Penske-Saturn Deal Falls Through – The Full Report
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When GM filed for bankruptcy protection in the summer of 2009, it made a deal with the Federal Government to trim down its brand portfolio. Certain brands were to be phased out (Pontiac) and other subsidiary brands were to be sold off (Saab, Hummer, Opel). Saturn fell into the latter grouping and the (old) GM crew has been looking for a suitor for the brand ever since. Saturn was planned to be sold to the Penske Automotive Group (of Roger Penske fame). To everyone’s surprise, the deal fell through at the final hour on Wednesday.
The purchase of Saturn by Penske Automotive Group was called off for multiple reasons, none of which were related to GM. Here’s how Mr. Penske described it:
Penske Automotive Group negotiated the terms and conditions of an agreement with another manufacturer, However, that agreement was rejected by that manufacturer’s board of directors. Without that agreement, the company has determined that the risks and uncertainties related to the availability of future products prohibit the company from moving forward with this transaction.
Basically, the Penske Automotive Group wasn’t able to secure the vehicles it needed to sell from “another manufacturer.” Sources close to the deal have let us know that this other manufacturer is none other than Renault, the French auto giant that, due to its unique partnership (ownership) with Nissan/Infiniti, is the world’s 4th largest auto maker.
I’d propose two reasons as to why Renault’s board of directors declined the Saturn deal:
1. Renault is considering an entrance in the U.S. market with its own set of products, badged under the Renault name. Supplying Saturn with Renault models would work against that goal.
2. Renault doesn’t want to enter the U.S. market directly, but already has done so through Nissan (Versa, Cube, etc.). Providing Nissan/Renault models to Saturn under the Saturn badge doesn’t make sense from a strategic point of view.
The fact that the deal fell through is a big loss for GM and its shareholders (the U.S. Government and in turn – U.S. taxpayers), as GM will most likely need to buy out the 350 Saturn dealers, spending even more money.
Moreover, I have to wonder what the Saturn-Penske value proposition would’ve been if the deal had gone through. Selling rebadged versions of other manufacturers’ cars, especially those that are already available in the U.S., isn’t exactly a formula for success. In fact, that’s what put Saturn on the selling block in the first place: the Saturn Outlooks was essentially the same vehicle as the GMC Acadia/Buick Enclave/Chevy Traverse, the Saturn Aura was a Chevy Malibu… the list goes on and on. Competing for the same buyer with a different name plate is an ineffective strategy since, among other things, the R&D and marketing costs must be spread out across different brands rather than being focused on one single brand.
We will be covering this story in more detail on this week’s GM Authority podcast, with an exclusive view from inside the Saturn-Penske developments.
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