Saturn to Become Different Kind of Car Company
Going back to 1990, Saturn
was billed as not being like other car companies. That may have been true,
at least in some respects, but under General Motors it was quite often
just like other auto manufacturers.
Now that a deal has been
reached for Roger Penske to acquire Saturn, it seems that the company is
really on the verge of becoming different. For one, Penske is the second
largest auto dealer in the U.S. behind AutoNation. Traditionally, car companies
have had the strong hand in relationships with dealers. They produced the car, established
promotions and dealers bought in or eventually stopped being a dealer.
Now, the dealer will
be leading the process and it will be up to the manufacturing end of the
business to respond. In the case of Penske/Saturn, USA Today reports
that it may mean that the company farms out production
specs and manufacturing to factories in places such as China and India
where the product can be produced cheaply and turned around more quickly.
Jack Nerad,
market analyst at kbb.com, told USA Today, said Penske’s purchase
of Saturn, should it go through, promises to create
“a new business model in this industry… The distribution side of the
business controls the brand, and manufacturing is conducted by one or more
subcontractors.”
Discussion Questions:
Will Saturn become a different kind of car company under the ownership of Roger Penske? What will
it mean for the auto industry in the U.S. and beyond?
Roger Penske has proved himself countless times as a great businessman. The big question is, can he prove himself as a great manufacturer, engineer and marketer?
At the end of the day, he still has to make cars people will actually want to drive. Something GM seems to have forgotten how to do.
GM simply didn’t execute its original ideas and it veered away from its own initial thinking. Saturn will have a brand new birth under Penske.
Innovation and looking at things differently is what makes for a better world. It does not have to be new, it just has to be done differently and this is what Penske is going to do. Just look at the number-one car rental company in the US. It is not Hertz, it is Enterprise. Look at the best airline in the sky and still the best-run Southwest, look at the leader in cell phones; Apple. They did not create a new product per-say but what they did was look at the business in a different way and create a new method of delivery. Same is going to be true of Saturn.
Roger Penske has a wealth of knowledge in the transportation business and I think he will succeed in developing the Saturn brand into a powerhouse based on his prior successes.
I have an opinion that he will take strong advantage of a very focused and well-positioned dealer network that will create a competitive edge seen mainly at Toyota dealerships as these facilities tend to sell and support only one brand of vehicles.
The major issues in my mind will be the ability to spend at competitive marketing levels and develop a manufacturing and distribution network that delivers quality at a reasonable cost.
He will also have some additional challenges in catching up with the leaders in the hybrid and electric car markets.
David is right–Saturn was the original social networking brand but the events were offline because online was not yet a reality for the average consumer. I think it’s fascinating to look at the disintermediation happening in the auto industry–dealers owning brands, workers having a major stake in plants–hopefully it will overcome a lot of the barriers that put the industry over a barrel in the first place. To echo what’s been said here, though, the proof is in how well the cars perform. My sister had a Saturn 10 years ago that was an absolute lemon.
Subcontracting and cutting costs is fine if the quality is still there. If not, no amount of channel power can solve it.
The evolution of the Saturn brand will be fascinating. If anyone can make a go of it, utilizing the respected Saturn dealer network as a foundation, it will be Roger Penske. I am intrigued by his vision of outsourcing production to not only GM, but other global suppliers as well. This could very well redefine the domestic auto industry in bold new ways.
This truly is a new kind of car company. It will turn Penske-owned Saturn into a Sales and Marketing company, allowing them to focus on what they know best; product innovation, marketing, and distribution. Imagine if they set up their new model to mimic the Apple model. Apple outsources all of their production, and focuses on what they know best. If Penske were to emulate the Apple model, they can prove to not only be a huge success, but they can illustrate how a “new” type of car company should really be executed.
I am looking forward to a turnaround for Saturn. My aunt is a Saturn fan from its inception and even purchased one for another aunt of mine. I’ve never heard nor experienced anything bad where this brand is concerned and hope Mr. Penske can right the ship.
The Saturn came into being by being a better way to build and sell cars. They came to market with a platform that spoke to those basic concerns and achieved a level of success. That level never met GM’s definition of success so they took a firmer hand on the product line and diluted it over time. I think Roger Penske will help the brand reach its profitable potential and be an industry idea leader.
This could really work.
When Saturn was born, I had the privilege of being in the same building where friends of mine were developing a good bit of the training (on Macs, as a point of trivia) for just about every division–and a driving philosophy was Total Quality Management–Deming, who had of course been so thoroughly spurned throughout the rest of Detroit.
Partly, it was the era–I think if a Klown Kollege had been a major client in the early 1990s, their training would also have been very heavily Deming-ized.
But the fact that a Detroit car company had seen that Japan was eating its lunch for reasons a rational human being could actually measure and fix–and then went about measuring and fixing–was a revelation to a lot of people, at least for a while.
I’ve often wondered what Saturn would have become if they’d had their styling right out of the gate. As much as I liked the company and liked what I was seeing in the building where they were literally building the corporate culture, when the cars came off the line, they were butt-ugly. In that same period, Toyota had revamped its Camry to look something like a bigger, prettier BMW–and I had a toddler, so we welcomed the room in the back seat and the trunk.
All this history is a long way of saying that as a sales and marketing guy, I hope Roger Penske will pay a lot of attention to styling and reliability. I think those are the true hot-button issues with consumers (come to think of it, that’s the secret of Apple’s success) much more than fuel economy–though it’s true that when gas gets back to $4 a gallon, we’ve got to be able to afford to drive. But as a different kind of car company, Saturn’s known how to deliver the right culture when GM let it.
If the Penske organization can make them stylish and persuade people that they will start EVERY morning no matter what, he should have a winner. To that end, I recommend they find John Gillis, of Maritz, circa 1992….
I think this is an indication that there was value in Saturn that GM never quite understood in its corporate culture. It seems to be a lesson that if you are going to move into a non-core business or process there needs to be 100% commitment, or don’t do it.
The rubber will meet the road when we learn if Penske can design and engineer innovative, compelling cars. If he can, then he may end up turning the auto industry on its head. His proposed business model, of decoupling design and engineering from manufacturing, and turning Saturn into a product development and branding company, could entirely change the economics of the business. This may not be good news for those working in high-cost assembly plants in this country, but it could be revolutionary for consumers.
I share in the general optimism about the Penske-Saturn deal. Roger has a tremendous track record as a businessman and he certainly knows a thing or two about vehicles – from racecars to rental trucks.
Saturn was a promising concept that always seemed reined in by its GM corporate parent. It produced some good quality cars, but seemed always to be last in line when the style was handed out.
In the best of all scenarios, the new Saturn might prove to be the poster child for the total realignment of the U.S. automotive industry–from a production-oriented culture to a market-oriented one.
Now is a moment for creative destruction. It wouldn’t be a tragedy if several GM (and Chrysler) brands were spun off like Saturn into nimbler business units that hire existing plants as contract manufacturers. Who knows, it might spur a new era of transportation innovation here and world wide.
Without a doubt it will be a different kind of car company. However, Saturn’s auto market share is not significant enough to have any impact in the auto industry. Over the last three decades, consumer purchasing behavior in the auto category has been evolving at a faster rate than prior decades. There are a variety of ways to approach the purchase experience. Further, the experience is often dictated by the brand of vehicle being considered. Frankly, I don’t see how the Saturn brand can carry the business model described in the article.
I’m very curious to learn what Penske will do with Saturn, I’m also curious as to which brand has higher value to the auto consumer. Penske or Saturn?
I don’t agree with Marcy Maguire. While we live in a global community, the consumer IS very aware of who makes their vehicle–this is why Toyota dominates the US auto market and GM and Chrysler are in trouble.
I feel like this the way I felt about Lord & Taylor: more hopeful than optimistic, but glad it’s being given a chance.
That having been said, I’m a bit confused by what “success” would mean in this case: IIRC the original point of Saturn was to show that an American–specifically GM–company could succeed with a car designed and built in the US; so it’s no longer going to be a GM product, and if it ends up contracting out work to a foreign plant–or a foreign-owned plant in the U.S.–what, exactly, will that show us?
I would have to see a copy of Penske’s deal with GM. Is he tied into using GM plants? Is he tied into GM design and engineering? How far can Penske get away from GM in the short term? Saturn has some decent product but can Penske get people like Consumer Reports to give Saturn a chance? I certainly hope Penske is successful but there are a lot of variables here and the economy is still going down and will go down a lot more before it starts to rise again (if ever).
Most consumers just don’t have buying a car on their mind right now. I think most of us would agree that if you are going to buy anything, maybe 40 acres and a mule is the way to go. Driving comes way behind eating in Maslow’s Hierarchy of Needs.
Roger Penske has done a remarkable job with what he has. However, like all business success, there is a degree of luck, timing and good sense. The real question here is does he have the leadership and personnel to change his model to include manufacturing cars as well as selling them. The barriers to entry here are tremendous, and the cash flow to actually create and sustain an automotive manufacturing model are even more so. This is not just about selling vehicles and financing them, but it is about cradle to grave logistical, supplier, inventory and customer management. Add to this the negative issues and problems that Saturn already has, and this is probably too much for Penske to handle. This is not a good investment for Penske to make.
The concept of the distributor controlling the brand has many success stories, the film industry being one of the best. Prior to the break-up of the studio-theatre monopolies in the late 1950s/early 1960s, each of the major studios owned chains of theatres to screen their films. One studio was instead owned by a theatre chain. That combination (Loews/MGM) grew to control 50% of the market by 1948 while their 7 major competitors shared the rest of the pie. Once the antitrust legislation forced the separation of the studios and theatres, MGM’s share of ticket sales steadily slipped until it was just one of 8 and no one studio has ever dominated again. I expect in this discussion GM is playing the role of Leo the Lion.
Racing certainly improves the breed.
It will be interesting to see if Penske can apply manufacturing, technical, and business prowess to the Saturn product without getting in his own way ala GM.
Until very recently, the GM organization has been a model of weak marketing prowess and truly substandard products. The Malibu, CTS, Corvette, new Camaro and others are fine examples of their technical improvement. Let’s hope that both RP and GM follow up with what we all expect will be better technology with the the right marketing plans.