February 20, 2009 / 12:07 PM / in 10 years

GM's new moonshot: Open Saturn to rivals

DETROIT (Reuters) - General Motors Corp set up Saturn with big ambitions 25 years ago reflected in its decision to name the brand after the rockets that carried astronauts to the moon, a symbol of American ingenuity.

Now Saturn could become a launching pad for GM’s overseas rivals who are being invited to consider the brand’s dealer network as a low-cost way to break into the U.S. market.

GM said on Thursday it was working to spin off Saturn as a distribution company to source cars from other automakers and sell them through the brand’s 420 U.S. showrooms.

For a brand that values an image for innovation but has struggled in the market, the spin-off has the potential to reshape the way cars are sold in the United States where dealers are typically tied to a single manufacturer.

“We have a team that is also made up of Saturn retailers that will be involved with us as we think about a future business model for Saturn that gets into the next decade,” Jill Lajdziak, general manager of Saturn, told Reuters.

Lajdziak also said the company has not ruled out the possibility of bringing in vehicles from other manufacturers to sell through Saturn before 2012, the year when the last Saturn-branded vehicles roll off GM’s assembly lines.

“All options are on the table,” she said.

With a range of assets on the market — including its Hummer and Saab brands — GM has had little success so far in offloading unprofitable units to restructure under the terms of its $13.4 billion U.S. government bailout.

With Saturn, GM has brought in a group of dealers and consultants to build a case for a distribution company that could survive on its own, people involved in the process said.

GM has also had initial contact with overseas automakers to assess interest in supplying vehicles to Saturn, three people with knowledge of the discussions said.

One of the manufacturers contacted was India’s top tractor and SUV maker Mahindra & Mahindra Ltd, one of those involved in the initial planning efforts said.

Lajdziak declined to comment when asked about any initial contact with other automakers on behalf of Saturn. In a memo to the brand’s customers, she said the new Saturn would look for future vehicles that were fuel-efficient, safe and reliable.

Todd Ingersoll, a dealer in Connecticut and a member of the Saturn dealer steering group, said that given GM’s decision to shut down the Saturn brand the decision to spin-off the sales channel was the best option.

“I think collectively Saturn has tried to redefine the way we do business, and we’re trying to take lemons and make lemonade,” he said.

Ingersoll said he saw a future for Saturn as a sales channel for green cars and fuel-efficient models from manufacturers now shut out of the U.S. market. Sales could start as soon as deals can be negotiated, he said.

FROM IMPORT-KILLER TO IMPORT FRIEND?

GM created Saturn in 1984 in a $3.5-billion 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.

But the brand languished over the past decade as GM throttled back investment. An attempt to reinvent Saturn under retiring GM product chief Bob Lutz fizzled despite strong reviews for products like the Saturn Aura sedan.

Lutz said recently GM may have sealed the fate of the unprofitable brand by not giving it enough new products.

“What we essentially did was we created a baby which was growing very healthily,” Lutz said last month. “It was like having a six-year-old kid at home and then you tell him: go get a job, we’re not feeding you anymore until you pay for yourself.”

Saturn sales dropped 22 percent in 2008, worse than the 18 percent decline in the overall market. But sales per franchise at Saturn remained high: 471 per outlet versus an industry of 347 vehicles last year, according to CSM Worldwide.

Some dealers expressed hope the new direction would allow them to stay in business at a time auto sales are slumping.

“The longer it stays without a real clear future, the worse it’s going to be for dealers,” said Tom Waurishug, general manager of a Saturn dealership in White Plains, New York.

Others questioned whether GM would regret the day it opened the door to its home market for ambitious rivals.

“For China or India, that might be the venue for them to put their products,” said George Nahas, who owns Saturn dealerships in Alabama and Florida.

But he said of GM, “They’re going to create a competitive situation for themselves.”

Additional reporting by Kevin Krolicki; Editing by Bernard Orr

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