Thursday, February 19, 2009

2011: End of GM Saturn cars

Saturn was established in early 1985 as a wholly-owned subsidiary of General Motors in response to the success of Japanese and German imports in the United States.

As a "different kind of car company", Saturn operated outside the GM structure for a time, with its own manufacturing plant in Spring Hill, Tennessee, unique models, and a separate dealership network. However, sales did not meet expectations, and by the 21st century, Saturn was sharing manufacturing and product designs with other GM brands such as Opel and Chevrolet

As automotive sales evaporated i nthe recession, GM announced yesterday that Saturn, Pontiac, Saab and Hummer would be phased out, abandoning a decades-old product strategy that once helped ensure its dominance.

Left with just four key brands, GM will be a leaner, more focused car company. But it also risks a further slide in its already-shrunken market share as it loses customers who gravitated to the four orphaned lines. These buyers may have little interest in driving a Chevrolet, Buick, Cadillac or GMC truck.

In 2008, Toyota supplanted GM as the world's largest auto seller. GM now faces the possibility of another blow -- Toyota could move ahead of GM as soon as this year to become the largest auto seller in the US.In January, GM had market share of 19.5%. Without Saturn, Pontiac, Saab and Hummer, its share would have been 16.9% -- a point less than Toyota's.

Some Saturn dealers now hope that instead of closing the brand, GM will spin it off as a separate company. A team of Saturn dealers is spending 60 days working with GM to evaluate the possibility. These dealers would sell vehicles under the Saturn brand made by other manufacturers, possibly from overseas.

GM's move to pare brands represents a major shift in thinking at the company. Adding brands to appeal to different types of consumers, from college students to senior citizens, was part of the formula that enabled GM to grow and remain the world's largest auto maker for nearly 80 years.

But faced with huge losses and relying on government handouts, GM will shrink to its most successful brands.

Saturn, Hummer, Saab and Pontiac have all struggled to attract customers. That prompted GM to sell large numbers of them to car-rental concerns, corporate fleet buyers and GM's own employees. Of the 504,000 vehicles sold under the four brands in 2008, 40% went to fleets and employees. Such sales generally are less profitable than those to consumer buyers.

In its recovery plan, GM said Saturn, Hummer and Saab generated an average annual pretax loss of $1.1 billion a year between 2003 and 2007.

Hummer, the maker of hulking sport-utility vehicles inspired by military models, will be sold or phased out. Saab, the Swedish niche brand, could file for bankruptcy protection within a month, GM said in its recovery plan. Pontiac will be reduced to just one or two models and essentially cease to exist as a full line.

For years, analysts have urged GM to pare its brands. But GM executives insisted it would be too expensive after spending an estimated $2 billion to wind down Oldsmobile earlier this decade. Yet cutting brands cuts operating costs because each brand requires a certain amount of spending on product development advertising, dealer support and other expenses.

In addition to trimming its main brands from eight to four by 2012, GM also plans to cut the number of individual US models to 36 from 48. Eliminating models should help GM sell more of each surviving nameplate. In 2007, Toyota sold an average of 90,000 vehicles per nameplate, such as the Camry LE, while each GM nameplate sold 54,000 on average.

Of the four brands being cut off, Saturn once held the most promise. GM created the line as a completely separate company offering small cars that aimed to compete head-on with Toyota and Honda.

Saturns featured dent-resistant plastic bodies, its dealers promised friendly, no-haggling sales and customers were invited to an annual "homecoming" cookout at the Saturn plant. For some customers, buying a Saturn was like joining a club.

But in the 1990s, GM starved Saturn for new products as it tried to revive Oldsmobile. After GM killed Olds, it turned to neglected Saturn. It spent billions to produce a range of new vehicles, many of them derivations of its Opel models from Europe. Some were hits; the Aura sedan was praised by many car reviewers.

Last year, 13.2 million vehicles were sold in the U.S., and this year, the level is expected to be between 11 million and 12 million.

Saturn sales in particular were slammed in January, falling 60% to 6,172 from a year earlier -- about 15 per dealership. (info from The Wall Street Journal)


Anonymous said...

GM's problem is that it is hurting important and coveted brands. they are selling major portions of their brands and business model to foreign competitors giving them well established dealership networks and entry into well established automotive markets.

Pontiac could be successful at importing the entire Holden line up under the Pontiac Brand.

Saturn could continue importing all of Opel's international vehicles. I would suggest saturn take the opel name and logo, but even minus that suggestion it seems a good fit.

Saturn and Pontiac would lead little to no investment from GM and will be able to import stylish international vehicles imported. cutting R&D Costs and other expensive costs.

Buick can succeed with 4-5 models and has a refreshed line up and purpose. I think they can survive.

I have stated in the past GMC should be merged with Chevrolet, retaining the chevrolet brand name to cut duplicative services.

Vauxhall could be folded into, and renamed Opel.

Daewoo could be folded into either Pontiac or Holden, drastically reducing brands and duplicative services.

I would not condone selling any of their brands or dealership networks to a foreign automaker or private equity group.

The only brand I could see GM selling is SAAB. I would prefer the company completely shutter Hummer rather than give that brand and dealer-network to another automotive group.

GM must be focused on the future and long term. strengthening these international automakers and giving them access to U.S market and dealerships they are putting themselves at a competitive disadvantage in the near future.

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