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I recently read an industry analysis written by Mark Scheiner on the demise of Saturn, now a brand in a huge state of flux within GM. In short he stated that it was a GM opportunity gone wrong. He stated, “The lesson here is that brands whether, they’re products or branding, need time to seed themselves. These are long-term investments in both capital and marketing with branding efforts surrounding them. Most importantly, the messaging needs to remain consistent across all channels, and audiences. Too many times companies become impatient or want to change something too quickly.”

While I can appreciate his emotions, I ultimately disagree with his analysis of Saturn's demise. It isn't as simple as staying the course, especially when you must sell your product through an independent dealer base.

In my opinion, GM indeed stayed the course. Since their inception in 1985 they never have turned a profit. They indeed had the logo, the freshness, and during the late 90s the public stated their dealers did it right as they were awarded the highest sales satisfaction ranking by J.D. Powers for four years running.

I consider 10 years to be long term. If you can't turn a profit, there is a problem that must be changed. Saturn had many problems. First, their dealers were challenged with profitability - even though the public loves them. With only three models, a returning customer had to re-up for the same vehicle. Saturn was popular with the 18 - 34 year olds. The problem is, that crowd gets married and starts a family and suddenly their transportation needs change. Saturn did not have a product to satisfy that need. It took 9 years to launch a mid-size vehicle. Customer went elsewhere and dealers never got on the right side of the ledger.

Additionally, dealers depend upon fixed operations (parts and service) to cover their overhead. With a new car line and no fixed ops base it is a long and painful process trying to develop that side of the operation.

Due to lack of profitability and the need to diversify their product offerings, Saturn dealers begged GM for additional products at a time when both domestics and imports year ahead of them bringing popular minivans and SUVs to market.

Lack of profits limited Saturn's R&D efforts. Their vehicles were of good quality, but nothing better than the rest of GM. The quickest way to solve the problem was to tap into the strong product development of the other GM divisions where SUVs and minivans already existed.

This didn't pollute the "Saturn Way" in terms of customer/retailer interaction. It did create new and fine products for Saturn dealers to offer. My wife drives one of them - a Saturn Sky - which was developed simultaneously with Pontiac. The problem is that during the years where there was no step-up vehicle, Saturn customers became Toyota and Honda customers. Now they are gone.

Scion is the most recent attempt to create something new. It worked famously for 2 - 3 years, then it hit a zenith and sales have started to fall. Same problem. The difference is that it never has had to stand alone. Scion was housed within Toyota retailers' stores. Investments were minimum. Additionally, the step-up becomes a Toyota product. Additionally, the retailers didn't have to build free standing facilities with separate service departments.

In short, 23 years without profits must end. It is sad, as I am a fan of the Saturn line. I have many clients that are Saturn dealers. In the end I must go back to what I wondered 23 years ago, "Is it really needed?" It was supposed to capture import buyers and those not of the GM ilk. With a limited product line that would take years to spool up, I wasn't sure it was viable then, and certainly don't see how it is today. Should it be sold to another manufacturer ala Jaguar and Land Rover, I don't see how that will change a thing. I don't want for its Saturn's demise, but if GM doesn't survive, what use is it. One thing is sure, it certainly isn't for GM failing to give it sufficient time to develop. 23 years is certainly is long enough.

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Tags: GM, auto, automotive, autos, bailout, industry, retail, sales, saturn

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Comment by Greg Goebel on January 5, 2009 at 6:34pm
Dwayne, I wish I had better news. I really do like Saturn but the track record is what it is. Every dealers' profitability has been in the sewer the last quarter. I really do expect Q1 to be about 10% better than Q4 was, of course twice nothing is still nothing. With six years invested, I wouldn't make any rash moves. At least see where things are pointed. The bottom line is that any successful "car person" can find a good home very quickly. I have always said that you'll never find a high dive by the talent pool in the car business.
Comment by Dwayne Shirley on January 5, 2009 at 3:51pm
Greg,
OUCH!! As a member of a Saturn Retail team, I have to admit that I am worried about my future. Our 3 dealer group has always been profitable until the last few months. I have worked for this group fro alittle over 6 years and this is of course the worst we have ever done in fixed or variable. It's ironic that you post this blog today, on the same day there is an article in MotorTrend with the headline "Saturn May Get Dumped"! I must say that I probably have no choice but to explore other sources of income. Any suggestions?

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