What Went Wrong With Saturn?: Analysis

By John Pearley Huffman

With the announcement that General Motors and the Penske Automotive Group have broken off negotiations to transfer ownership of the Saturn brand between them, the Saturn saga sadly ends. Over the next few months, GM will implement the "wind-down" agreements it has with Saturn dealers and start closing up the division. As you read this, the last bundles of Saturn sales brochures are likely being heaved into dumpsters around the country.

It's an almost tragic end to one of GM's boldest experiments. Devised back in the early '80s, the Saturn concept was for GM to set up an entirely new company that would be owned by GM but operate outside its entrenched culture. It would build small cars to compete with Toyota and Honda that many analysts believed couldn't be manufactured profitably in North America. Saturn was a startlingly creative burst from then GM Chairman Roger Smith—not a man known for indulging much creativity.

After years of development, Saturn was created. Dealers were recruited. A new assembly plant was built in Spring Hill, Tennessee and a new, innovative labor contract was negotiated with the United Auto Workers. Saturn developed its own S-Series small sedan, coupe and station wagon that shared little with any other GM product. When the first Saturn rolled off the line in July 1990, Roger Smith and UAW President Owen Bieber were both in it.

Saturn dealerships operated under a no-haggle pricing mandate and early buyers of Saturn cars were thrilled with the service and attention they received from the dealers. It was a premium buying experience for small cars. Yet Saturns were anything but premium priced. The S-Series sold well, but cracks were already appearing in the Saturn architecture.

The front-drive S-Series wasn't a bad car, but it wasn't a particularly good one either. About the only innovative aspect of their engineering was space-frame construction covered in plastic panels impervious to most parking lot damage. The S-Series engines ran roughly, the handling was mediocre, the interiors were chintzy and those plastic panels needed big gaps at the seams to deal with their expansion and contraction in heat. Some S-Series buyers loved (and still love) their Saturns, but they weren't cars that had every owner turning into a repeat buyer.

Roger Smith left GM shortly after Saturn opened and his pet project quickly became an orphan. Rumors abounded that within GM other division heads saw Saturn sucking up resources they thought were needed by GM's established brands. The internal politics soon had Saturn starving; when satisfied S-Series buyers returned to their dealers to trade up to a new car, there was nothing to trade up to. Saturn didn't get a larger car to sell until the 1999 model and the car it got, the L-Series, was pure mediocrity. By then, the S-Series was getting more and more tired.

In short, Saturn was a great buying experience that didn't have the right products to sell.

But with the turn of the century, GM re-committed itself to Saturn. The Vue small crossover joined the line in 2002 and the S-Series was redesigned as the Ion in 2003. By 2007 Saturn dealers had a thick portfolio of significantly improved vehicles to sell including the mid-size Aura sedan, versatile Outlook crossover and the two-seat Sky roadster. But buyers had lost the habit of shopping at Saturn and sales for all of them were lackluster.

Ironically, while Saturn started going downhill because of a lack of attractive products, its fate was sealed when it couldn't sell a full range of solid products.

Penske broke off negotiations, it says, because of the inability to secure future vehicles to be sold at Saturn dealers once the current GM-produced products had run through their life cycles. It's a pity. Because for a few moments in the Nineties it looked like Saturn had the potential to be something special.

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