Saturn's Last Chance At Success

[ragingfish]

Quote, originally posted by Detroit News »Do or die for SaturnNew models give the withering GM division one last chance to succeed.By Ed Garsten / The Detroit NewsDETROIT -- General Motors Corp.'s Saturn division, once the model for a progressive new car brand, came perilously close to ending up on the scrap heap next to Oldsmobile.Saturn Aura conceptSaturn SkyAs GM executives weighed a death sentence a few years ago, they balanced its skimpy product line, mounting losses and swooning sales against its still-solid image with buyers and standout dealer network."We had to look at continuing with the exact same thing we were doing, or exiting, which we had to look at," GM Vice Chairman Bob Lutz said in an interview this week.Ultimately, the automaker committed last summer to dig deep into its corporate kitty and make one more big push to turn Saturn into a healthy brand that delivers cars and SUVs to match its sales and service quality.A huge test comes Sunday when Saturn unveils the 2006 Sky roadster and midsize Aura sedan concept at the North American International Auto Show in Detroit.In all, GM plans to spend $3 billion to double Saturn's product line to six models by the end of 2006. Last summer, GM's board of directors approved a $400 million to $500 million investment to upgrade a Spring Hill, Tenn., assembly plant to build new models, and a new labor contract with union workers that ended a unique 20-year arrangement that forbade layoffs.Saturn also plans to market a new crossover vehicle GM will build at a plant under construction outside Lansing, analysts say.It's finally Saturn's turn after years of getting the scraps left over from huge GM investments in Oldsmobile, Cadillac and Pontiac. But like Oldsmobile -- which GM desperately tried to revive with an all-new model lineup in the 1990s -- the new products may be Saturn's last chance.GM's steady market share losses in the United States -- it ended 2004 with 27.3 percent of U.S. sales -- may force it to undertake additional downsizing.So Saturn executives will be understandably nervous when nearly 7,000 members of the global automotive press corps start crawling over the Sky and Aura on Sunday.Dressed in curvy, sophisticated European-type exteriors and vastly upgraded interior cabins, the Sky, a two-seat convertible roadster, and mid-size Aura concept car, represent more than a new styling direction for Saturn. They embody the brand's break with its low-brow past.After making due with Saturn's current product line, Vince Olsen, the general sales manager at Saturn of Troy, is ecstatic about the impending arrival of two new vehicles."It's hard to believe how beautiful the convertible is and the midsize car is definitely the design where Saturn needs to go," Olsen said. "I'm now looking to the future as very optimistic."But to save Saturn, GM had to change much of what made the brand unique.Saturn was launched in 1990 as a semi-independent maker of Japanese-fighting small cars sold in cheery no-haggle dealerships. GM didn't want Saturn to be just another nameplate in the automaker's portfolio, but an entirely different company as its advertisements heralded for years.The word "different" permeated every aspect of the brand, including its plastic-clad cars, homey dealerships, no-haggle price policy, and more team-like relationship with union workers that included a no layoff provision.Saturn owners considered themselves different, too. They turned out by the tens of thousands at two Woodstock-like "homecomings" on the grounds of the Spring Hill, Tenn., assembly plant in 1995 and 2000 to bond with the men and women who built the little cars.Saturn was a wonderful concept that produced billions in losses for GM as Japanese and Korean automakers gained strength and the buying public migrated to SUVs, minivans and crossovers.Since it debuted in 1990, Saturn has never turned a profit for GM, chewing and swallowing billions of dollars -- $1 billion a year during its early years."It's hard to make money when you're starving for product," said Rebecca Lindland, senior analyst at automotive consulting firm Global Insight Inc. "Saturn buyers left the brand because they were forced out, not that they wanted to."Few buyers have returned after outgrowing their first Saturn compact car, and few new customers are giving the brand a try. Saturn's 2004 sales dropped 21.8 percent to 212,017 units -- the lowest level since 1992 -- from 2003, according to Autodata Corp. GM blamed the discontinuation of the midsize L-series last summer to the sharp drop.As GM consolidated its vast North American engineering operations to save money and accelerate product development, Saturn eventually lost much of its autonomy as a subsidiary and became just another GM division. Last summer, a unique arrangement with the United Auto Workers local in Spring Hill ended when workers approved a new contract placing them under the same national agreement that covers workers at GM, Ford Motor Co. and DaimlerChrysler AG's Chrysler Group.Without the characteristics that once set Saturn apart from the rest of GM, it seems foolish to throw more money at the brand, says Brett Hoselton, an analyst who follows the automaker at Keybanc Capital Markets in Cleveland, Ohio."The key question is how do you differentiate this brand from other existing brands that General Motors has," he said. "It's more of a distraction to the company, than a viable long term move."The blur between Saturn and the rest of GM's lineup is confusing consumers, too, says Mark McCready, director of pricing strategy at Carsdirect.com, an Internet vehicle price guide. "They run the same financing and rebate promotions as the rest of GM," he said. "It would have been nice to see them run something different, like offering free maintenance or a longer warranty."But Saturn does represent considerable value to GM.Despite its recent sales slump and shaky financial position, the brand has perennially led or been near the top of industry customer service surveys. It has also been successful at winning over customers from other brands. Seventy percent of Saturn's customers would not otherwise consider a GM vehicle, Saturn General Manager Jill Lajdziak said."If you're going to try to remake a brand, remaking one with a strong customer focus and history of good dealer relationships with customers is probably better than the alternative," said Chris Struve, an analyst with credit ratings company Fitch Inc.Saturn's enduring positive image is the manna that's fed the brand during its long product famine and led to the decision to invest heavily to revive it."Saturn has a lot of brand equity," Lutz said. "If we do fabulous products it'll be a real breakthrough because you know the dealers won't take advantage of people, and the great selling experience is already there."Those products can't come soon enough.The Saturn brand may be strong but its portfolio atrophy made it easy for buyers to look elsewhere. Ironically, what's changed the least at Saturn until now has been its product line.It took 12 years to replace the Saturn's original small cars -- the S-Series -- with the Ion in late 2002. But the Ion was not well received by reviewers who hated the center-mounted instrument panel, and a recent facelift has failed to improve sales. So many Ions have gathered dust on dealer lots that the company cut 300 to 400 jobs at the Spring Hill, Tenn., assembly plant that builds the car. Last year, Ion sales dropped 11.2 percent from 2003, the first full year it was on the market.Saturn's lineup wasn't expanded until 1999 when the mi
d-size car L-series was introduced. But critics panned it and customers ignored it. GM finally pulled the plug on the car last summer.The lone bright spot for Saturn is the Vue, a small sport utility vehicle that debuted in 2001 and continues to meet sales targets. And high-performance, upscale Red Line versions of the Vue and Ion are also showing success.It's too soon to judge the success of the new Relay minivan, Saturn's first entry in the segment and its first product without the brand's trademark plastic body panels. The Relay is also the closest thing Saturn has to another GM product. It is built on the same basic platform as GM's other three new minivans, the Chevrolet Uplander, Buick Terraza and Pontiac Montana SV6. But all four minivans have received lukewarm reviews by critics.But the Relay, Vue and Ion represent the past. The Sky and Aura's DNA have been cultured in an entirely different Petri dish and represent Lutz's plan to take the brand a bit more upscale and make it more sophisticated."What clearly is changing at Saturn is the character and scope of its product offerings," Lutz said.Breaking from past practices of designing new vehicles solely at GM's Warren Technical Center, the Sky and Aura are the results of international cooperation. Seven of GM's 11 far-flung global design centers contributed to the Sky and Aura's development. The Sky is based on the Vauxhall Lightening, a concept car developed for GM's British affiliate."This is really the new halo for the Saturn brand," said Ed Welburn, GM's North America vice president for design. The Sky will be priced in the $20,000 to $25,000 range.Even though it will be sold in fairly low volumes beginning early next year, there's no mistaking its importance. Lutz has called it the brand's new "signature" vehicle.The Aura is built on the same platform as the Chevrolet Malibu and Pontiac G6. The platform was first used by Opel, GM's biggest European unit. While it's officially dubbed a concept car, GM and Saturn officials say the Aura is very close to the vehicle that will go on sale sometime in 2006, though it may carry another name.Saturn interiors have long carried the stigma of being barely basic, but the company has upgraded those as well using more expensive materials and more thoughtful design, said Lutz.Further ahead for Saturn is a larger sport utility vehicle to be built on a completely new platform."We have a very bright future for the Saturn brand," said Lajdziak, Saturn's general manager.The new products are a good start, say analysts. But Saturn will have to prove that the once "different kind of car company" can succeed by proving to consumers just how different it has become from its past.Detroit News Staff Writer Eric Mayne contributed to this report.