It is hard to find two people more respected throughout the auto industry than Roger Penske, a serial entrepreneur with a knack for managing turnarounds, and Jerome York, Kirk Kerkorian's right-hand man through a series of auto investments who sounded an early warning about the industry's need for radical change. Which is why it is so striking to see how drastically they disagree over the prospects for General Motors Co.'s vagabond Saturn brand.
Penske is a believer in Saturn, and has put his money where his mouth is. His Penske Automotive Group Inc. (NYSE:PAG) over the summer struck a deal to pay an undisclosed sum (believed to be less than $200 million) to acquire Saturn, hopeful of reusing a strategy that has worked for its Smart car unit: becoming a "virtual automaker" that contracts out manufacturing to a foreign supplier while focusing on sales, service and marketing.
But in a Sunday New York Times
Penske profile, York, a former CFO of Chrysler LLC and one-time director at GM, offers a grim prognosis for a brand he thinks never should have been launched in the first place. "It may well be the biggest fiasco in automotive history since Ford brought out the Edsel." York, who while on the board of GM pushed for Saturn to be shuttered, says there is no place for Saturn in a crowded marketplace.
"It's like you go to the grocery store and you have 40 brands of toothpaste," he says. "Well, the world doesn't need 40 brands of toothpaste. I think Saturn falls into the same category. The world doesn't need it."
So who is right? Maybe both.
York's opinion on Saturn seemingly was shared by the White House automotive task force as well as, belatedly, GM management. Both were ready to kill Saturn if a buyer could not be found. If Penske wants to avoid merely prolonging the agony, he'll have to reprise the Smart strategy in more ways than one.
Smart has succeeded in part because it offered a product (an ultra-compact and fuel-efficient vehicle) that was largely unavailable in the marketplace. Similarly, Saturn must figure out a way to differentiate itself in the markets for midsized sedans and crossover vehicles already crowded with traditional competitors as well as rapidly growing new entrants like Hyundai Motor Co.
But that is not to say Penske won't make out in a deal. As the Times piece notes, there is money to be made selling parts and service for the more than 3 million Saturn cars already on the road. While that business pays the bills and GM continues to manufacture vehicles for Saturn over the next two years, Penske's team will have time to come up with designs capable of recapturing consumer imagination and reinvigorating sales.
At worst Saturn will end up being a small write-off for Penske Automotive, a $1.5 billion market-cap company that can afford to take some bets in a rapidly changing auto business. And should Saturn make it, the potential payout will be huge both for the company and for the legacy of the 72-year-old namesake who is leading the charge. -
Lou Whiteman
Lou Whiteman is a senior writer covering the automotive, transportation and industrial sectors. Follow him on Twitter @louwhiteman
Join Corporate Dealmaker's LinkedIn forum
Juergen Lasowski
And the winners are...
Hmm... i Have a 95 saturn sc1 and its the best car ive had to date, and i've had a few american cars. Ive always asked others if their saturns were reliable, gas efficent cars and the response is always yess. I reallly hope Penske makes a big turn around for saturn; if you think about it saturn is one of the only gm brands without a bad reputaion!