontiac, Saturn and Hummer as part of its bankruptcy restructuring in 2009, but hoped to keep most of the buyers of those brands in the GM family.
GM “knew by cutting these brands they were going to lose market share and they have,” said analyst Jesse Toprak of online data firm TrueCar.com in Irvine, Calif.
“But higher sales numbers doesn’t always equal profits,” said Toprak, adding that GM will be better off in the long run by making its four surviving brands more profitable.
The Detroit automaker is wooing owners of its defunct brands in hopes they will transfer their loyalty to Chevy, Buick, GMC or Cadillac when they buy a new vehicle. There are about 3 million Pontiacs, Saturns and Hummers on U.S. roads.
But GM faces a tough battle in the competitive automotive industry, where customers lured from competitors are called conquests — converts who are considered critical to helping automakers gain and preserve market share.
While GM reports some success — Chevrolet, for example, is a top choice for many Pontiac and Saturn owners — a majority of those customers are defecting to rival brands, including Honda, Toyota and Nissan.
In 2010, GM retained 36 percent of Pontiac owners who bought new vehicles, as well as 26 percent of Saturn and 39 percent from Hummer, according to California-based research firm J.D. Power & Associates.
That’s far below the 55 percent retention rate for GM’s Chevrolet brand, as well as under the industry average of 48 percent.
To keep these customers from straying, the automaker has worked to connect them with alternate GM dealers for their service needs and regularly keeps in touch with special promotions, said Julie Heisel, GM’s director of customer lifecycle management.
The automaker has rolled out one-year free maintenance offers and invited customers to test drive new GM cars and trucks.
“The size of owner base is very important to us,” Heisel said. “And we want to do everything possible to retain these owners.”
In March 2010, GM began offering Pontiac, Saturn and Hummer owners $1,000 off a new GM vehicle — a deal still in place today. GM extended the $1,000 offer to all current GM customers in January and February, hoping to keep them loyal.
Analysts and investors, at the time, criticized GM for the move, which they viewed as falling back into the old habit of pushing sales numbers over profits. The discounts, they said, also contributed to flat North American earnings for the first quarter of this year, compared with the first three months of 2010.
GM has since dropped many discounts to keep incentive spending in line with the rest of the industry.
‘Abandoned’ owners courted
Dealers, too, are offering additional perks and incentives to hold onto Saturn, Pontiac and Hummer owners.
Sam Slaughter, owner of Sellers Buick GMC in Farmington Hills, has invited these customers for meet-and-greets with his dealership employees, offered them free oil changes and, at times, discounted specific new GM cars, such as the Buick LaCrosse or GMC Terrain.
“We’re aware they’re feeling a little bit abandoned,” said Slaughter, whose dealership used to sell Pontiacs and is now authorized to service Saturns. “Not only did their manufacturer go away but so did their dealer.”
Dolph Lohwasser, 61, a semiretired engineer from West Bloomfield, now takes his Saturn to Sellers. He says not much has changed and the dealer is doing a good job of keeping up Saturn’s “no pressure approach.”
“I’m sure they’ve lost some people for good, but they’re trying to make the best of it,” Lohwasser said, adding that Sellers keeps in touch through mailings and emails, but no personal calls. He has taken up the dealer on free oil changes and is eyeing a new Buick Regal as his next car.
“I value (the dealer) experience. That’s the most important, no matter what car I purchase,” he said.
GM and its dealers will need to keep up their efforts to save Pontiac, Saturn and Hummer buyers because many of them haven’t yet wanted or needed to buy a new vehicle; the average vehicle in the United States is more than 10 years old.
Defunct brands left ‘holes’
For some brand loyalists, however, returning to GM is a tough sell.
“The truth of the matter is they didn’t have many options for people to stay in the GM family,” said Steve Witten, an analyst with J.D. Power & Associates.
Saturn, Pontiac and Hummer had distinct brand images and filled a sizable niche in GM’s portfolio not served by other parts of its lineup, Whitten added.
For example, in 2007, GM sold more than 650,000 vehicles from the Saturn, Pontiac and Hummer brands before the bottom fell out of the U.S. market, according to Autodata Corp., which collects sales figures.
“Now, there are holes,” Whitten said.
Saturn owners, in particular, are the most inclined to stray. The brand, established as a competitor to the Japanese automakers, sold itself as a counterpoint to the mainstream, and many Saturn loyalists latched on to that image, he said.
“When they decided to pull the plug on it, there wasn’t really another GM brand similar enough from an image standpoint,” Whitten said.
About a third of Saturn customers bought models produced by Toyota, Honda and Ford, according to J.D. Power & Associates.
Some former Saturn dealers have left the GM fold, taking their customers with them.
John Java, a dealer in Lake Charles, La., used to sell Saturns but switched to the South Korean brand Kia in 2009, after becoming disillusioned with GM for killing off the brand.
“The Kia product was very similar to what Saturn was trying to accomplish,” Java said.
“I would say the majority of people who had Saturns were very unhappy they got left holding the bag on this one. A lot of them took a hit on the value of their cars and that turned them off to Saturn and GM.”
GM’s Heisel said the Detroit automaker has learned from the experience.
“We work with them to identify what they loved so much (about Saturn) and how do we replicate that with our dealerships,” she said.
Ford holds Mercury owners
So far, according to J.D. Power and Associates, Ford Motor Co. has done slightly better at holding on to its Mercury customers, last year retaining about 46 percent of them.
Ford spokesman Christian Bokich said the Dearborn company, which killed the Mercury brand last year, keeps a close eye on those owners, but declined to discuss incentives.
Many Mercury owners, he said, are now taking notice of Ford’s lineup because the price difference is smaller than the difference between Mercury and Lincoln, Ford’s luxury brand.
Of those leaving Ford, Toyota and Honda are the biggest beneficiaries, seizing about 14 percent and 8 percent, respectively, according to J.D. Power.
Analyst Whitten said Ford has done better than GM because it had the opposite problem. Instead of having brands that were too unique, “Mercury was too similar to its other brands,” he said.
“They’re going to have a lot easier time keeping those people loyal.”