UPDATE 3-U.S. investor group approaches GM on Saturn

* Group includes private equity firm, Saturn dealers
* Looking to rebuild Saturn as diversified auto retailer
* To source small cars from other automakers
(Adds comment from GM, background from Black Oak, detail on
other automakers)
By Soyoung Kim
DETROIT, April 15 (Reuters) - An investor group including
private equity firm Black Oak Partners has approached General
Motors Corp about buying its Saturn brand assets and
dealership network, both sides said on Wednesday.
The investment group, which includes some Saturn dealers,
said its goal was to set up an independent distribution network
that would first sell GM vehicles and then branch off into
products -- including electric vehicles -- from its rivals.
GM confirmed it had been in discussions with Black Oak and
said there were other investment groups interested in taking
over Saturn, a struggling brand GM launched 25 years ago in a
failed bid to head off market gains by Japanese imports.
"They're one of several parties that we've had discussions
with at this point," Saturn spokesman Mike Morrissey said of
Black Oak. He declined to name the other potential investors.
Financial terms of the deal, which Black Oak proposed to GM
earlier this month, were not disclosed.
The Black Oak Partners-led group said in a statement that
its offer would preserve about 10,000 retail jobs and would
spare GM the cost of shutting down Saturn.
GM, which has been operating since the start of the year
under a federal bailout and faces the risk of a
government-financed bankruptcy, had pledged to present its
dealers with an update on Saturn by this week.
Morrissey said GM expected to update Saturn dealers on
negotiations with potential investors in the distribution
network and other automakers by early next week.
In mid-February, when GM said it was working to spin off
Saturn as a distribution company, the brand had about 420 U.S.
showrooms. That number has dropped to about 380 stores now.
"We understand the pressure in the marketplace," Morrissey
said.

CHINA OPTIONS
People briefed on the discussions have said GM has sounded
out a number of overseas automakers about their interest in
selling cars through Saturn dealerships, including China's
Chery Automobile Co and Geely Automobile Holdings. <0175.HK>
Representatives of those automakers could not be
immediately reached for comment, and it was not clear if either
was actively considering using the Saturn sales channel to
break into the U.S. market.
Under the restructuring plan it submitted to U.S. officials
in February, GM committed to provide Saturn dealers with
vehicles through 2012.
Black Oak Partners said in a statement that it wanted to
open Saturn to sell small and fuel-efficient vehicles from a
range of manufacturers.
That would make the sales operation closer to a traditional
retailer and set it apart from other U.S. auto dealerships,
which are typically restricted to selling vehicles from a
single manufacturer.

PART OF THE PROCESS
GM, which has taken $13.4 billion of U.S. government loans
since the start of the year, is reviewing underperforming
brands, including Saturn and Hummer as part of a sweeping
restructuring mandated by the U.S. government.
GM is also under pressure to win deep concessions from its
bondholders and the United Auto Workers union, with the
government warning the alternative would be bankruptcy.
GM created Saturn in 1984 in a bid to compete head-on with
Japanese vehicles for quality and customer service.
The first Saturn dealerships opened in 1990 and pioneered a
"no hassle," flat-price sales model that took much of the
negotiating out of buying a car.
But the brand languished over the past decade as GM
throttled back on new investments. An attempt to reinvent the
brand under the stewardship of retiring GM product chief Bob
Lutz failed to revive sales, despite strong reviews for
products such as the Saturn Aura sedan.
Saturn brand sales dropped 22 percent in 2008, worse than
the 18 percent decline in the overall market. Sales were down
by 58 percent through March this year.
(Additional reporting by Poornima Gupta; Editing by Andre
Grenon and Steve Olofsky)
((soyoung.kim@thomsonreuters.com; +1 313 967 1903; Reuters
Messaging: soyoung.kim.reuters.com@reuters.net))

Keywords: SATURN/INVESTOR

(C) Reuters 2009. All rights reserved. Republication or redistribution of
Reuters content, including by caching, framing or similar means, is expressly
prohibited without the prior written consent of Reuters. Reuters and the Reuters
sphere logo are registered trademarks and trademarks of the Reuters group of
companies around the world.

nN15504767