UPDATE 1-GM to trim production of slow-selling Saturns


(Adds inventory levels in third paragraph, car review in ninth paragraph)

By Michael Ellis

DETROIT, Feb 27 (Reuters) - General Motors Corp. said on Thursday it will cut back production of its slow-selling Saturn small- and mid-size cars by shutting the two plants where the cars are assembled for two weeks in March.

The Saturn L Series, the division's first entry in the highly competitive mid-size car segment, has suffered weaker-than-expected sales since it went on the market in 1999. L Series sales fell 17 percent last year to 81,172 units in the United States, far below the 200,000 capacity at the Wilmington, Delaware, plant where the cars are assembled.

Saturn expects stronger results for its new small car, the Ion, which replaced the aging S Series in Saturn's lineup. But inventories of unsold Ions have ballooned to a 143-day supply at the end of January, GM said, far above the industry target of around 60 days.

In January, the Ion's third month on the market, Saturn sold 5,386 of the cars in the United States, more than double the results from December and November.

Saturn expects a new advertising campaign that began in January will help Ion post a double-digit sales gain in February, spokesman Mike Gardner said. Selling off the remaining S Series small cars should also boost Ion results.

The addition of the "quad coupe" -- a two-door with an additional small, rear-opening back doors -- to the Ion lineup in April should also help, Gardner said. Saturn is not backing off its annual sales target of 150,000 Ions, he added.

"In February ... we're going to see a strong double-digit increase in sales," he said. "We're pleased. Once we fully ramp up ... annual sales should be in the 150,000 range. The response has been good to the product."

The Ion has met mixed reviews since it was launched in November. Car and Driver magazine said the Ion "is probably the most disappointing all-new American car in a decade," while Consumer Reports said the Ion is "a very disappointing car."

But other reviewers have been more complimentary. USA Today said the Ion "has a high likability ."

The shutdown during the first two weeks of March will help GM cut inventories of unsold Ion and Saturn L Series cars, which stood at just over 100 days' supply for the mid-size car, Gardner said.

The shutdown will also allow the Spring Hill, Tenn. assembly line where the Ion is built to prepare for production in March of the Ion "quad coupe."

Production of the Saturn Vue sport utility vehicle, which is made on a separate assembly line in Spring Hill, will not be affected, GM said.

Saturn backed away from its policy of not having incentives on its vehicles and in January and February offered zero percent financing for up to five-year terms on both the Ion and the L Series. Cash rebates of $3,000 were also offered on the L Series.

Workers at the Wilmington plant will be laid off during the two-week shutdown and will receive unemployment pay, Gardner said. At Spring Hill, workers will prepare the plant for the new Ion model.



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