Saturn turns 10

Spring Hill, TN -- A new "employee" on the assembly line makes a mistake. While trying to fit a speaker into a door assembly, he accidentally drops it, then tries to put it into the door anyway. Others on his work team grab him and gently admonish him to scrap the part. The worker, Al Serra, gets concerned and asks what the junked part will cost the company. The team leader tells him not to worry, but it doesn't help.

Agitated, he pulls out his checkbook and demands to know the exact cost so he can reimburse the company. His fellow team members refuse to acquiesce, even though they know the new guy can afford it. After all, he owns a number of car dealerships, including a profitable Saturn store in Clarkston, MI. He's just working on the line today for fun.

This anecdote often is repeated by Saturn executives, who say it's just another day at the company that uses "A different kind of car. A different kind of company" tagline on its ads. Critics argue the car really isn't all that unique. Even the newly restyled '96 models don't look much different from the horde of small, fuel-efficient cars they compete against.

But spend only a few minutes at a Saturn dealership, or at its massive factory here in middle Tennessee, and you'll quickly realize it's not a conventional carmaker. From dealership owners who work the line, to its sport-shirted executives and irrepressibly friendly and concerned factory workers, Saturn -- the company -- indeed is different.

It has been more than 10 years since this experiment was born on Jan. 7, 1985, as an independent subsidiary of General Motors Corp. -- a grand vision of former Chairman Roger B. Smith, who was under heavy fire at the time for making deals to sell GM-badged Japanese-made small cars in the U.S., and by inference "giving up" on America and its workers' ability to produce world-class products.

He called Saturn a "clean sheet of paper" approach to making profitable small cars in the U.S. and allocated $1.9 billion on the plant and $3.5 billion overall for the project, which was to re-establish GM in the fiercely competitive entry-level auto market worldwide.

During June Saturn reached a major milestone as the millionth model rolled off the line.

It was a huge gamble, but by most measures Saturn has done the job. Young import buyers love the car, and it's selling at record levels. Saturn dealers are profitable and workers are happy: They get a big say in workplace decisions and got bonuses totalling $3,245 in 1994 while the rest of GM's hourly workers brought home $550. And Saturn in June won the top spot on the most recent J.D. Power sales satisfaction index (SSI), beating out even Lexus and Infiniti with the highest score ever recorded.

Even so, as the company looks to the future it remains controversial both inside and outside GM. There are published reports the company intends to add a larger sedan to its lineup -- based on the new 1996 Adam Opel AG Vectra -- and build 200,000 annually by 1999 at a Wilmington, DE, plant scheduled to be idled.

Saturn President Richard G. (Skip) LeFauve, who now also heads up GM's Small Car Group, won't comment on future product plans. However he acknowledges that Saturn -- like Opel -- is working with GM's European technical development center to look at possibilities for world-car designs. That group engineers vehicles for a variety of far-flung GM-controlled organizations, including Saab in Sweden, Vauxhall in the U.K. and GM Holden's in Australia. "It's not an Opel thing, it's really a European engineering organization. We're all in the small car business and we're all looking at ways we can utilize common systems in the future," he says.

But other GM divisions fret that any further Saturn expansion might well cannibalize their sales. Early complaints on that score have died down, division sources tell WAW, but it's unlikely another 200,000 Saturns would be carved out of competitor's hides without some damage to GM's other divisions.

Other longer-term questions, cited by a variety of competitors, Wall Street analysts, former employees and car reviewers also continue to nag: Can Saturn maintain currently enviable momentum as its baby-boomer clientele ages? Can it avoid having its unique culture smothered by GM or UAW executives who don't like Saturn's innovative, some would say cozy, agreement? Can it spread its successes and "Saturnize" the rest of GM as originally planned?

Nevertheless, no matter how you look at it Saturn has accomplished plenty during its decade of existence. Unlike Japanese automakers that set up carmaking operations in North America, Saturn didn't recruit workers from tens of thousands of heavily screened, farm-fresh faces. Although applicants were carefully evaluated, Saturn still got the bulk of its 8,000 workers from deeply entrenched GM/UAW ranks -- many of whom were laid off because of factory shutdowns and had few alternatives.

"I think what we've done is proved that if you can build a culture and a company around people values, that it really does result in customer enthusiasm -- which basically is what business is all about," says Mr. LeFauve.

"People values." It's all part of a new-age sounding language best described as Saturn speak. Dealers are retailers, people who build cars aren't unskilled hourly workers, but operating technicians, or just plain "car builders."

"Wherever we have an expectation that is different from the norm, we use a different title. We try to destroy stereotypes," says Tim Epps, whose official title is vice president of people systems. "Vocabulary is one of the ways you change a culture, one of the ways you walk the talk."

Among Saturn's successes:

* Sales this year through May were up 17.5% compared with the same period last year while the segment Saturn competes in -- upper small -- is off 14.4%, says Ward's Automotive Reports. This performance also comes without resorting to heavy incentives many of its competitors have been forced to offer.

* High quality and customer satisfaction rates. Besides Saturn's recent J.D. Power SSI victory, both new and used Saturns were rated among the top vehicles for reliability and resale value in the April 1995 edition of Consumer Reports Auto Issue.

* Astonishingly loyal customers: 44,000 owners and their families attended the company's homecoming celebration here a year ago. Despite heavy rain, the event was ballyhooed as a winner in cementing ties with customers. At least two attendees had tattoos of the Saturn Logo applied to their arms before leaving. More importantly, Saturn says 60% of all owners already have purchased a second Saturn and 80% say they will consider purchasing another one.

* Profitability. Saturn officials say the company posted its first operating profit (before taxes and interest) in 1993, and continues to make money, but they refuse to release specific financial data.

* Price hikes on the restyled '96 sedans are expected to hold at a modest 2%, or slightly over $200.

* Saturn's thermoplastic vertical body panels -- considered unnecessary by many engineers and marketers -- have turned into a huge product virtue. Because they don't rust and resist dents so well, many owners say they wouldn't buy another car without them.

But Saturn is not without warts. Among them:

* A limited product line. Customers looking for vehicles Saturn doesn't offer are supposed to migrate to Oldsmobile, which now is implementing many of Saturn's marketing and sales techniques such as nohaggle pricing. However, no clear mechanism exists for doing this, and there are absolutely no plans to somehow combine Oldsmobile with Saturn, says Mr. LeFauve.

* Lack of larger vehicles. Some analysts and Saturn insiders worry about losing its baby-boomer clientele for lack of a larger upscale model. This may be remedied by the Opel product in a few years, but the void may not be as important as some analysts think. With middle-class incomes stagnating and many consumers increasingly choosing to spend discretionary income on non-automotive items such as computers and home entertainment systems, some evidence suggests owners will choose to remain where they are on the price ladder. Donald W. Hudler, vice president-sales, service and marketing, points out that Saturns often are second or third cars chosen for their low cost and utility. "We sell a surprising number of cars to retired people," he says. "A lot of those folks won't be moving up."

* Lackluster styling. Styling is way down the priority list of a typical Saturn buyer -- well below features such as quality, reliability and price. But critics point out there are limits to even Saturn buyers' boredom level, and more interesting styling from Toyota, Honda and others could put Saturn at risk in the future.

* Buzzy engines. They are reliable, wonderfully fuel efficient and reasonably powerful, but Saturn's engines are heavily criticized for having poor noise/vibration/harshness (NVH) characteristics -- and just generally being too noisy -- despite numerous improvements. One solution, an inline 6-cyl. boasting inherently excellent harmonic balance, apparently is being eyed by Saturn. A spy photographer for Ward's Engine and Vehicle Technology Update recently photographed such an I-6 fitted into an existing Saturn.

* Union troubles. Saturn UAW Local 1853 often is cited as being the union's most innovative and forward-thinking, thanks largely to the drive and charisma of President Mike Bennett. Many Saturn UAW members like to brag that it's difficult to tell who's union and who's management at contract bargaining sessions. However, Mr. Bennett and Saturn's local agreement are under heavy fire by conservative forces within the UAW's top ranks -- and at Saturn in Spring Hill -- who consider the agreement a sellout and want a contract closer to those at other GM plants.

Incoming UAW President Stephen P. Yokich has frequently criticized the Saturn agreement. However, opinions are mixed as to how Mr. Yokich's rise to the UAW's top spot will affect Saturn. Some union insiders downplay the impact, saying his new responsibilities may focus his attention away from Tennessee.

So is it a success? Consider Saturn's mission statement, displayed by workers on the October 1990 cover of Ward's Auto World:

"Market vehicles developed and manufactured in the U.S. that are world leaders in quality, cost, and customer satisfaction through the integration of people, technology and business systems and to transfer knowledge, technology and experience throughout General Motors."

Even Saturn's severest critics would likely admit the automaker is fulfilling the first part of its mission. It's the second part, transferring its successes to the rest of GM, where critics say Saturn has fallen flat.

Besides sales and customer satisfaction victories -- and keeping a lid on prices -- Saturn's grabbing young import buyers. Mr. Hudler says nearly 50% of Saturn owners indicate they would have purchased an import such as a Honda or a Toyota. And 73% say if it had not been for Saturn, they would not have purchased a GM product.

Thanks in part to the strong yen, Saturn also seems poised to fulfill the "world leadership" aspect of its mission. It has developed right-hand drive (RHD) versions and plans to market them in Japan through exclusive Saturn stores as early as 1997. It also likely will export to other RHD markets as well, such as Southeast Asia. Saturn already sells about 3,000 cars annually in Taiwan. Its small (1.9L) fuel-efficient engines are well-suited for international markets where gas is expensive and engines over 2L are taxed heavily. Most other GM small cars, such as the Chevrolet Cavalier, are equipped with engines larger than 2L.

Critics, mostly at competitors or Wall Street, still say GM's investment in Saturn will never pay off -- considering the number of cars and profit it produces -- to ever be considered a financial success. Former Ford Chairman Harold A. Poling was fond of saying that Saturn could build cars for 40 years and never make a dime of real profit.

But Mr. LeFauve says that's unfair. "A lot of what was spent on Saturn was pure development costs -- try these things and see what happens ... That's a little like being critical of your research department," he says. "There was some money spent there, but if you eliminate the monies spent just on development and look at the investment in facilities, ($1.9 billion), you could look at us as a profitable unit."

"One thing we'll never know is how good a vehicle Saturn could have been, and how profitable a vehicle it could have been if they had used somewhat more conventional fabrication and assembly techniques," says Joseph S. Phillippi, an auto analyst at Lehman Brothers Inc.

Mr. Phillippi says it's too soon to assess whether or not the entire Saturn exercise has been worth the effort.

"Was the money well spent?" he asks. "The real answer will come over the next several years in the things Saturn does in customer satisfaction and if Saturn values get translated into the rest of GM, mostly on the retail side of the house, as opposed to the production side."

Saturn officials say they already have transferred much of what Saturn has learned to the rest of GM and that outsiders just haven't noticed yet. Mr. Hudler says he spends a third to a fourth of his time working in "other parts of GM."

Mr. LeFauve, in addition to being president of Saturn, now is GM's group executive in charge of small cars. He says this, along with having numerous new North American Operations (NAO) executives on Saturn's board of directors, enables both companies to better coordinate product strategies and trade information.

From a business standpoint, or even according to Saturn's own mission statement, it probably is too soon to call Saturn an unqualified success. But as sales remain strong, details of a global strategy continue to leak out, and GM's overall customer satisfaction shows marked improvement, it sure doesn't look like a loser.

June 15, 1982

Alex C. Mair, then vice president of what is now GM's Advanced Engineering Staff, summons engineers to discuss a new, innovative "small car project."

November 3, 1983

Saturn project announced publicly by GM Chairman Roger B. Smith.

January 7, 1985

GM announces addition of new automotive operating unit -- Saturn Corp., a wholly owned subsidiary.

February 4, 1985

William E. Hoglund appointed new Saturn president.

June 1985

Saturn marketing begins to study customer requirements for new vehicle line.

July 26, 1985

Historic new labor agreement for Saturn reached between GM and the UAW.

July 30, 1985

Selection of Spring Hill, Tenn., as site for Saturn's manufacturing facility.

February 1, 1986

First Saturn team members move onto Spring Hill site.

February 3, 1986

Richard G. (Skip) LeFauve named president of Saturn Corp.

November 1986

First Saturn UAW technicians are recruited for permanent employment.

May 27, 1987

Saturn announces innovative distribution system and retail strategy.

July 1987

First Saturn-intent vehicle built with all thermoplastic panels, excluding steel roof and hood.

December 7, 1987

GM board approves $1.9 billion for plant construction, equipment and tooling.

February 1988

Saturn begins recruiting the first of 3,000 workers for its Spring Hill plant.

January 29, 1989

Saturn announces first franchise agreements with 26 automobile retailers.

July 19, 1990

Saturn announces that it plans to have more than 130 retail outlets (dealerships) operational by mid-1991 in 33 states.

July 30, 1990

GM Chairman Roger B. Smith and UAW President Owen Bieber drive a red metallic 4-door sedan off the final assembly line in Spring Hill.

October 25, 1990

First saleable vehicles available at Saturn retailers.

May 10, 1991

Saturn voluntarily replaces 1,836 cars due to improperly formulated coolant.

March 1992

Saturn ranked as No. 1 in new-car sales per facility in 1991, averaging 776 units, the first time in 15 years a domestic nameplate tops the list.

April 28, 1992

First shipment of Saturn vehicles leaves California port bound for Taiwan.

March 1993

According to an industry survey, Saturn averaged 1,072 new-car sales per retailer in 1992. Honda was second with 654.

June 10, 1993

Saturn Corp. announces an operating profit for the month of May 1993 -- the first profitable operating month since it began manufacturing cars in July 1990.

June 14, 1993

Implementation of a 2-shift/3-crew/6-day production schedule begins at the Spring Hill complex.

September 16, 1993

Saturn produces its 500,000th car.

January 1994

Saturn announces that it realized an operating profit (before taxes and interest) for calendar 1993.

June 23-25, 1994

44,000 Saturn owners and their families attend the Saturn Homecoming in Spring Hill.

July 1994

Saturn's 300th retail facility opens.

October 4, 1994

In an effort to enhance its competitiveness, GM North American Operations announces formation of the Small Car Group, formalizing a strategic relationship between Saturn and the Lansing Automotive Division.

January 4, 1995

Saturn announces record sales were established in 11 of 12 sales months during 1994. In addition, total 1994 calendar year sales were 286,003 vehicles, a 25% increase over the 1993 calendar year.

June 1995

Saturn produces its 1 millionth car.