What Really Happened? Penske Drops Saturn bid; GM Says Division Doomed

Today, Roger Penske called off talks for his takeover of Saturn, almost certainly dooming yet another General Motors division.

For so many months, it's seemed like a slam dunk for one of the auto world's smartest and richest executives.

Penske, whose racing team has won a record 15 Indy 500s, had come to agreement with GM to take over their once-vaunted Saturn brand as a distributor, keeping the stores open and workers making cars.

It appeared to be great deal for Penske; he would initially buy cars from GM to sell as Saturns at his stores, then in another two years work with another carmaker which would supply the cars, branded with the familiar "Saturn" name.

A GM exec with a car which will never be; a 2010 Saturn plug-in hybrid

Though details were never forthcoming, many thought Penske was getting Saturn for next-to-nothing. He would supply the approximately 250 dealers with cars and trucks; he wouldn't have to make the cars, he wouldn't have to sell them; just be the go-between the factory and dealers. He was going to be a car distributor, the same way he's the Smart car distributor for the US.

But that "other" carmaker, never officially named, the one Penske needed to supply him and his Saturn stores with vehicles, dropped out of the negotiations when, according to Penske, that company's board of directors balked.

So as of today, he has nothing to distribute.

GM said after the Penske announcement that they would begin "winding down" Saturn as a corporate division.

Roger Penske at his favorite weekend hobby; in the pits, running his IndyCar team

It's an ignominious and atypical end to the deal for Penske. He's used to being in close control of his vast business empire (he's one of the world's biggest car dealers, for one thing), and that another carmaker's board of directors would doom his dream must especially chafe.

Penske's failure will almost certainly result in Saturn's demise, and publicly, officially and finally ends the Roger Smith era at GM.

Smith (the "Roger" in Michael Moore's first film, Roger and Me) was ultimately considered something of an uninformed buffoon by the time he left his GM CEO position. He didn't speak well in public and always seemed ill-at-ease at media events, But he was also something of a visionary, if not always as detailed as he should have been, with his creation of Saturn and he was a tough political in-fighter who held some sway over GM for years after he officially left.

Smith created Saturn in the early 1990s specifically to do battle with the Asian imports. Dealerships would be open and friendly, prices would be "no haggle" and buyers would be treated with respect.

Roger Smith at the Saturn factory he built

Smith built a dedicated factory which would make only Saturns in Spring Hill, TN, a hint of the industry's future moves to southeast "greenfield" locations. The contract between Saturn and the United Auto Workers was way ahead of its time and is still considered a model of fairness.

Smith didn't want the GM name associated with Saturn at all; he even hired an ad agency with no automotive experience, Hal Riney and Associates of San Francisco as Saturn's agency. Riney himself did the voiceovers for the spots, classics of the sort (his company also created and he voiced the infamous "It's morning in America" ad for Ronald Reagan).

Even when things went wrong, Saturn seemed able to turn it into a positive.

When a customer in Alaska had a problem with their car's seats, Saturn flew a technician there from the Lower 48 to make the fix, and that made national news (and a good TV spot). When the occasional recall hit, dealers would hold cook-outs when owners brought their cars for repair to strengthen their bond with their customers. And things were fixed right, the first time, if at all possible.

Perhaps most surprising, for several years "Saturn Homecoming" conventions were held at the Spring Hill factory, with thousands of owners driving from everywhere in the US and Canada to attend.

This is something you expect at, say, the Corvette plant in Bowling Green, KY -- not at a factory building cars selling for around $20,000.

Saturn indeed became an American phenomenon, and there was a major reason behind their success: they built pretty damn good cars. Combined with the dealer attitude towards customers and the great PR the company was getting, GM appeared to have a winner, possibly a huge one.

A 2003 Saturn; the company was on its fatal downturn by this point

So what went wrong?

GM started running out of money a long time before the current depression. As the 21st century approached, GM's board apparently chose Saturn to suffer most from the downturn.

Saturn dealers started selling cars and trucks not built in Spring Hill and available in other GM stores under other names, and those cars were not covered with what had become a Saturn trademark --- plastic body panels to ward off parking lot dings.

Though the dealers stayed loyal to Saturn's original concept of treating the customer like they'd never been treated at a car dealer, since 2000, new product barely trickled into the stores (this is how a carmaker can punish dealers or an entire division) and not-so-slowly Saturn appeared destined for some sort of failure.

Why was Saturn picked by the GM board to suffer? Some think, with a new generation of leaders, it was the company's way of thumbing the corporate nose at Roger Smith, who had embarrassed GM so often and so badly. Others say it was because no one really knew what Smith had spent to create Saturn; many put the figure above $10 billion, in 1990 dollars, and some insiders told me Saturn would always be a liability and never be able to pay for itself, much less show a profit.

Another possible reason: Somewhere in every Chevrolet dealer's contract, it states that Chevy is the "entry level" car for GM. A Saturn store selling a lot of cars and trucks for less than the Chevys down the street didn't engender warm feelings from Chevy dealers towards Saturn. Chevy dealers are the 800-pound gorilla of GM; there are 3,812 Chevy stores in the US, and that carries weight with the corporation. Perhaps those Chevy dealers just wanted Saturn to go away -- and GM wanted to avoid lawsuits.

A 2010 Corvette Gran Sport, the modern version of Roger Penske's 1963 race car; both the Corvette and Saturn factories are far from Detroit

It's no secret that Roger Penske has been sought-after by every carmaker in Detroit to serve as a top executive. He's always turned them down, preferring to run his own companies as he pleased and succeed or fail on his own terms. Penske, along with very few others, including Walter P. Chrysler, Pete Petersen in the '80s at Ford, John DeLorean, Lee Iacocca and Bob Lutz, is certainly among the smartest people ever in the car business.

Over 20 years ago, on the day he opened his $100,000-million California Speedway with a full house of over 100,000 fans and great racing events, early that morning I watched Penske drive a minitruck around the track and the infield area, stopping to get out and pick up litter when he spotted some. He leaves nothing to chance; that incident told me all I needed to know about Penske.

Want a Smart car? Daimler, its owner, distributes Smarts to its dealers in the US through Penske

And he's still going strong at age 72. Daimler picked Penske to distribute their Smart car to its US dealers. Longo Toyota in southern California is reputed to be the single biggest car dealer in the world of any type, retailing a new car or truck every 15 minutes, 24 hours a day, every day of the year. I never recommend dealers because it often turns into a nightmare and I become the bad guy: Longo is the only dealer I recommend and I've never been disappointed.

Penske almost tasted the sweetest irony. He's been on GM's radar since he won the Sports Illustrated Driver of the Year award racing sports cars in 1960, then started a Cadillac dealership in Philadelphia, but GM could never get him to work for them. (Penske even raced one of the five legendary 1963 Gran Sport Corvette race cars, built to take on Ford's Cobra, which they did.)

Then Penske gets a chance, almost 50 years later, to essentially own a former division of that same company. Then, the deal fails because of an unnamed foreign carmaker which couldn't supply Penske with the cars he'd need to get to his Saturn dealers, something out of Penske's control.

He's also known, not surprisingly for a top business person, for a certain steely coldness. When his racing team fired Paul Tracy from his IndyCar racing job, one story says that Tracy was called to a hotel room where he found two seated Penske executives, and he was simply told, "You're through." And that was that.

Automotive trivia lovers probably know that Enzo Ferrari was known as "Il Commandatore." Roger Penske is known as "Captain" to those around him, and his achievements are legion, outliving those of even Roger Smith.

Can Saturn survive? Is there another savior out there with the money, brains and experience to keep those stores open, cars selling and most important, people working? Or could only another car company do what Penske had planned for Saturn?

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Comments

[petef59]

A manager like Penske and banks with taxpayer bailout money could not save Saturn? A no BS car-maker in an all BS finance world.

[watchTVgetSTUPID]

I will tell you what happened

Czars are corrupt insiders who have nefarious agendas. Look at Rattner the car czar known as the NYC DNC's ATM machine. Rattner is a Wall Street Gordon Gekko who forced GM to abandon millions of loyal Saturn customers. GM's CEO Waggoner tried to save the company and jobs but Obama's car czar Rattner would not have any of it and forced Waggoner out in a corporate coup. Then Rattner replaced GM's board of Directors with his own followers. Rattner's outsiders now controled GM and announced GM would eliminate Saturn, Pontiac, and 2,000 dealerships. Millions of loyal customers who have been stabbed in the back by Obama's car czar will now buy foreign imports. I voted for Obama and I am disappointed.

OBAMA HAS BECOME THE DESTROYER OF AMERICAN JOBS

[Steve Parker - Huffpost Blogger]

Thanks for your thoughts. Some good points about what happened to GM just pre- and post-bankruptcy. But getting rid of Rick Wagoner was a good thing; he proved his ineptness ... he killed the EV1 so there's some karma there for him to repay.Putting Fritz Henderson in charge was just replacing one bean counter with another. And Ed Whiteacre is a temporary 'caretaker.' It's going to be interesting watching GM and how often they need to go to DC for permission to spend money. GM gave up on Saturn around 2000, when the corporation decided not to fund any new cars for Saturn, just GM retreads from other divisions and Europe. And GM should have closed divisions years ago; I think keeping both Buick and Cadillac means still one too many luxury divisions, and keeping GMC and Chevy trucks doesn't make sense either. Apparently you just don't know how close GM and Chrysler came to shutting down completely, before Obama took office. I have a lot of disagreements with how DC has handled the mess, but at least the companies still exist.
Steve

[WindySailor]

I don't think that GM executives have ever really cared what they were producing and selling - if they could have generated as much income from pitchforks, that would have been the product. Their essential purposes were nest-feathering and political infighting. What few "car guys" were in the company along the way (Duntov for example) never rose to the top. I'm wondering if the designs for future Saturn models weren't just warmed over Cobalts and Traverses.

[econ1]

There isn't enough demand for the current car production capacity so this is probably not a bad thing. Too bad he didn't have connections to Al Gore.

[ryderartist]

Unfortunately with the creative accounting and repaying the huge debt that was created to start Saturn, there was only one profitable year according to GM. That was 1994. The Saturn dealers were hand picked to be the best retail network in the auto industry from a quality of dealer standpoint and they know how to take care of their customers bettr than anyone.
I've has Saturns, Toyotas, Hondas and nothing compares to the cost of ownership of a Saturn.
I will miss Saturn and only can hope that there is a "plan B".
By the way, to angrystan, the first cars were released in August of 1990 (not 1989) for the 1991 model year.

[vlm1948]

I love my Saturn. It is 6+ years old and I have never had a problem with it and I loved the dealership. They were always very professional and not the least pushy. Sad to see them go.

[Steve Parker - Huffpost Blogger]

Yours seems a pretty typical Saturn owner's experience.
Steve

[angrystan]

Corrections and clarifications: 352 Saturn dealers. The allegedly unnamed automaker was Renault-Samsung Motors of Korea. Penske Automotive is the exclusive distributor for Smart in the United States. They also run many, but by no means all, "smart centers". One need not append “car” to every reference to Smart. Saturn was created as a company 07 January 1985. The first cars shipped for the 1990 model year in August 1989. “winding down operations” is not a euphemism. Saturn has ended. They will have no 2010 model year.

The extent to which the original Saturn was successful was due to the “no-haggle” policy, and the boring, simple cars which people found familiar and reasonably priced. If you wanted some “made in the USA”, they had that, too. These cars were not what GM wanted to build and absolutely not what dealerships wanted to sell. Abandoning the one-model policy guaranteed the demise of the division. When Saturn dealers began to hustle and haggle and sold the same cars you could get at the now similar Chevy dealer with a notable markup. It has no reason to exist.

I still don’t understand why the S-series wasn’t a Chevrolet and Oldsmobile to begin with.

[montestruc]

I bought three Saturns, the first in '94, the last in 2004. After the "attitude problem" I encountered at the dealership soon after I got the last one I vowed never again.

It was a good idea, but then the SOBs screwed it up.

[Steve Parker - Huffpost Blogger]

I was using Automotive News' data information for 1-1-09; there are actually about 250 dealers now.
Steve

[LeftRight]

I don't know about the division making any money for GM, but I DO know that the one Saturn that I bought (used, more than 4 years old) is the best car I've ever had. If it hadn't made sense for me to get the newer car with better mileage than my daughter (who was driving our old 5 gallons/mile car before that...) I'd still have it, now more than 10 years old. Unfortunately it wasn't able to withstand a limo driver stopping for no reason in front of my daughter less than three months after we let her have it....

[Steve Parker - Huffpost Blogger]

I always enjoyed driving Saturns, and the 'made in USA' part of it was factored into that enjoyment. It was great to drive a US-made car which really approached then quality (then) of the Japanese imports, and sad to see Saturn's company-mandated slow death of the past few years.
Sorry to hear of your daughter's accident. Was the car equipped with airbags and did they work?
Steve

[LeftRight]

Yeah, I was sorry to hear about the accident too.... Yes, it had airbags, and yes, they worked EXACTLY as designed.... Destroyed the bottle her passenger was holding in his hand too...

The worst part was getting it off the road, cause she wasn't up to driving at the moment, so I had to get back into it and see it in such bad shape, with MAJOR electrical issues (the flashers were on, and caused every other light in the car to go out when they lit up...)

[roudy]

The Saturn experiment was a huge money pit for GM for many years. Sad to the Saturn fans, but it was never really profitable.

[LiLSuzQ32]

This is horrible ... Penske is such a visionary, who paid him off to back out at the last minute?

[Steve Parker - Huffpost Blogger]

If I were a cynic, I'd say Penske made the announcement the day after the Toyota recall announcement because Penske is one of the world's biggest Toyota dealers ... and the Penske story got the Toyota story off the front and business pages.
But nah, even I'm not that cynical ... maybe... It comes from 35 years in journalism, and dealing with some of the best and smartest (and sometimes dangerous...) PR people in the world, those that work for the carmakers.
Penske didn't back out; the foreign carmaker he was dealing with to provide him with vehicles for the Saturn dealers backed out. Nothing to distribute, no deal necessary.
Steve