Saturn seeks another carmaker

http://www.businessweek.com/ap/financialnews/D96FIDV80.htm

February 20, 2009
Saturn seeks another carmaker as GM casts it aside
By TOM KRISHER

The last hope to stop General Motors Corp.'s wounded Saturn brand from falling out of the solar system appears to rest with some unknown automaker building cars for the dealers to sell.

GM said in its restructuring plan presented to the U.S. government Tuesday that it will only keep Saturn running through 2011, but it's open to the possibility of spinning off the money-losing brand to retailers or investors. It's one of many tough steps the Detroit automaker says are necessary as it seeks a total of $30 billion to ride out the worst sales slump in 26 years.

Chinese and Indian automakers, which have made noise about entering the U.S. market, would be the most likely suppliers, but GM says it hasn't had any discussions with them, and Indian automakers either expressed no interest or wouldn't comment.

Saturn's dealers, with laid-back salesmen and no-haggle pricing, often match luxury brands' scores in independent customer satisfaction surveys. Their locations could be a ready retail network for a foreign automaker to come to the U.S.

"The goal -- from a product perspective -- would be to find future vehicles that match the Saturn Brand: fuel-efficient, safe, reliable and affordable," Saturn General Manager Jill Lajdziak wrote in a message to customers this week. "From a retailing perspective, we would build on our core strength of unmatched customer service. The same hassle-free experience that is a hallmark of the brand could be taken to even higher levels."

Carl F. Galeana, who owns two Saturn dealerships in Michigan, said he would welcome a buyer from China or India, as it would keep the company going and bring innovation to the product line.

"It's very possible," he said. "It gives a footprint for an automaker to come into this country on the cheap and have a good distribution network."

But other dealers are angry at GM for what they say is a lack of support for Saturn.

When GM executives cast doubt on the brand in December by announced publicly that it was under review, Mike Edwards, principal investor in seven Texas Saturn dealerships, said showroom traffic dropped and he decided to close three of his locations.

Edwards said GM's announcement raised doubts from lenders and customers about whether Saturn would even exist, yet the brand had nothing to do with GM getting government aid.

"It wasn't very well thought out," Edwards, who locked up Saturn dealerships in Amarillo, Midland-Odessa and Abilene. "Showroom traffic dropped considerably."

Mahindra & Mahindra Ltd. and Tata Motors have had the greatest appetite for foreign acquisitions among India's automakers and would be the most likely buyers, said Vaishali Jajoo, an auto analyst at Mumbai's Angel Broking. But Tata has cash flow problems and Mahindra might not be a good fit, she said.

Tata Motors spokesman Debasis Ray said the company wouldn't be interested in the Saturn brand or its distribution network.

"We are happy as we are," he said.

Mahindra declined to comment.

Calls were not returned by BYD, a Shenzhen, China, company that has touted goals to bring its electric and hybrid cars to the U.S.

GM started Saturn in 1990 as a small-car answer to Japanese automakers and billed it as a "different kind of car company." Its new factory in Spring Hill, Tenn., had more flexible work rules than traditional GM plants and more autonomy for those who built the cars, known for their plastic body panels.

Despite a cult-like following that drew thousands to annual reunions in Spring Hill, the brand never made money for GM.

As GM focused more on high-profit pickup trucks and sport utility vehicles, Saturn began to languish in the late 1990s. But in 2006, it started getting the best of GM's new models, and executives viewed it as a precursor for GM's restructuring effort.

After a good year in 2007, sales dropped 22 percent last year as the U.S. market withered.

Edwards blamed the sales drop on a lack of marketing support. Analysts often criticize GM for having so many brands that it can't advertise them adequately.

"There's nothing wrong with this product lineup," he said. "But it has to be supported by the manufacturer. They were pretty plain that they weren't going to support that."

GM also has said it is reviewing the fate of its Saab and Hummer brands. Swedish-based Saab went into court protection from creditors Friday so the unit can be spun off or sold by its struggling U.S. parent.
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AP Auto Writer Kimberly S. Johnson in Detroit and Business Writer Erika Kinetz in Mumbai contributed to this report.