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http://www.autonews.com/article/2008...812080318/1078

GM cuts off new product funds as execs mull brand's future

Jamie LaReau
Automotive News
December 8, 2008 - 12:01 am ET

DETROIT — As General Motors executives weigh the future of the disappointing Saturn division, GM is not allocating new money toward future Saturn products, according to a source familiar with GM's budget.
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In a plan submitted to Congress last week, GM said it would "explore alternatives" for the Saturn brand, which has "performed below expectations."

GM's plan says the company will focus "substantially all of its product development and marketing resources" to support its Chevrolet, Cadillac, Buick and GMC brands.

Saturn's next scheduled substantial new-product change is a freshening of the Aura sedan in 2010.

GM executives have been disappointed with Saturn's weak sales in light of its strong new vehicle lineup. But although GM isn't sure what to do with the brand, GM is not ready to give up, insists Mark LaNeve, GM vice president of North American vehicle sales, service and marketing in an interview with Automotive News.

Saturn can't be sold, and closing the division could cost cash-strapped GM more than $1 billion in dealer buyouts alone.

Saturn's Franchise Operations Team — a council of eight dealers — will meet with Saturn and other executives Thursday, Dec. 11, and Friday, Dec. 12, in Detroit to discuss how to make the brand profitable, a Saturn spokesman says.

Saturn declined to make General Manager Jill Lajdziak available for this story.

"Saturn has a product program, both current and future, that is currently in our plans," LaNeve says. "But a lot of what is in our plans is in a state of flux right now given the state of the economy and everything."

Saturn's future

GM hopes to conceive a new business model to make the brand profitable, LaNeve says. Saturn is not a candidate for sale because it has no dedicated manufacturing or engineering facilities apart from GM, according to another source.

And if GM terminated the brand like it did Oldsmobile in 2000, state franchise laws would protect the 211 dealers who own 425 Saturn dealerships.

Dealer George Nahas has been through the brand-closing trauma before. Nahas, owner of two Saturn stores in Alabama and Florida, owned an Oldsmobile dealership in 2000 when GM killed the brand. He says GM will have to pay off Saturn dealers if it wants to drop the brand.

"If they want to get rid of me, I can show them how," he says. "I used some of that Oldsmobile money to get a Saturn franchise, and I traded the devil for the witch."

Nahas adds that GM may already have damaged Saturn: "When the public hears something like this, their tendency is to not come into your showrooms. (GM) needs to tell us what they are going to do here posthaste!"

Costly closing

Factor a Saturn death in with GM's plan to cut its total dealer count from the current 6,450 to 4,700 by 2012, and the cost would be billions.

Dealer broker Mark Johnson estimates that GM would have to pay $3 million to $5 million to buy out the average GM dealer. So Saturn's dealer network alone could cost upward of $1 billion to shut down.

At Johnson's projected cost, taking out the 1,750 stores GM-wide could cost more than $5 billion. Many of those closings would come from the endangered Hummer and Saab brands, along with 41 stand-alone Pontiac dealers. GM plans to make Pontiac a "niche" brand within the current Buick-Pontiac-GMC network.

Johnson, president of financial advisory and brokerage firm MD Johnson near Seattle, says his estimate factors in a 40 percent drop in a dealer's real estate values and other financial challenges in laying off dealership employees and closing up shop.

Those figures don't include the possibility of lawsuits from Saturn dealers if GM does terminate that brand, Johnson says.

John Pitre, general manager of Motor City Auto Center in Bakersfield, Calif., says cutting off Saturn product would be legally shaky.

"I think they'd be at risk on every franchise agreement that would expire, on the virtue that they say they're not going to build cars anymore," Pitre says. "State franchise laws would override the right that would allow them to walk away. They're either going to have to sell it or continue to operate."

Michael Martin, owner of Saturn of Manassas in Manassas, Va., says Saturn dealers are worried about GM's shifting product and marketing money to the other four channels.

"The Saturn retailers are more concerned with product flow coming down the line and marketing money behind it, because those are the keys to our profitability," says Martin, who is a National Automobile Dealers Association director and GM line chair for industry relations.

New business model

Through November, Saturn's sales are down 20.9 percent to 175,434 compared with the year-ago period. Saturn's three cars — the Aura, Astra and Sky — sold a combined 76,191 units through November, while the Chevrolet Impala alone sold 244,692 units.

Since Saturn began production in 1990, it has been "break-even to slightly profitable" only in 1993 when it had just its original small coupe and sedan, says a Saturn spokesman. Saturn's U.S. sales peaked in 1994 at 286,003 units.

GM's appeal for $18 billion in federal loans makes its need for profits from Saturn urgent.

When asked how long GM could afford to wait for Saturn to be profitable before getting rid of it, LaNeve said: "We want to begin repaying the loans in 2011. So we have to work quickly to put a business model in place that we're confident is a plan that will be profitable fast."

Some Saturn dealers sympathize with GM's plight.

Ed Williamson owns three Saturn stores in southern Florida. His store near Miami sold 12 new cars last month, when it normally sells 60 to 70, he says. He'd be sad to see it go, but he also owns Cadillac stores and wants what's best for GM.

"I think they've lost a lot of money with Saturn for a long time," Williamson said. "And so with that plan they sent to Congress, I wasn't too surprised. The big question in everybody's mind is: How are they going to do it?"

Sources inside GM say that's the big question they're asking themselves.

herbvdh

I remember that Saturn came out as the new car manufacturer in America supposedly independent of any big corporations I went to the dealer was asked what I drove? I replied a 1987 Toyota Camry I then got a lecture on how difficult it was to change the oil in the car. I replied filter is removed from top of engine bay in minutes end of conversation. I got a brochure went home and read it cover to cover when I realized there were subtle hints to GM in the brochure. I wish I had it today! The car show in NY I saw demonstrated how hard you could hit a door panel with no damage I sure would not try it as the panel would have shattered with the punch it was given on a real production that we would get. SATURN IS DEAD who buys them anyway? Very few on the road here.

Trexus

Rest In Peace Saturn...

1993ES300x

i was really liking the saturn sky.... it was pretty cool looking (and that's all) ..

spwolf

i have read from some car blogs that saturn PR told them as few days ago that they are not authorized to give our any saturn press vehicles anymore... seems like it is hanging by thread and news like this will not help customer confidence..

mmarshall

This is RIDICULOUS. Utterly absurd. Saturn doesn't have to die. ALL they have to do is start doing again what they did so well in the 1990's...well-made, plastic-body cars with unique features like the spin-off transmission filter. They did it once.....they can do it again. Though the Saturn Aura is, admittedly, a nice car, it is simply a Chevy Malibu clone. Otherwise, Saturn has tried to mass-market Opel-designed cars on a large scale...it just hasn't worked. GM has GOT to realize that, and get the company back to its roots.

spwolf

and where will GM get the money to design these vehicles?

jwong77

I think they're eyeing our tax money.

mmarshall

How much will it cost to reinvent a simple wheel? All they have to do is look at 15-year-old designs that already existed and make a few updates like adding tire-pressure systems and stability control. Heck, it would beat some of the Saturns currently on the market....certainly the Astra.

Look at Porsche, for example. The basic 911 design goes on.....and on....and on.

Trexus

Money GM might not be able to pay back...we can kiss that bridge loan good-bye...

When Saturn originally came out, it was different. I highly doubt they can bring that back. Saturn can be like Scion then Chevy could be like Toyota and Cadillac can be like Lexus. If GM focuses it could happen but the odds are against them...

toy4two

hopefully bankrupcy would void the contracts they have with franchised dealers. Its a shame Saturn is making the best looking products in GM's lineup (OPEL whatever), but with the UAW contracts still valid they will continue to cut costs on their vehicles reliability.

I8ABMR

The brand never really wowed anyone. The early models were horendous in terms of build quality and design. Then as time went on I remeber them buying honda motors for their suvs. They wont be missed by many. At least not many people I know

mmarshall

Incorrect on several counts.

First, the "early" models. during the 1990's, despite a lot of plastic in their assembly, had reliability records in the Honda-Toyota-range, which, admittedly, was unusual for a domestic car. They, in fact, wowed a LOT of people. The customer-service was also first-rate....up there with Lexus. Second, their quality did not start to drop until they moved away from the sucessful Saturn in-house designs of the 90's and started to use vehicles derived from Opel platforms. ...the first sign of this was the L-series in 1999. Third, the use of the 3.5L Honda V6, in the VUE, did not happen for several years after that. Fourth, the early Saturn S-series is indeed missed by many. That is the main reason for the company's gradual downfall. GM/Saturn management is simply too blind to se it, and are living with their heads in the sand.

Roid Rage

THE 911 has followers, Saturn doesn't, and that's the problem.

mmarshall

Saturn DID have followers.....BIG time. It almost reached cult-status. But the company blew it by dumping the vehicles that GAVE them that cult-status........THAT is the problem.

Now that's not to say that all current Saturns are unattrative.....there's no doubt the Aura is a nice car (I've driven and reviewed it). But, like everything else the company sells today, it is not real Saturn.....it's a Chevy clone, with a GM Ecotec-4 engine and a standard-GM V6, and it would appeal to Saturn customers far more if it had the plastic body panels and Saturn-designed engines like in the 1990s.