GM To Close Saturn

Story from the NY Times

DETROIT — General Motors said Wednesday that it would shut down its Saturn division by next year after Roger Penske abruptly cut off talks to acquire the brand.

The Penske Automotive Group said it could not proceed with the deal because another auto manufacturer, which it did not identify, said it would not build vehicles to be distributed under the Saturn brand name.

The decision by Penske Automotive stunned G.M. and Saturn dealers, who had hailed Mr. Penske, who has built a track record of successful turnarounds, as the savior of the brand that G.M. was forced to sell as part of its government-financed bankruptcy reorganization.

“Today’s disappointing news comes at a time when we’d hoped for a successful launch of the Saturn brand into a new chapter,” G.M.’s chief executive, Fritz Henderson, said in a statement. “We will be working closely with our dealers to ensure Saturn customers are cared for as we transition them to other G.M. dealers in the months ahead.”

There were no indications that the negotiations — first announced in June — were faltering.

But Penske Automotive said that an agreement with a potential manufacturer of future Saturn products had been rejected by that company’s board. Penske Automotive declined to name the company, but people familiar with the transaction said that the Renault-Nissan alliance had been involved in discussions.

G.M. had agreed, under its proposed deal with Penske, to continue supplying Saturn with three vehicles through 2011. Penske Automotive said that it could not acquire Saturn without a deal in place for the supply of future models.

“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,” Penske Automotive said in a statement. Thomas Pyden, a G.M. spokesman, said there were no plans by the automaker to seek other buyers for the Saturn division, which was created in 1985 to compete against the tide of small, fuel-efficient Japanese sedans that had become popular with American consumers.

Saturn’s 350 dealerships across the United States will close because of the development. The Saturn stores are known for their no-haggle, low-pressure sales approach and focus on customer service. None of the stores sells vehicles made by another G.M. brand. GM and Saturn derive steady profits from a diverse line of aftermarket parts, sportbike parts, OEM parts, even unique lines such as GSXR 600 parts and GSXR 1000 parts.

Saturn dealers said Wednesday that they were blindsided by the news of Penske Automotive’s reversal.

“We’re all stunned,” said Mary McHugh, an executive with Saturn of Schaumberg near Chicago. “We didn’t get any communication from Saturn. We just heard it on the news.”

Under the proposed deal with Penske Automotive, the dealers were to continue selling three vehicles: the Aura sedan, Outlook crossover vehicle and Vue sport utility vehicle. Two models, the Astra compact car and Sky convertible, were being discontinued. Penske Automotive had already sent the dealerships new two-year franchise agreements to sign.

G.M., with the Penske deal now off the table, said it planned to stop building all Saturn models at the end of the 2009 model year, meaning almost immediately. Sales of the brand were down 58 percent this year, through August.

Penske Automotive, which owns a chain of dealerships and already distributes Daimler’s Smart car brand in the United States, had been in exclusive talks with G.M. for Saturn since June, beating out proposals from several other bidders, including a private equity firm tied to a Saturn dealer in Oklahoma.

Auto analysts had predicted that Penske Automotive could succeed in selling Saturns where G.M. had failed, mostly because of Mr. Penske’s reputation. The 72-year-old former race car driver is considered one of the savviest businessmen in the industry, and a specialist in turning around troubled automotive operations.

But Mr. Penske’s plans for Saturn depended on attracting another manufacturer to supply vehicles after G.M. cut off production.

“I don’t think he could find anybody who could give Saturn a competitive product line within two years,” said Joseph Phillippi, a principal in the firm Auto Trends Consulting. “It’s not surprising that a foreign automaker would not want to be entering the U.S. market now.”

G.M. said it would honor the warranties of all Saturn vehicles through other G.M. dealerships.

Saturn is one of four brands that G.M., which spent about six weeks in Chapter 11 bankruptcy protection this year, plans to eliminate in the United States.

It is shutting down Pontiac by the end of the year, is selling Saab to a company in Sweden and has a deal to sell Hummer to a Chinese manufacturer.

G.M. also has agreed to sell a majority of its European brand, Opel, to a group led by Magna International, a parts maker, and the Russian bank Sberbank.