The iPod of the Industry: How GM Starved Saturn
In 1985, General Motors did something it had not done since 1918.
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The iPod of the Industry: How GM Starved Saturn
Episode guide
In 1985, General Motors created a separate car company and put roughly $5 billion behind it. Saturn was built to take buyers away from small Japanese cars. It had its own plants, its own labor agreement, its own dealer network, and one price with no haggling. The brand started selling cars in 1990 and was a genuine hit with customers. It never got the product line to match.
This episode reconstructs the decision moment. The viability plan GM handed the U.S. Treasury on February 17, 2009 put Saturn up for sale or phase-out, and stopped new vehicle development for it. Underneath that sits the longer decision: GM's mid-1990s choice to support its other brands over Saturn. The episode follows the dissent as it was actually written down, from Saturn's general manager's letter to about a million and a half owners to dealers volunteering their own money for a spin-off. Then it follows the outcome, including the buyer who signed and the committee in Paris that ended it. It closes with a counterfactual that survives contact with the numbers.
What to listen for
- Why one sentence in a government filing was the real decision: sale or spin-off possible, otherwise phase out at the end of the current product lifecycle. The more consequential part was reported separately — no more new vehicles would be developed for Saturn.
- How a five-year freeze on new product, described by GM's own executives, shaped everything that came after.
- What the dissent actually argued, and what counter-evidence GM had in the same room.
- Why the rescue deal collapsed on a supplier's math rather than on Saturn's customers or its dealers.
- What the disciplined counterfactual claims, and what it deliberately does not.
Evidence in this episode
General Motors' directors approved Saturn as a separate company at a meeting in New York in January 1985. It would have its own plants, management structure, labor contract and dealer network. The plan called for about $5 billion in assets, roughly 20,000 employees, and a goal of 400,000 to 500,000 cars a year. 1
The project began inside GM in 1982 and was announced as the Saturn Corporation on November 3, 1983, with $150 million of initial capitalization. Chairman Roger Smith called it the key to GM's long-term competitiveness and a learning laboratory for the rest of the company. The UAW executive board approved Saturn's separate labor agreement on July 26, 1985. Saturn sold 74,493 cars in 1991 and 196,126 in 1992, and ranked behind only Lexus and Infiniti in a 1992 J.D. Power customer satisfaction survey. 2
GM's filing with the U.S. Treasury on February 17, 2009 reported the Saturn review as complete: "sale or spin-off possible; if not, phase out the brand at the end of current product lifecycle." The plan named Chevrolet, Cadillac, Buick and GMC as GM's four core brands, set an 11.5 to 12.0 million-unit break-even for North America, and described an industry down about 40 percent from its 2005 peak. 3
The New York Times reported the next morning that GM planned to phase out Saturn by 2012, and that it did not plan to develop any more new vehicles for the brand. The same account records the earlier decision: GM executives decided in the mid-1990s to support GM's other brands over Saturn. The consequence was five years without a new vehicle in the Saturn lineup, despite dealers' pleas for bigger vehicles, and Saturn's second product did not arrive until 1999. The report also carries CEO Rick Wagoner's line that the timing was "a cruel twist of fate at a time when Saturn is loaded up with a fantastic product portfolio." It records the letter to dealers signed by Mark LeNeve and Jill Lajdziak, and GM's more than $1 billion Oldsmobile dealer buyout as the precedent for closing a brand. 4
At the Detroit auto show in January 2009, GM North America president Troy Clarke acknowledged the brand had been built but never made to earn its way: "We created a heck of a brand. We created the iPod of the industry. We just never finished the job in balancing its cost structure." The same report dates Saturn's second product to 1999. It describes the Ion as having fizzled after reaching dealers in 2003, and counts 409 Saturn stores in the U.S. 5
Saturn general manager Jill Lajdziak wrote to about 1.5 million owners. Her letter confirmed that GM and Saturn would investigate a spin-off of an independent Saturn Distribution Corporation, the entity the retailers held their franchises with. Under the plan, it would source products from GM through 2011 and from other manufacturers after that. Saturn formed a study group of retailers, GM employees and consultants, and asked dealers to make no decisions for 60 days. 6
Ward's reported that several Saturn retailers volunteered to invest in the spin-off. It also reported that GM's updated Treasury filing showed Saturn, Saab and Hummer generating an average annual pre-tax loss of $1.1 billion, with Saturn contributing about $3 billion in revenue since 2003 against Chevrolet's $88 billion. Analyst Erich Merkle said only Lexus dealers ranked above Saturn's on customer satisfaction, and called that "the real travesty of this situation." Dealer Jim Cimino said the brand was worth saving, because it had set new standards by separating from GM's standard procedures. 7
A 1995 J.D. Power sales satisfaction study found more than 90 percent of Saturn owners were very satisfied with the way their vehicle was sold and delivered. That was far above the industry average. 8
GM and Penske Automotive Group confirmed the proposed sale of Saturn on June 5, 2009. Both companies said the deal would save more than 350 dealerships and 13,000 jobs, with GM continuing to build the Aura, Vue and Outlook on a contract basis. GM also stated that Saturn had sold more than 4 million vehicles since 1990, and that more than 80 percent were still in operation, citing R.L. Polk data. 9
Penske ended the talks on September 30, 2009, after another manufacturer's board rejected the agreement to supply vehicles. GM CEO Fritz Henderson called it "very disappointing news," and credited the employees and Saturn retailers who had tried to keep the brand alive. 10
Renault confirmed it was the manufacturer. Chief spokeswoman Frederique LeGreves said the business case "just didn't add up," and that the decision came from the company's executive committee rather than its board. Penske's Tony Pordon said the group had spent four months negotiating and could not sign without a supply agreement. 11
The Congressional Research Service's account of the auto industry restructuring records that GM discontinued two brands, Pontiac and Saturn, and that GM dealer contracts ran out in October 2010. 12
References
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- 2Encyclopedia.com, Saturn Corporation
encyclopedia.com
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- 7WardsAuto, Can Car Dealers Save Saturn?
wardsauto.com
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- 12
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