Saturn: GM's Best Defense Against Toyota
February 28, 2007

Saturn is conquering one of GM's most formidable challenges: it's getting on the shopping lists of potential buyers and converting lookers into buyers like never before, according to an analysis by Edmunds.com.

Surpassing Edmunds.com forecast for a 52-percent sales increase in February, Saturn reported a 60-percent increase in sales, helping GM boost its total U.S. sales by 3.5 percent in a flat market and while Ford and Chrysler posted declines.

Just as important, sales are coming from largely Asian brands, especially Japan's Big Three -- Honda, Nissan and Toyota.

And while GM is often criticized for having too many brands and those brands cannibalizing each other, not a single GM model ranks among the top 10 vehicles cross-shopped by potential Saturn buyers across its line in Edmunds.com's analysis.

Saturn's product renaissance

As he introduced Saturn’s newest small car, the Astra, at the recent Chicago auto show, General Motors Vice Chairman Bob Lutz declared Saturn now has a "no-excuses product line." He added: "If this lineup doesn't work, I'm out of ideas."

Well, it's working.

Saturn went into business in 1990 as GM's import fighter, and it performed admirably at first, capturing 75 percent of its sales from outside GM. Then GM quit feeding Saturn; it failed to provide it with much-needed additional models to flush out its line and to freshen its existing models to make them competitive. The attitude seemed to be that Saturn owners care about the dealership experience, but not much about the car per se. Saturn clung to life on its reputation for customer pampering until GM management finally decided to back the brand with money for new models. Saturn's renaissance of new product began last spring.

Now, with the product drought over and its showrooms being showered with new models to complement its extraordinary customer pampering, Saturn is living up to its billing as the import fighter. Indeed, it has become GM's best weapon to beat back Toyota and other Asian automakers.

Cross-shopping brands

Edmunds.com's analysis shows shoppers looking at Saturn models are also shopping Asian brands, especially Honda, Nissan and Toyota but also Hyundai and Mazda. In Edmunds' list of top 10 vehicles also considered by Saturn shoppers, nearly all are import nameplates across every Saturn model line.

Conversely, Saturn is seeing huge spikes in reverse cross-shopping as well; that is, shoppers who had Honda, Nissan, Toyota and Volkswagen on their lists but decided to look at a Saturn model as well. Saturn reports double- and triple-digit increases in reverse cross-shopping figures.

"We're seeing more cross-shopping than ever," acknowledged Saturn General Manager Jill Lajdziak in an interview with AutoObserver.com Tuesday. "Our retailers are seeing people they've never seen before in their showrooms, in terms of demographics and what they are trading in."

In addition, Saturn is seeing strong sales in key markets where imports dominate, including Southern California and South Florida. Lajdziak said February sales will show the nation's No. 1 or No. 2 volume Saturn dealer is in Los Angeles; in fact, four of the top 10 will be in Los Angeles. None made the top 10 list in 2006.

Cross-shopping model by model

Saturn’s two newest vehicles – the Aura and the Outlook – are performing particularly well against Toyota, Nissan, Honda and VW.

The Aura is doing well against Toyota's formidable Camry, Nissan's newly freshened Altima and Honda's Accord, which undergoes a redesign by fall. The midsize Aura sedan, which shares its underpinnings with the Chevrolet Malibu and Pontiac G6, is Saturn's first legitimate contender in the large and extremely important midsize family sedan segment with its handsome exterior, upscale interior and refined powertrain. The Aura was voted by a jury of 49 journalists as the winner of the 2007 North American Car of the Year award over the brand-new Camry.

According to Edmunds.com's analysis, 20 percent of shoppers compare the Aura to the Camry, 20 percent to the Altima and 19 percent to the Accord. (Generally, shoppers compare multiple vehicles against each other.) Other vehicles on Aura shoppers' lists include the Hyundai Sonata and larger Azera, the Honda Civic and the Volkswagen Passat as well as the Ford Fusion, Mazda 6 and Mercury Milan, all three of which share the same underpinnings.

The Outlook is a first for Saturn -- a car-based crossover with three rows of seats. It is the first of a family of new GM crossovers, which also include the GMC Acadia and Buick Enclave. GM engineers used the previous-generation Honda Pilot as their benchmark in developing the Outlook and set out to surpass it in many areas, particularly quietness.

Edmunds.com's cross-shopping analysis shows the Outlook is dead-on against the Pilot. Redesigned for the 2007 model year, the Pilot ranks No. 1 with Outlook shoppers to also consider. And Saturn dealers are seeing Honda Pilots as well as Toyota Highlanders being traded in for Outlooks.

Not surprisingly, the Sky roadster, which kicked off Saturn’s product revival, is most heavily cross-shopped against the Mazda MX-5 Miata, with 17 percent of Sky shoppers also considering the Miata. The remainder of the list includes a hodge-podge of models, from the Ford Mustang and Nissan 350Z to the Mini Cooper and Toyota Solara.

Even Saturn's existing models, most of which are scheduled for redesigns or complete replacement, are heavily cross-shopped against foreign competitors. That paves the way for their upcoming new versions.

The Vue, a car-based compact sport-utility, is heavily shopped against the Honda CR-V and Toyota RAV4. Of Vue shoppers, 20 percent also look at the CR-V and 17 percent consider the RAV4. The high-volume Ford Escape ranks 3rd on Vue shoppers' lists, which is rounded out by the Hyundai Tucson and Santa Fe, Mitsubishi Outlander, Mazda CX-7 and Jeep Compass. The Vue also comes as the hybrid Green Line version. As the lowest-cost hybrid SUV, the Green Line adds about $2,000 to the price of a non-hybrid Vue, starts at less than $23,000 and promises a 20- percent improvement in fuel economy. The Vue Green Line is cross-shopped against hybrid versions of the Ford Escape and Toyota Highlander. The 2008 Vue receives a Euro-style makeover.

The soon-extinct Ion small car is cross-shopped exclusively against Asian -- mostly Japanese -- imports with the exception of the Ford Focus. Of Ion shoppers, 25 percent consider a Honda Civic. The Mazda 3, Toyota Corolla and Nissan Sentra also rank high on the Ion's shoppers list. That high level of cross-shopping bodes well for Saturn's Astra, based on a German-made Opel of the same name that replaces the Ion in 2008. Indeed, the Astra is a far superior car from the Ion it replaces and may well stand out from the small-car crowd with its European flair, an advantage only Volkswagen has had so far.

Even the Relay, a lame attempt by GM to disguise a minivan as a sport-utility, is mostly shopped against Asian imports, led by the Hyundai Entourage, Honda Odyssey, Toyota Sienna and Nissan Quest. Obviously Chrysler minivans are also on the list, but farther down.

Translating shopping to sales

Getting shoppers to consider your vehicle is only half the battle; the other half is converting shoppers to buyers. Saturn is gaining momentum in that regard. If Saturn gets on the shopping list, it has a good shot at winning the customer over the competition, Edmunds.com’s analysis indicates. And that’s showing up in sales results.

Saturn's sales resurgence started last year, a year in which its new products began coming online. For 2006, Saturn sales were 211,195, up 7 percent from 2005. It was one of only two domestic brands to increase sales last year. Saturn sales have continued rising in the past few months, with a huge spike expected when February sales are reported Thursday.

The outlook for higher sales through 2007 is good. The Aura has been on sale only since last fall; a hybrid version goes on sale in spring. The Outlook just hit the market. February is a slow month for convertible sales, so the Sky may see an uptick in the spring. The new-generation Vue goes on sale in the second quarter, with the hybrid version to follow. And the Astra arrives at year's end. A two-mode hybrid follows in 2008.

"We laid this plan out two years ago, and the pieces are starting to fall into place," said Lajdziak said. "We've started gaining momentum."

New advertising launched

Last year, Saturn ditched its longtime tag line of "A Different Kind of Car Company" for "Like Always, Like Never Before" to introduce its new products. It also ditched its previous agency, Goodby Silverstein & Partners, hiring Deutsch/LA as its replacement.

This week, Saturn launched a new campaign from its new agency during the Academy Awards.

Saturn had replicas of the 2007 North American Car of the Year award made, borrowing an idea from the Detroit Red Wings. Each Red Wing hockey player was loaned the Stanley Cup trophy the team had won for a couple of days. They showed it to family, friends and fans.

Loyal Saturn owners get the car of the year trophy on loan. They are encouraged to show the trophy to their friends, take it to the office, photograph it and then mail it back, postage paid by Saturn. Saturn owners not automatically on a list to borrow the trophy can request one via Saturn's Web site. Also part of the campaign, Saturn owners, with or without the trophy, can post their photo and comment about their Saturn on the automaker’s Web site.

"We were thrilled to receive this award in particular, because it's not about how much advertising we bought but about what 49 journalist-jurors thought," said Lajdziak, humbly failing to note the Aura had won in a landslide over archrival Toyota Camry. "It's the real deal, in our mind."

The first ad during the Oscars showed Saturn owners in San Francisco having their turn with the award. The ad was extremely good and oh-so Saturn. Business Week praised the ad saying: "The idea fosters the sense of community Saturn's loyal customers have felt over the years…. The ad and the idea are successful because it returns Saturn to the tonality it enjoyed during its launch some 16 years ago -- a car, and a brand for and about real people, and community."

A second ad highlighting the award breaks in a couple of weeks, Lajdziak confirmed.

Pamper the customer

Not long after it was in business -- in 1986 -- Saturn became the first non-luxury nameplate to rank No. 1 in customer satisfaction, according to J.D. Power and Associates, dethroning Toyota's Lexus and Nissan's Infiniti. The white glove treatment made Saturn owners intensely loyal to their dealers, J.D. Power noted. And Saturn has held lofty spots in customer and sales satisfaction ever since.

In contrast, the Achilles' heel of Toyota and other Japanese imports has been the dealer end of the business. Despite its acknowledgement of the weakness, little progress has been made. In the most recent J.D. Power Sales Satisfaction ratings, which rates the dealership, its people and its processes, Toyota and Honda ranked average across the board. In contrast, Saturn received "better than most" grades in all categories but one -- and it received "absolute best" in that one.

"Now we're marrying a wonderful product portfolio to the equity of the brand," notes Lajdziak.

The marriage is not lost on Edmunds.com's forum participants who have been buzzing about Saturn's new models. Writes one: "Remember that the biggest weakness of Honda and Toyota is their dealer network. People regularly complain about the treatment they receive from Honda and Toyota dealers when buying a vehicle. If Saturn offers vehicles that can compete with Honda and Toyota, but are sold through its '"warm and fuzzy' dealer network, it has a real chance of making headway."

Writes another: "With their awesome new lineup being built, Saturn will be putting the real hurt on the imports this year. I predict, the Aura to take the top-selling car spot away from the bland, unreliable Camry for 2007, while the Outlook is going to cost the competition quite a few sales."

The moral of the story

Many lessons can be learned from the Saturn story:

It's the product, stupid. For years, GM deprived Saturn of new models as it limped along with a small car that took so long to bring to market that it was extremely outdated by the time it did. Then GM added a midsize model that wasn't competitive either. Later GM added the Vue sport-utility, also subpar.

Never waver in caring for the customer. Even with no competitive products to sell, Saturn and its dealers (they insist on calling them "retail partners") never wavered on delivering extraordinary customer care. Loyalty to good dealers is extremely under appreciated by automakers, generally.

Combine great products and great service. It’s not rocket science, but it’s hard and expensive.

A global strategy works. GM has said Saturn is a test of its new strategy to develop vehicles globally instead of regionally. Saturn proves GM's strategy works, and bodes well for the rest of GM's new globally developed models that roll out over the next 12 to 18 months.

No resting on laurels

Saturn, smartly, is not resting on its newly found laurels. One would think Lajdziak, who has been at Saturn from the start, through good times and dismal, would be exuberant at the glimmers of hope. But she’s amazingly low-key – and humble. She uses terms like “encouraging,” “nice uptick” and “momentum” to describe Saturn’s rising sales – not victory and success. Having been at Saturn since it was created and as the daughter of a Wisconsin car dealer, she has seen how quickly fortunes can change.

“We have to be humble. That’s how you win in the marketplace,” she said. “We’re tenacious that we win our way back one customer at a time.”

Indeed, Saturn still has a ways to go in convincing hard-core import buyers that it is worthy of consideration. Despite Saturn’s significant gains in getting on import-intenders shoppers lists, Edmunds.com’s analysis of cross-shopping patterns illustrates there’s still vast room for improvement. According to Edmunds.com data, there’s still a hard-core group of Camry and Accord buyers who only look at those models. The Aura ranks 14 on the shopping lists of Camry intenders; and 16 for Accord intenders.

The question of Saturn's profitability nags. The brand refuses to reveal its financial status, but it is believed it has never been profitable or only marginally so, at best, in some years. GM’s investments in Saturn – from getting it established to feeding it with new models of late – has been massive. And GM’s investment in Saturn is far from over. As it introduces new and freshened vehicles, it must immediately prepare for replacements of those to keep Saturn’s line constantly fresh. When and how much GM will receive as a return on its investment is unknown.

An even bigger question is Saturn’s contribution to GM as a whole. Indeed, Saturn is showing encouraging signs against tough competitors, like Toyota, threatening GM’s spot as the world’s No. 1 automaker. However, Saturn sales – currently at under 300,000 units a year – remains just a drop in the bucket.

Edmunds.com is forecasting another down sales month for GM in February. GM will sell 284,000 units in February 2007, down 4.9 percent compared to February 2006 and up from 15.7 percent from January 2007. GM's market share is expected to be 23.5 percent of new vehicle sales in February 2007, down slightly from 23.7 percent in February 2006 and up from 22.6 percent in January 2007.

And can the Saturn experience be translated throughout GM as it was intended to do from the start? It has struggled to do so as it has sucked resources from the rest of GM, with much resentment and cynicism from GMers over the years.

What Saturn does demonstrate is that a turnaround is accomplished, not just from cost-cutting, but by investing in a steady stream of fresh models that constantly up the ante. On the dealer side, Saturn -- like Toyota's Lexus and Nissan's Infiniti -- was in the unique position of starting a dealer network from scratch, carefully selecting the best dealers in the business and then indoctrinating them to take care of customers. Brands with long-established dealer networks, like GM's other brands, have been less successful in accomplishing the same as GM and Toyota have found.

Posted by Michelle Krebs at 5:56 AM under Analysis , Featured , GM | Comments (4) | digg this | Seed Newsvine