By on October 8, 2009

Hind(enberg)sight is always 20-20 (courtesy:consumerreports)

Penske Automotive’s official explanation for pulling the cord on Saturn was that they couldn’t get a supply deal. Renault-Samsung figured the risks of supplying a reborn Saturn were high, while the reward was (at best) competition with established Nissan offerings.  But Roger Penske was putting his company out on a limb as well. Penske Automotive stock had been bid up in the days before the Saturn deal fell apart, as speculators sought to get in on the ground floor of the new company. As usual though, the speculative bid-up was based more in hype and long-term potential than underlying financial realities. Despite a losing over $3 in share price after the collapse of the Saturn deal, Penske’s forbearance is being rewarded. Standard and Poors had put Penske on a credit-rating downgrade watch on fears of the firm over-leveraging to take on Extreme Makeover Saturn Edition. With the deal called off, Penske stock might not have the speculative upside it once did, but it has already doubled this year. And backing away from a potentially messy revival of a troubled brand has PAG headed out of the credit-rating doghouse. And as the man himself has said, “my dad told me a long time ago, it’s not what’s good for you Roger, it’s what’s good for the company.” Meanwhile, Pete “Autoextremist” DeLorenzo figures the Saturn network would make a good upscale network for Hyundai’s Genesis and forthcoming Eqquus lines. A whole network for two vehicle lines? I wouldn’t be holding my breath. Luckily Saturn dealers have had a few years to get used to being unwanted.

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25 Comments on “Why Penske Let Saturn Die...”


  • avatar
    paul_y

    It’s a bit disappointing, but A) not a huge surprise, and B) a fairly logical decision.

  • avatar
    dwford

    Completely logical. Why bring a new competitor into a shrinking market? Made no sense.

  • avatar
    pete

    DeLorenzo must be nuts (so what’s new?) – has he seen some of the Saturn dealerships. They’re far from being anything near upscale. Hyundai can and will do much better to look elsewhere. If they bite you can start a deathwatch…

  • avatar
    Paul Niedermeyer

    What DeLorenzo actually said was that the Saturn dealers should just carry the Equus, not the Genesis. Hyundai is projecting Equus sales of 1-2k per year. Think a Saturn dealer could live on three or four cars sold per year?!?

  • avatar
    Edward Niedermeyer

    Paul: I was giving Sweet Pete the benefit of the doubt. Even with Genesis and Equus combined though, I doubt many Saturn dealers would be falling over themselves to see this happen. Oh well, selling used cars might be… exciting.

  • avatar
    Gardiner Westbound

    Can’t imagine Saturn dealers acquiescing to losing the hot selling Genesis.

  • avatar
    JSF22

    Come on. Roger Penske? The CAPTAIN? The main who makes things happen through sheer force of will? The man who actually made f****** Detroit hold a Super Bowl without a flaming disaster? The man who NEVER takes no for an answer when he wants something? Taking NO — and taking it IMMEDIATELY when the frogs said no? Trust me on this — he had come out of the ether and was just waiting for the first off ramp. He must be somewhere on his Gulfstream 550 tonight thanking his lucky stars that he did not have to go through with this disaster.

  • avatar
    lw

    Penske spent a few bucks to put the deal together and I’m thinking he had two options in mind.

    1) The global economy is “fixed” by all the government intervention and 2 years into the mess things start to turn around. Combining the Saturn dealer reputation with some sweet products sourced from various manufactures could be a huge profit engine if sales returned to 16M in the USA. Chrysler and GM are severely wounded, so a dynamic Saturn brand could have a real shot at grabbing some serious market share in a 16M market. Remember A LOT of experts predicted that unemployment would hover around 7% at the peak.

    2) Things don’t turn around and he walks away.

    A very smart bet with limited downside.

  • avatar
    gslippy

    Maybe he also thought twice about his chances of turning a profit at Saturn for the first time ever.

  • avatar
    Stu Sidoti

    Some smart OEM is going to figure out that for 10+ years running, Saturn dealers have consistently been in JD Powers’ top five for overall dealer satisfaction, often rivaling Lexus dealer’s scores. Considering they are always spotting the Lexus dealer their posh digs, the Saturn dealers must be doing something right.

  • avatar
    tscurt

    JSF22 has this pegged. I’m surprised Penske considered it (taking on Saturn) from the beginning.If the plan was to sell a rebadged something-or-other until they could design a car that would be built by someone else, that would’ve been awfully shaky. Chrysler territory shaky.

  • avatar
    willbodine

    I’m a little surprised that “the Opel situation” wasn’t part of the Penske vision for Saturn. After all, the Astra and Aura are Opels. I would think that the new owners would try to build on that particular strand of DNA. What would make a Renault appealing to the existing Saturn owner base? As I recall, they were a pretty loyal bunch. Just sayin’…

  • avatar

    Even ten years ago Saturn dealerships were mostly used car retailers more than new cars.

    When I lived in South Dakota the only Saturn dealer was in Sioux Falls and stocked rows and rows of late-model used cars. Maybe two rows of new Saturns. That’s it.

    When I moved to Phoenix I noticed the same thing. Every Saturn dealer had many more used cars than new Saturns to sell.

    For those dealerships that stay in business used cars might not be a bad way to stay in our economy.

  • avatar

    willbodine, the only real Opel GM sold through Saturn was the Astra. The Aura is actually a Chevrolet Malibu/Pontiac G6 styled to look like an Opel. The Outlook was an Opel-styled GMC Acadia/Buick Enclave. The Sky was a Pontiac Solstice. The VUE was a rebadged Daewoo. Not much Opel in Saturn’s last product line.

  • avatar
    Ken Elias

    Penske’s auto dealerships don’t have any “low end” brands. He does control the “Smart” distribution in the USA but that’s going nowhere fast. So the concept of a line of cars that don’t compete with his public group (PAG) made sense to cover the bases.

    The problem was the lack of a supplier – clearly Renault’s board realized it didn’t make sense to make the kind of investment needed to federalize Renault’s line up (through its underutilized Korean affiliate) only to compete with its 44% stake in Nissan in the same market. Better to help Nissan at a lower cost and gain value there rather than take a bigger risk with Penske.

  • avatar
    Rix

    Luton:
    I believe the photograph to be taken in front of Hangar 1 at Moffett Field in Mountain View, California. Hangar 1 was built in order to house the US Navy’s experimental zeppelin flying aircraft carrier, the USS Akron. The Akron airship was lost at sea in the early 1930’s. It is quite a building and can be viewed from Highway 101; it is a landmark in Silicon Valley.

  • avatar

    It’s interesting that nobody has commented on how the Renault board didn’t support Carlos Ghosn and what that portends for Renault-Nissan and the relationship between the BOD and the CEO. Ghosn is used to getting his own way and can’t be happy that his board cut his legs out from under him.

  • avatar
    JSF22

    It’s interesting that nobody has commented on how the Renault board didn’t support Carlos Ghosn and what that portends for Renault-Nissan and the relationship between the BOD and the CEO. Ghosn is used to getting his own way and can’t be happy that his board cut his legs out from under him.

    I wouldn’t wholly discount the possibility that the board’s disapproval was, let’s say, engineered. You typically don’t go into the boardroom unless and until you have greased the outcome. I wouldn’t be completely shocked to learn (if the story ever comes out) that Penske and Ghosn had decided to pull the ripcord and the lack of board approval was their out without Penske breaching his contract with GM.

  • avatar
    Samuel L. Bronkowitz

    Very, very sad to see Penske drop out. I’ve got family members that are loyal Saturn buyers, and for their sake I’d hoped Penske would save the day.

    As for Pete’s take on this… why on earth would Hyundai want any of GM’s table scraps? They seem to be doing very nicely on their own, thank you. While it might make sense to an accountant for Hyundai to pick up some Saturn dealers and thus lower start-up costs, from a brand perspective I think it’s an epic fail. If Hyundai’s going upscale they sure don’t want to be associated with an entry-level line like Saturn, even indirectly.

    I used to enjoy Pete’s work, but at this point I think it’s time for him to get some stronger meds.

  • avatar
    Rod Panhard

    I wouldn’t make any assumptions about who Penske talked to about building products. What we know is that everyone seemed to think it was a “done deal” until the last moment when it appeared that the wheels fell off. This means it was no where close to a done deal with Renault or anyone else.

    What we do know is that GM planned to cut off the supply of product in two years, which left very little time for any manufacturer to redesign or redevelop their home market products for use in the US. We also know that every automobile manufacturer with experience building cars for the US market currently has overcapacity in production. So in a lot of ways, that made it a “buyers market” for Penske. But at the same time, every one of those manufacturers knows how long it takes to repurpose product for the U.S., and there’s no way it fit into their product plan.

    Meanwhile, we all know a lot of car dealers are struggling, and Smart sales aren’t what they used to be. Penske’s plate is more than full, and it’s a safe bet that those factors had to contribute to his decision.

    From my perspective, there was No frickin’ way this deal could have happened, unless GM extended their production timetable for the current Saturn products. GM couldn’t afford that, and Penske couldn’t afford to keep his dealers open for a year without competitive new products.

    So the next question is, we know how long it takes to develop products for the U.S. market. Why on God’s Green Earth does anyone, ANYONE, think Fiat can bring their products to the U.S. in short enough order to save Chrysler? Who, WHO I say, will buy warmed-over reskinned Dodges in two years when the current products aren’t competitive. The answer is “employees, retirees, and friends of family.” That’s not enough to keep Chrysler alive.

    It’s the exact same question Penske faced. The man has a reputation for being able to do anything. But he said, “Ain’t gonna happen.”

  • avatar
    superbadd75

    Wasn’t Saturn, at one point, a whole dealer network for 2 vehicle lines? Sure, it’s a bigger network now, — or maybe not with dealer culls and Saturn dealers withering away on their own — but they need to do something, why not take over some exisiting buildings? I can’t imagine why Hyundai would keep selling their upscale products in the same showrooms as Accents and Sonatas. If they want to truly move up the ladder and compete in the luxury market, they need to seperate those models.

  • avatar
    DweezilSFV

    Mr. Panhard: at least Fiat has something to sell: trucks,vans,etc. After 2 years Saturn would have nothing. Apparently work has been continuing on the 200C and the new Jeep is set to debut. The Pentastar V6 is nearly ready as well.

    With all due respect, there’s a lot going on there @ Chrysler especially in comparison with what Saturn would have to offer in 2 years.

    As a matter of fact, the intention by GM was to end all Saturn products after the 2009 build out, a claim that was made in a statement some time before Penske got involved.

    Me? I was hoping to buy a Korean made non GM Saturn as a big Fung Gu to GM, so I am a Little disappointed.

  • avatar
    Autosavant

    Is Penske getting senile and losing his touch?

    After his horrible blunder with the “Dumb” (aka the “Smart” covered scooter), who would have been a blunder from day one if not for the oil price spike in mid-08), he wasted his time with that loser Saturn. WHY? he should not ever have touched it, let alone waste so much time and effort before, as he should, dropping it.

  • avatar
    Geotpf

    I don’t know what De Lorenzo is smoking with his “Hyundai will buy Saturn thing”. First, Saturn is no longer for sale. Second, there’s no indication that Hyundai is even vaguely interested. Third, his idea is completely retarded.

  • avatar
    toxicroach

    Geotpf: De Lorenzo has been in full on Hitler-in-the-bunker delusional psychosis for a while now. He will advance any half-assed idea that might help save Detroit without regard for logic, common sense, or the laws of physics.

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