Astra

Why No Blastoff?
Jerry Flint 

The word drifting from Detroit is that General Motors' Saturn division is on the line:
Show some signs of success or be set aside to die.

This does not mean an announcement that General Motors is killing the Saturn brand. GM's present managers
have had more experience wrecking car brands than building them, and they learned an expensive and painful lesson
when they discontinued Oldsmobile. No, the new strategy is to starve a car line of new product until the business just
disappears.

I personally believe that Saturn has enormous potential today, so what is the trouble?

Saturn, launched by GM in 1990, to win back sales from low-priced Asian small cars, was an instant success, but the
GM bureaucracy despised the division, the inspiration of then-chairman, Roger Smith, who was unpopular within the company.
Second, Saturn's creation drained money from other divisions. When Roger Smith retired, GM neglected Saturn, even though
it was a hit with the public.

The shame was that Saturn was not just a car, but also an idea that the company could do things differently.
The company aimed for cooperation and trust in worker-union-management relations; the showroom was a place of square
dealing; and it charged fixed prices for the cars, with no haggling.

For a decade, GM restricted Saturn to just a single lineup of small cars, with just modest freshening of the models.
When Saturn finally expanded the lineup, the new vehicles were less than adequate. No wonder that annual Saturn sales
hit 300,000 shortly after Saturn's initial launch and then began to decline.

Saturn, which started as an independent company, was gradually stripped of everything that made it unique--its independent
operations, its separate Tennessee headquarters, its own factory and its separate union contract. Today, Saturn is just another
GM marketing unit, like all the others. Starting this fall, GM will build a new Chevy sport utility vehicle (SUV) in what was once
an exclusive Saturn factory in Spring Hill, Tenn.

In 2001, Robert Lutz, who had been president of Chrysler, joined GM as vice chairman and chief product executive and began
rethinking Saturn. GM did not have the money for a traditional new product blitz, so he envisioned Saturn as the American arm
of GM's German unit, Opel. The cars would be slightly modified German designs, and have the engineering and handling qualities
of European vehicles. It sounded like an affordable way to bring desirable vehicles to market and to turn around Saturn.

Over the past few years, Saturn received an entire new lineup. It just introduced the Astra, a sleek, small car, which it currently
imports from Europe. Given the weak dollar, GM cannot be making money on the current Astra, which is why it plans to build
the next generation model in Mexico. Last year Saturn launched the Aura, a family-sized sedan that it builds in the U.S.,
though it is closely based on a European design. Saturn also has other new U.S.-built vehicles: the Sky two-seat roadster,
an under-the-skin twin of the Pontiac Solstice; the Outlook, a big crossover SUV; and the new Vue, a small SUV based
on a German design.

Saturn now has the best lineup in its history, but sales have been anemic.

Saturn Sales

	Jan-April 2007	Jan-April 2008
Aura	21,961	17,751
Ion*	16,748	263
Sky	3,955	2,983
Astra**	---	2,386
Outlook	8,648	8,929
Vue	29,256	28,544
Total	77,030	65,194

The total for Saturn, which also includes a handful of discontinued Relay minivans, is down 15% through the first four
months of this year. This indicates that the division is headed towards an annual sales rate of 200,000 compared with
240,000 sales last year, 226,000 the year before and 214,000 in 2005 when the product was undistinguished, to say
the least.

This is a bad year for the auto industry, yes, but Saturn is a disappointment, anyway. Industry-wide, passenger cars are
holding up better than SUVs--total car sales in four months almost equal sales in the same period last year, and Saturn's
Vue, a small SUV, is in the middle of the healthiest segment of that market.

So what is the problem? The Vue and Astra are new, and sales may improve as consumers become more familiar with
these vehicles. Nevertheless, there are some serious issues.

Saturn has priced its new cars much higher than the old models. The Outlook SUV, for example, is C$45,000 well-equipped,
which is high for traditional Saturn customers. GM is trying to push the brand up-market. The old Saturn was for people who
wanted transportation, not excitement. Now Saturn must find a new group of customers willing to pay more for better cars.

The new lineup also has some shortcomings. The Saturn Outlook SUV runs against two similar vehicles from Buick and GMC,
and I think those two are better looking. This fall there will be a Chevy version, which means more competition within GM.
The Aura, a mid-size car like the Honda Accord and Toyota Camry, runs against a similar car from Chevrolet, the Malibu,
which gets much more promotion.

The new Astra, being from Europe, is relatively expensive, nearly C$25,000 well- equipped. I will say this: I drove an Astra
from New York City to Virginia and back, got nearly 30 miles to the gallon, and it was comfortable with four people and
luggage. The Sky roadster is pretty as can be, but the Pontiac Solstice is essentially the same car, and the overall market
for small roadsters is not that big. The new Vue is far better than the first-generation model, but it is heavy for a small SUV.

Another problem is that the dealers, happy as they might be with the new product, have had nearly two decades without
great years, and the market's poor reception to date of the new models must hurt morale.

Of course, GM is short of money, so the marketing and advertising that the new line needs now just does not seem
to be available.

GM is not going to say that Saturn's survival is at stake. As I recall, management decided to shut down Oldsmobile without
first telling the boss at Oldsmobile. But you can sense the discouragement in executives' remarks.
GM Chairman Rabid Rick Wagoner Jr., speaking of the move to higher-priced cars:
"It's fair to say that's not an easy assignment."

GM group vice president, Troy Clarke, dumped on the Saturn ad campaign, which is, "Rethink."
People aren't ever aware of the brand, he said, and it must be reintroduced--but without extra money, of course.
He is right, but who did the damage all these years?

It will take imagination and dynamic leadership to fix this troubled division.