Penske Breaks Off Talks with GM for Saturn; Saturn Goes Away

Penske Breaks Off Talks with GM for Saturn; Saturn Goes Away

By Michelle Krebs September 30, 2009

In a surprise move, Penske Automotive Group terminated discussions with General Motors to acquire Saturn  due to its inability to secure agreements for the future supply of vehicles beyond what it had negotiated with GM. As a result, GM will wind down Saturn much as it is doing now with its Pontiac division.

In a statement issued by the Penske Group late Wednesday, on the eve of the expected close of the deal, the auto retailing group cited "concerns directly related to the future supply of vehicles beyond the supply period it had negotiated with GM."

Retailers who had signed franchise agreements for the new Penske-run Saturn group were as shocked as anyone. They were scheduled to attend meetings with company founder Roger Penske next week, after the deal was closed, to hear about plans for product and timing. Instead, they head through the media - not the Penske group, Saturn or GM -- that the deal had fallen apart. Some are hoping something can be salvaged of the plan.

Founder Roger Penske's vision for Saturn, as he outlined in an interview with AutoObserver.com after the June 5 announcement of the retailer's intent to acquire Saturn, was to sell GM-made Saturns and eventually fill Saturn showrooms with vehicles made by manufacturers from around the globe.

The Penske group said it had an agreement with another manufacturer to supply vehicles after its contract with GM to source vehicles expired. However, the unnamed manufacturer's board of directors rejected the arrangement.

The rumor had been that the manufacturer was Renault, which would supply vehicles to the Penske group from its own organization or its Korean affiliate Samsung. However, the Penske group had not even told dealers with what manufacturers they were negotiating.

The Detroit Free Press, however, confirmed Renault had been in contact with Penske to supply cars, parts and technology to Saturn through an OEM agreement. The conditions for an agreement have not been found," a Renault spokeswoman, said in a statement, the paper reported.

Still, "without that agreement," the Penske group said in a statement, "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."

Indeed, added Edmunds.com CEO Jeremy Anwyl, "The Saturn dealership network represented a unique opportunity for Penske, but the risk was sourcing product and that proved to be too much to overcome to complete the deal."

In a statement, GM said: "This is very disappointing news and comes after months of hard work by hundreds of dedicated employees and Saturn retailers who tried to make the new Saturn a reality."

As a result of the Penske group's decision, GM will eliminate Saturn. GM "will be winding down the Saturn brand and dealership network, in accordance with the wind-down agreements that Saturn dealers recently signed with GM. Pursuant to the terms of those agreements, the wind down process will be determined and communicated shortly."

When Penske announced its plan to acquire Saturn, the retailer said it would result in saving 13,000 jobs and 350 dealerships, most if not all of which will be lost.A GM spokesman said Saturn Aura production already has stopped; production of the 2010 version was to start as part of the Penske-owned Saturn portfolio for the next three years. The GM spokesman said the assembly of the Saturn Vue and Saturn Outlook would be wound down "as quickly as possible." 

GM said Saturn customers and owners will continue to be able to purchase and have their vehicles serviced at Saturn retailers during this process. Once the wind down is complete, Saturn owners will still be able to have their vehicles serviced at other GM dealerships. "We will be communicating with our customers very soon to explain the next steps in this process," GM's statement said.

GM concluded in its statement: "Today's disappointing news comes at a time when we'd hoped for a successful launch of the Saturn brand into a new chapter. We will be working closely with our dealers to ensure Saturn customers are cared for as we transition them to other GM dealers in the months ahead. I'd also like to thank every GM employee and Saturn retailer who worked so hard to try to make this new beginning happen for Saturn." -- By Michelle Krebs, Senior Analyst and Editor at Large

Edmunds.com's Erin Riches contributed to this report.

Photo by GM

1 - Saturn Aura 

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.