Summary
On Tuesday, GM thought it had a deal to sell its Saturn brand to Roger Penske. On Wednesday afternoon the automaker was blindsided by news Penske had pulled out of the deal. This, on the heels of the announcement that GM will not extend its venture to sell cars through eBay. Neither announcement was good news for GM, one, however, was worse than the other.
Analysis
In a move that left the folks at General Motors stunned, Penske Automotive Group has terminated discussions to acquire Saturn. Citing an inability to secure agreements for the future supply of vehicles beyond what it had negotiated with GM. As a result, GM will wind down Saturn much as it is doing now with its Pontiac division.
Penske had been negotiating with Renault's Korean affiliate, Renault Samsung Motors and two Chinese OEMs, Chery and Geely to supply vehicles to Saturn dealers when GM's agreement ran out in two years. Another issue facing Penske was finding a floorplan provider for Saturn dealerships.
Dealers,or, "Retailers" as Saturn prefers to call them, were as shocked as anyone. They were scheduled to attend meetings with PAG founder Roger Penske next week, after the deal was closed to hear about plans for product and timing.
GM began selling Saturn vehicles in 1990 as part of a plan to reinvent the way GM did business. Original Saturn dealers were given geographical areas of sales responsibility, with the opportunity to open as many as five Saturn stores in the area. The company pushed "no-hassle" car buying processes, vehicle delivery celebrations, and a comfortable buying experience.
But Saturn sales peaked in 1994 and are down almost 60% this year. Customer loyalty, originally a strong point for dealers has waned over the past several years as the brand was unable or unwilling to bring new product to market.
The approximately 350 dealers and 13,000 employees affected by Penske's termination of the agreement had seen PAG as their last hope as GM had announced a year ago it planned to shut down the brand if it could not find a buyer.
GM said it would immediately begin shutting down production at plants in Michigan and Mexico which build the Outlook SUV and Vue small SUV, respectively. It will also halt plans to resume production of the Aura sedan at a Kansas plant.
On another front, GM announced this week it was terminating its short-lived effort to sell cars online through eBay Inc.
The program,launched Aug. 11 as a pilot program in California hasn't driven sales for the auto maker, according to dealers and early sales figures.
The eBay venture was one of GM's first moves after emerging from bankruptcy in July. The eBay deal was set to end on Sept. 8, but was extended through the end of the month.
Under the program , shoppers using special eBay sites could elect to "buy it now" or bargain online with a dealer. Edmunds.com looked at the "buy it now" prices and advised eBay shoppers to select the "make an offer" option. The program inadvertently encouraged lowball offers that resulted in frustrated dealers and shoppers. Well, we have to give GM credit for at least trying something new.
Jack Sayer consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
