Exec: We Never Finished Job with Saturn

General Motors Corp. built one of the industry's greatest brands with its Saturn division, but never properly cultivated it to where it could earn its own way, the auto maker's head of North American operations acknowledges.

“We created a heck of a brand,” GM North America President Troy Clarke tells journalists during a roundtable discussion at the North American International Auto Show here. “We created the iPod of the industry. We just never finished the job in balancing its costs structure.”

GM created Saturn in 1991 with the S-Series small car and a no-haggle sales approach that lured consumers seeking a combination of value and quality on par with Japanese auto makers. GM, and critics, hailed it as a thrifty import-killer.

But while Americans in the 1990s flocked to larger vehicles, such as fullsize pickup trucks and SUVs, it wasn't until 1999 that Saturn added a second product — the larger L-Series sedan. Its next-generation small car, the Ion, fizzled shortly after its arrival at dealerships in 2003.

More recently, GM decided to throw product at Saturn and position the brand higher up the food chain, pricing its vehicles more in line with upscale competitors, such as Volkswagen AG.

That hasn't worked either, Clarke acknowledges, because it betrays Saturn's original entry-level role. Most buyers now view the brand as too expensive.

Saturn sales last year fell 21.7%, according to Ward's data, while GM deliveries, overall, dropped 22.7% in a miserable market. Among the brands, only Chevrolet saw a smaller sales decline.

GM late last year put Saturn under strategic review as part of its government-assisted restructuring plan. GM would prefer to sell the brand, along with Saab, Hummer and the shrinking Pontiac marque, and focus on four core divisions rather than the current eight brands.

Clarke says it remains unclear exactly how GM might detach itself from Saturn, given the expensive lesson it learned when it killed the Oldsmobile brand.

“We've entered into a very open and candid discussion with our (Saturn) dealers,” he says. “We have a brand we know has been successful on many brand attributes, such as customer-facing parts, but it hasn't been a good business for us.

“And it's not that we haven't worked at it,” he adds. “We can't continue brands or models that have no prospect of earning their way. That is a discussion we are in with (Saturn) dealers every day.”

Clarke says it's wrong to assume Saturn does not have a future somewhere. “It may not exist as a General Motors brand, but Saturn could continue,” he says. “That's just one of three or four relevant options that could be considered. But, with respect to the fact that we are dealing with some of the finest entrepreneurs on the retail side of the business, I don't want to go too far to predispose where we might go with those discussions.”

State franchise laws make it difficult for auto makers to pare down their dealers bodies, but Clarke says GM's agreements with its Saturn retailers are unique and provide the auto maker with the flexibility it needs to separate itself from the 409 Saturn stores.

“Within state franchise laws, we think we have the ability to do what we need to do, but it won't be free,” he says.

GM wants to trim its dealer body to roughly 4,700 from 6,600 by 2012, as part of its new restructuring effort..

Clark also says he's confident GM successfully can trim its business to four brands — Chevy, Buick, GMC and Cadillac, which account for 85% of its sales.