Thursday, May 14, 2009

Could Saturn Outlive GM?

In one of the biggest ironies of the General Motors saga, it is beginning to look as if Saturn could outlive its parent company. GM shut down the Saturn factory five years ago, pulling the rug out from under the Saturn brand image of manufacturing quality. In February, GM listed Saturn as one of several nameplates it was likely to discontinue. Yet the good vibes left over from the old Saturn might be enough to keep the company alive.

The most likely scenario being floated now is that a group of Saturn dealers, working together with another buyer from within the auto industry, could buy Saturn and use its name and distribution network to sell cars made by another manufacturer. No specific automaker has been named, but these days, any major automaker would have enough excess factory capacity to supply Saturn with cars, and it wouldn’t take anything special to make cars that mimic the style and form factor of the original Saturn models, and attach a Saturn nameplate.

Saturn dealers are looking to arrange this because many of the Saturn dealers are nicely profitable. Yes, Saturn sales are down about 60 percent from their peak, but because Saturn has a rational distribution network, this isn’t the crisis that it is at the other GM divisions. A few Saturn dealers have closed, but most remain profitable. And these days, if you have a way to sell something to the public at a profit, it makes sense to find a way to keep that going. Saturn the company has been losing money, but it ought to be profitable too, once freed from its GM manufacturing obligations.

Meanwhile, the prospects for GM keep declining along with the world economy. Regardless of how General Motors accomplishes its restructuring this summer, it needs a rebound in sales to keep its factories going, and that rebound does not appear to be on its way.