Penske: Envisioning Saturn as a Global Motors

Penske: Envisioning Saturn as a Global Motors

By Michelle Krebs June 5, 2009

By Michelle Krebs

DETROIT -- Roger Penske's dealership group doesn't hold a single Saturn franchise, but now he's offered to buy from General Motors the whole kit and caboodle.

Penske's vision, as he laid it out in an exclusive interview with Edmunds' AutoObserver.com Friday shortly after GM and the Penske Group announced they had made a deal for Saturn, is twofold: to sell GM-made models in Saturn showrooms while shopping the globe for other vehicles to sell, eventually convincing the offshore manufacturers of those vehicles to make them in the United States.

(Penske announced on Sept. 30 it terminated discussions with GM for the purchase of Saturn.)

Keeping GM Plants Humming

For the moment, Saturn dealers will continue to sell GM-made models -- the Saturn Vue compact crossover, the midsize Saturn Aura sedan and the Saturn Outlook full-size crossover. GM will make those vehicles for Penske Auto for at least three years through their current lifecycles. An extension for Penske's Saturn to buy GM-produced models could be negotiated beyond that.

Penske, long a GM fan, said the arrangement will be good for GM as well, as it will keep its assembly lines producing GM vehicles and help the bankrupt automaker with costs.

Penske Goes Shopping

"Concurrent with that, we'll go around the world to see what products could be brought into this country," Penske said. Those foreign-made products will begin filtering into Saturn showrooms in 12-18 months, he added.

While the media has speculated the new Saturn will source vehicles from French automaker Renault and its South Korean Samsung unit, Penske insisted he has not said that. Rather, his company has talked with many other automakers. "We'll be up front about announcing any partnerships," he said, because the time to get vehicles into showrooms is soon.

However, Penske said Saturn showrooms absolutely will not sell smart-brand cars. Penske Auto has the exclusive license from Daimler AG to sell smart cars in the U.S., which it does through a separate dealership network.

The Shopping List

High on the shopping list will be vehicles with exemplary aerodynamics, fuel-efficiency, safety and styling -- key traits that Saturn's existing customer base finds important, Penske noted.

"We'll be focused and targeted on models that serve the existing Saturn customer base and in the price ranges that already have surfaced with the existing owner base," he said. Vehicles will include SUVs, coupes and four-door models, he said.

"When there's sufficient volume, we'll do what the transplants did -- we'll get them to relocate production capability in the U.S.," Penske said.

Production partners will not only have access to Saturn's dealer network but also its parts distribution operations, based in Spring Hill, Tennessee, separate from GM's Service Parts Operations. The Saturn parts operations become part of Penske's purchase. "We won't be manufacturing vehicles but providing distribution services and customer support," he said.

Electric Power First; Performance Later

In light of the U.S. government's emphasis on available funding for alternative-powered vehicles, Penske said "electric vehicles will be right at the forefront" and "might be the first vehicles produced in the U.S." under this new Saturn arrangement with foreign partners.

A former racecar driver and still a race-team owner, Penske said performance, which Saturn tried to highlight with its Red Line models, will take a backseat for now.

"We need to be focused on the core volume before we become a specialty house. We need to generate volume," he said, noting that Saturn's volume has fallen to less than 100,000 vehicles sold annually. "We need to get back to a 150,000-200,000 run rate. Then we'll look at specialty items.

"Performance is close to my heart and adds value to attract certain customers," he continued. "But first we have to be sure the customer base is satisfied with low-cost and efficient models."

Ready-Made Customer Base

What's most attractive to Penske about Saturn is the 3.5 million consumers who have bought Saturns, most of which remain on the roads.

"It's not often you get to go into a business with a ready-made customer base," he said. "My vision first and foremost is the 3.5 million consumers already driving Saturn vehicles. They are validation of the brand and the work that's been done over the last 20 years. Their loyalty to the brand will be key to our success going forward."

Turning Things Around at Breakneck Speed

In typically speedy fashion for his race teams and businesses, Penske intends to turn things around in the next 12-18 months, aided by the economic tailwinds he is forecasting. And he has his work cut out for him on the sales side and even in terms of owner loyalty.

Saturn sold 188,004 cars in 2008 for a market share of 0.9 percent; that compares to Saturn's high-watermark of this decade with sales of 280,248 and 1.7 percent market share in 2002. So far this year, Saturn has sold a scant 35,256 vehicles.

Edmunds.com's data further shows Saturn loyalty has been plummeting, even before GM announced plans to eliminate or sell the brand. Of people who traded in Saturns on new cars of late, only about 30 percent opted for another Saturn.
 
Saturn Retailers Offered Penske Franchise

Penske, who became a Chevrolet dealer in Philadelphia in February, 1965, had a Saturn franchise among his GM brands at a dealership in Bakersfield, California, in the early days of Saturn in the mid-1980s, but he later sold all of the GM franchises. He later went on to build a publicly owned dealership group that now ranks as the No. 2 retailer of vehicles in the U.S. He also has dealerships outside of the U.S. GM prohibited publicly owned dealership groups from having a Saturn franchise.

Still, as a retailer, Penske has competed against Saturn dealers, who were carefully hand-picked by the division when it was formed in the 1980s. Penske says Saturn dealers are the best in the country and "are passionate about the brand." The current 200 Saturn dealers operating 350 outlets across the country, which employ about 12,000 people, will be offered a new franchise agreement with Penske. "We'll give each existing Saturn dealer an opportunity to sign on with our franchise," he said.

Signing on with Penske organization, too, may be some of today's approximately 1,000 Saturn employees, some of whom could be offered new jobs with Penske's Saturn. Longtime Saturn General Manger Jill Lajdziak would not say in the interview -- nor has she told Penske -- if she will be among them.

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.