Saturn Dealers: Now What?

When General Motors Corp. said early this year it planned to shed its Saturn brand, Shau-wai Lam decided to do the same thing at the major dealership group he heads.

After consulting with his management team, he closed the last two of his remaining Saturn stores. He once had six in New York and New Jersey. Those were closed earlier as Saturn sales fell.

“We had originally put hope in the future of Saturn, but when GM stopped supporting it, and wouldn't be supplying it for long, we felt we should not let the agony linger,” says Lam, chairman of DCH Auto Group based in South Amboy, NJ.

“We calculated that leaving the stores empty would cost less money than hanging on,” he says. “We are working at finding uses for them or renting them out.”

His decision looks prophetic in light of the collapse of a business deal that would have kept the 350-store Saturn dealership network alive under the brand ownership of Roger Penske's Penske Automotive Group.

GM says it will shut down Saturn after Penske announced that his plan to buy the brand has failed due to an inability to find a supplier of vehicles beyond GM.

Some Saturn dealers have other brands to fall back on. Those that don't are the hardest hit.

One of them is Todd Ingersoll, owner of Saturn of Danbury, a facility that opened last year. At the grand opening, the Danbury, CT, store was hailed as “a vote of confidence in the division's future.”

When the proposed Penske-GM deal to save Saturn was announced in July, an elated Ingersoll said he was “thrilled.”

Now he somberly weighs options.

“We can always remain hopeful, but it doesn't look good,” says Ingersoll, who in retrospect figures he placed too much confidence in a happy ending.

He's scrambling to find a new use for his store, “but we didn't really do our homework there, because the Penske deal looked so good.”

Saturn dealers have been “holding on by a thread” since GM announced it was divesting itself of the brand, says George Nahas, who owns two Saturn stores in Florida and Alabama.

“When they make an announcement like that, it damages the brand,” he says. “Customers have stayed away. There isn't a Saturn dealer whose sales haven't tanked. We've been handcuffed for months.”

Through September of this year, Saturn sales were down 60.2%.

Nahas was a single-point Oldsmobile dealer. When GM killed off that brand, he acquired the Saturn stores.

“At least with Oldsmobile, they did it in such a way that you had five years to figure out something else to do — and you received adequate compensation,” he says.

Saturn dealers who signed a wind-down agreement with GM will receive between $100,000 and $1 million in financial assistance, depending on their particular business, says GM spokesman John McDonald.

“With only about 350 Saturn dealers, this is not a huge financial issue in the bigger scope of dealer consolidations,” he says.

Nahas had faith in a Penske-GM deal. “We thought Roger Penske would revive the brand,” he says.

But his confidence was shaken a couple of days ago when he received a Federal Express letter from GM saying the deal, which was supposed to be finalized in September, would likely be delayed until mid-November.

“I was livid when I got that letter, and now they make the announcement that the whole deal is off,” Nahas says. “Dealers should not have been strung along, taking the losses. We're the ones who drank the Kool-Aid.”

Nahas hopes to sell another auto maker's vehicles at his stores. “After 30 years of selling nothing but GM products, I expect to be in competition with them,” he says. “We'll land on our feet. At this point, I'm more concerned about my employees than myself.”

Expressing guarded optimism is Carl Galeana, who owns two Saturn dealerships in Michigan, in addition to other brands' dealerships in three states.

“Roger did the best he could, and now we are going to have to move on and work on other things,” he says.

Saturn stores, all relatively new and modern, would make excellent potential outlets for other franchises, Galeana says. “There are a lot of good dealers and good facilities.”

Lam says he thought all along that a better alternative for Saturn stores would be for them to serve as outlets for Chinese or Indian auto makers who plan to come to North America to do business here.

“It would have given them a head start, but now a lot of valuable time has been lost,” he says.

The failed Penske deal demonstrates “there are inherent long-term difficulties for a distributor without production capacity to come up with product,” Lam says.

He's glad he got out when he did. “Terminating Saturn has allowed us to focus on other things,” he says.

Saturn, which began as a ballyhooed novel way of doing business, now nears a sad end.

“Despite being widely acknowledged as one of the best, most customer-friendly dealer organizations in the country, Saturn is now taking that last turn in what has been a slow, bumpy road of decline after a very promising beginning just 20 years ago,” says Jack Nerad, executive editor and market analyst for Kelley Blue Book.