GM to shut down Saturn after Penske walks away

[October 01, 2009]  DETROIT (AP) -- For those who expected General Motors' once-funky Saturn brand to live on with a new owner, there has been a sad twist. Saturn, once billed as a different kind of car company, appears as dead as Pontiac and Oldsmobile.

At the brand's 350 remaining dealers around the country, there were high hopes that a deal would be announced for GM to sell the brand to former race car driver and auto industry magnate Roger Penske.

Instead, Penske Automotive Group Inc. announced Wednesday it is walking away from the deal, unable to find a manufacturer to make Saturn cars when GM stops producing models sometime after the end of 2011. GM then announced it would stop making Saturns and soon would close down the brand, just like it did with Oldsmobile in 2004 and soon will do with Pontiac.

The day's events mean an almost certain end to Saturn, a brand that was set up in 1990 to fight growing Japanese imports. Instead of celebrating a rebirth, the announcements sent dealers scrambling for ways to stay open and preserve about 13,000 jobs.

"I find this hard to believe," said Carl Galeana, owner of two Saturn dealerships in suburban Detroit. "Everyone's been saying we're right at the goal line."

Although GM and Penske reached a tentative agreement to sell the brand in June, the deal collapsed Wednesday after Penske was told by an unidentified manufacturer that its board had rejected a deal to make cars for the new Saturn.

"It was a stunning turn of events," said GM spokesman Tom Pyden, who added that most of the details between GM and Penske had been worked out and both sides expected to announce this week that the deal had been closed.

GM had agreed to keep building three Saturn models even beyond 2011, but after that, Penske had to come up with its own products made by another manufacturer.

Penske spokesman Anthony Pordon said there is little if any chance that the talks could be reopened. Without another supplier in place before the deal was signed, Penske couldn't run the risk of taking on Saturn, Pordon said.

It takes several years to design new vehicles or engineer foreign vehicles to meet U.S. standards. Penske would risk having no products to sell once the GM contract expired.

The French automaker Renault discussed building cars for Penske but Renault spokeswoman Frederique Le Greves said in an e-mail Thursday that "the conditions for an agreement have not been found." She said the decision was made by the Renault executive board.

Penske's purchase price was never disclosed, and he will not have to pay a termination fee, Pyden said.

GM will stop making Saturns as soon as possible, but no layoffs are expected, said spokeswoman Sherrie Childers Arb. Saturns are made at plants in Kansas City, Kan.; Delta Township, Mich., near Lansing and Ramos Arizpe, Mexico.

"Those plants produce products for other brands, and we think we can increase volume on those products that will meet market demand," Childers Arb said.

Saturn owners can still go to their dealers for service. They will also be able to go to a certified GM dealer once Saturn dealerships close, GM said.

Stephen Spivey, senior auto analyst for Frost and Sullivan, said he was surprised Penske had no alternative plan for a manufacturer.

"There are lots of car companies in the world. I'm surprised they had all their eggs in one basket," he said, adding that other companies may still be interested in the dealership network.

Penske, who could not be reached for comment, said in a June interview that foreign automakers would be key to making Saturn succeed, but they would have to match GM's quality standards before Saturn's dealer network would distribute their products.

Bloomfield Hills-based Penske Automotive owns the second-largest U.S. automobile dealer chain. The company also distributes Daimler AG's Smart subcompacts in the U.S. and has race teams in the IndyCar, NASCAR and Grand-Am series.

Galeana said he's heard nothing yet from GM or Saturn, but if the plan is to phase out the brand and cut the products, he'll have to come up with other options.

"I assumed if you're at the goal line, those things would have been figured out," he said Wednesday. "We're going to try to put some plan Bs in place at this point."

Galeana said he's concerned for his employees and still hopes the deal can be resurrected.

"It's tough out there, but we'll keep fighting. That's all we can do."

GM Chairman Roger Smith first unveiled the Saturn brand in November 1983. But the project was slow to develop and the brand did not officially launch until 1990. It featured the iconic tag-line "a different kind of car company" and people were attracted by its low-key showrooms and no-haggle pricing.

GM's hope was that Saturn, with its dent-free plastic panels, would attract younger buyers with smaller, hipper cars. It built a new plant in Spring Hill, Tenn., devoted to Saturn vehicles.

Despite a cult-like following that drew thousands to annual reunions in Spring Hill, the brand never made money, although the company has never disclosed how much it invested or lost. The Tennessee factory stopped making Saturns in 2007. Although it was retooled to make Chevrolet crossovers, it's now scheduled to close. A parts plant in Spring Hill will stay open in the short term, but its future was unclear.

As GM focused more on high-profit pickup trucks and SUVs, Saturn began to languish in the late 1990s. Then in 2006, car buyers began to find Saturn's new models more appealing. But after a good year in 2007, sales dropped last year as the U.S. car market withered. Through August, Saturn sales were down 60 percent from the first eight months of last year.

GM has been trying to sell Saturn since earlier this year as part of its turnaround plan.

[Associated Press; By TOM KRISHER and KIMBERLY S. JOHNSON]

AP Auto Writer Bree Fowler in New York contributed to this report.

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