Thursday, October 01, 2009

End of the Line For Saturn As Penske Kills Deal

Roger Penske, who had been seen as the guy who could save Saturn and turn around the company's fortunes after GM destroyed the brand's value, has withdrawn his bid to buy the company. Saturn will wind down its business after opening with such fanfare and hopes in 1985.
Saturn’s 350 dealerships across the United States will close because of the development. The Saturn stores are known for their no-haggle, low-pressure sales approach and focus on customer service. None of the stores sells vehicles made by another G.M. brand.

Saturn dealers said Wednesday that they were blindsided by the news of Penske Automotive’s reversal.

“We’re all stunned,” said Mary McHugh, an executive with Saturn of Schaumberg near Chicago. “We didn’t get any communication from Saturn. We just heard it on the news.”

Under the proposed deal with Penske Automotive, the dealers were to continue selling three vehicles: the Aura sedan, Outlook crossover vehicle and Vue sport utility vehicle. Two models, the Astra compact car and Sky convertible, were being discontinued. Penske Automotive had already sent the dealerships new two-year franchise agreements to sign.

G.M., with the Penske deal now off the table, said it planned to stop building all Saturn models at the end of the 2009 model year, meaning almost immediately. Sales of the brand were down 58 percent this year, through August.

Penske Automotive, which owns a chain of dealerships and already distributes Daimler’s Smart car brand in the United States, had been in exclusive talks with G.M. for Saturn since June, beating out proposals from several other bidders, including a private equity firm tied to a Saturn dealer in Oklahoma.

Auto analysts had predicted that Penske Automotive could succeed in selling Saturns where G.M. had failed, mostly because of Mr. Penske’s reputation. The 72-year-old former race car driver is considered one of the savviest businessmen in the industry, and a specialist in turning around troubled automotive operations.

But Mr. Penske’s plans for Saturn depended on attracting another manufacturer to supply vehicles after G.M. cut off production.

“I don’t think he could find anybody who could give Saturn a competitive product line within two years,” said Joseph Phillippi, a principal in the firm Auto Trends Consulting. “It’s not surprising that a foreign automaker would not want to be entering the U.S. market now.”
It's a stunning development, and apparently Penske couldn't get another unidentified automaker to build the vehicles that would be sold under the Saturn nameplate.

It means that the 350 dealers nationwide will close, throwing still more people onto the unemployment rolls around the nation, to say nothing of reduced advertising revenues for media outlets including newspapers, added real estate inventory that is exceedingly difficult to move, and the shuttering of more manufacturing base in the nation.

For GM, three other brands will be axed by the end of the year, including Pontiac which is being discontinued, Opel is being sold to Magna and a Russian bank, and Hummer is being sold to a Chinese automaker.

This report indicates that 13,000 people will be out of jobs by the end of the year if Saturn closes as GM indicates. That includes those building the vehicles and the dealerships, but doesn't include all those who depend on the dealers continued operations. There will be a ripple effect from the closure, just as the shuttering of dealerships around the country has resulted in blighted commercial areas suffering from closures and lost job opportunities that aren't going to rebound anytime soon. In fact, it is feared that the job market will not rebound to 2007 levels until 2017 at the earliest.

No comments: