Penske drops Saturn bid; GM says stores to be wound down

Lindsay Chappell
Automotive News
September 30, 2009 – 4:32 pm ET
UPDATED: 9/30/09 5:30 p.m. ET

Penske Automotive Group Inc. canceled plans to acquire General Motors Co.’s Saturn, a move that looks likely to put the brand out of business.

Penske had been in discussions with unidentified automakers around the world to plan Saturn’s product portfolio after a sale by GM. The retailer had an agreement to source vehicles from another automaker, but the automaker’s board rejected the deal.

“Without that agreement,” Penske Automotive said in a statement today, “the risks and uncertainties related to the availability of future products prohibit” the vehicle distributor from moving ahead with the deal.

A statement from GM said, “This is very disappointing news and comes after months of hard work by hundreds of dedicated employees and Saturn retailers who tried to make the new Saturn a reality.

“We will be winding down the Saturn brand and dealership network.”

13,000 jobs at stake

GM, which emerged from bankruptcy in July, had said it aimed to finalize the agreement with Penske in the third quarter — a deal it had said could preserve more than 350 dealerships and 13,000 jobs.

GM said it would determine and communicate to dealers how it plans to wind down the Saturn brand and dealership network “shortly.”

Saturn customers and owners will continue to be able to purchase and have their vehicles serviced at Saturn retailers during this process, GM said. Once the wind down is complete, Saturn owners will be able to have their vehicles serviced at other GM dealerships.

“Today’s disappointing news comes at a time when we’d hoped for a successful launch of the Saturn brand into a new chapter,” GM CEO Fritz Henderson said in a statement.

“We will be working closely with our dealers to ensure Saturn customers are cared for as we transition them to other GM dealers in the months ahead. I’d also like to thank every GM employee and Saturn retailer who worked so hard to try to make this new beginning happen for Saturn.”

Months of ‘limbo’ time

Dealer George Nahas has been through the brand-closing trauma before. Nahas, owner of two Saturn stores in Alabama and Florida, owned an Oldsmobile dealership in 2000 when GM killed that brand.

He says this latest news is disappointing, but at least provides clarity for his future.

“We’ve been in limbo since Dec. 2,” Nahas said. “The brand has been damaged since then. Penske buoyed our spirits and our hopes. Our spirits were high because we thought the Penske deal was going to go through. At least now we know what it is and we know what our destiny is, right? We can act accordingly.”

Nahas said he has some import brands who want him to carry their products. “I guess I’ll be selling the competition.”

As part of its bid for federal rescue loans, GM on Dec. 2 told Congress that it may sell Saturn in order to focus on four core brands. At the time, GM also said it would turn Pontiac into a niche brand. It, like Saturn, is scheduled to be shut down.

Tobin Oberhoulser, sales manager at a Saturn store in Lafayette, Ind., said he was holding out hope that the Penske deal would still come through.

“I stay confident in Roger Penske,” he said. “He’s a guy that’s got unlimited resources, and I have a feeling that come once everything settles down, since we’ve pushed it back so far anyways, I think it will end up being worked out.”

If Penske doesn’t renew its decision to buy the brand, Oberhoulser said he hoped one of Saturn’s previous bidders would renew interest. Until his store gets information that he views as final, he said, he doesn’t plan to mention the failed deal in a press release or advertising.

Not enough time to ‘reboot’

Detroit analyst Jim Hall of 2953 Analytics believes the deal-breaker for Penske was the time needed to reboot Saturn’s lineup with vehicles sourced from other automakers. Any months-long interruption in supply would have put Saturn dealers out of business and left Penske exposed to lawsuits, Hall said.

“The timing is critical. Any hiccup in supply kills Saturn,” he said.

Hall said some vehicles not originally engineered to be sold in the United States could have been modified to meet U.S. crash and emissions standards. “It’s possible, but it is a hard push,” Hall said.

Jamie LaReau, Richard Truett, Chrissie Thompson and Reuters contributed to this report