• Oct 1st 2009 at 2:27PM
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In the early 1980s General Motors launched a top-secret program to figure out how it could build a small car to successfully compete against the Japanese automakers. It was called the S-car program and the results of this study shocked top management at GM.

It conclusively proved General Motors could not profitably build a small car in the United States that was priced against the Japanese -- at least not under the current GM system. And that launched another study to figure out what it would take become competitive.

GM concluded that it needed a clean-sheet approach to designing, engineering, manufacturing and retailing small cars in the American market. In other words, it needed a whole new car company. And so Saturn was born.


John McElroy is host of the TV program "Autoline Detroit" and daily web video "Autoline Daily". Every week he brings his unique insights as an auto industry insider to Autoblog readers.

Saturn was going to teach GM how to compete again.
When GM's chairman Roger Smith announced the company was launching a new car company the excitement was electric. Almost every state in the nation submitted a bid to try and get Saturn to locate in its backyard. The media frenzy reached a crescendo when GM chose Spring Hill, Tennessee as the site for the Saturn plant, but carried on well after that as publication after publication ran story after story of how Saturn was going to teach GM how to compete again.

The Spring Hill site was impressive. It was the first fully integrated manufacturing facility that GM had in the United States. Not only would the plant assemble cars, it would also make its own engines and transmissions, as well as do all of its own stampings and moldings, all at the same site. Additionally, Saturn did pioneering work in using lost foam casting to make cylinder heads and engine blocks. No one had ever done that before in mass production.

The engineering of the cars was still done in GM's Tech Center in Warren Michigan, but at a totally separate facility. In fact, the engineering area was laid out to mimic an automobile. All the engineers working on the front end of the car were located at the front of the building, everyone working on the interior of the car was located in the middle, while everyone working on the rear of the car were at the end. If you needed any information involving the engineering of the car, you knew exactly where to go.

The biggest breakthrough came with the new labor contract with the UAW. Any GM hourly workers signing up to work at Saturn had to give up all their seniority. Once they were in there was no turning back. And while their wages were not as good as a typical UAW worker's, they could earn bonuses based on quality and profits, which could push the total earnings above that of their other brothers and sisters in the union.

It was the retail experience which clearly set Saturn apart.
But the most transformational change was on the retail side of the business. GM went out and cherry picked the best dealers at the choicest locations and wrote up one out of the most innovative franchise agreements in the industry. Indeed, it was the retail experience which clearly set Saturn apart from every other mass-market brand in the business.

It started with a set price. There would be no haggling over the price of the car, you would pay what the sticker stated. Salespeople were paid a salary, not commissions, so there was no pressure to hound customers into signing. When you came to take delivery of your car everyone at the dealership would drop what they were doing and come over to congratulate you on your purchase. Anytime you brought your car back for service it would get washed for free. And customers were encouraged to stop in at Saturn dealerships anytime they were on the road to get complimentary coffee and doughnuts.

And the advertising was brilliant. With the tagline "A different kind of car company," Saturn ads spun a folksy story about the company, its roots in Tennessee, and about the kind of people who bought its cars -- all beautifully narrated in the mellifluous tones of pitchman Hal Riney.

One episode which really put Saturn on the map involved its first recall. A supplier, Texaco I believe, inadvertently sent the wrong kind of engine anti-freeze to the plant. It was like pouring Drano into the engine and destroyed it in short order. But instead of telling customers that it would rebuild their engines, or that it would replace their engines, Saturn told anyone who ran into this problem go to their nearest dealer and pick out a new car. At the time one of my friends had a Saturn which was not affected by the Drano problem. "Damn," he said, "sure wish my car had been recalled." That's when I realized Saturn truly was a different kind of car company. When have you ever heard anyone say they wish their car was recalled?

The cars themselves weren't that great.
The cars themselves weren't that great. They were designed using a space frame construction covered with plastic body panels, a technique that General Motors had perfected with the Pontiac Fiero. The idea was that the plastic panels were so much cheaper to tool that Saturn would be able to do more frequent styling changes and that would keep it ahead of the competition. But that's not what happened.

General Motors poured over $3 billion into getting Saturn launched. After that, GM told Saturn it had to live off its own cash flow. But Saturn simply could not generate enough cash on its own, so it stuck with the same models long after they should've been replaced.

Indeed, some of Saturn's toughest competition came from within GM itself. A year before Saturn launched, Chevrolet launched its Geo brand to compete against the Japanese by selling Japanese cars. Other divisions complained that Saturn was getting too much money and attention from top management. And so Saturn languished for over a decade before GM got serious about providing it with a broader product line with fresh designs.

Some of Saturn's toughest competition came from within GM itself.
But by this time Saturn was no longer a different kind of car company. All the engineering, manufacturing and purchasing was moved back into the existing GM bureaucracy. The separate union contract was abandoned in favor of a typical UAW one.

And the new products, even though they were quite good, were significantly more expensive than the car's Saturn had been selling. Even though the brand had over a million satisfied customers, many of them could not afford any of the vehicles in the new lineup. Saturn walked away from its customer base.

To use a military analogy Saturn represented a beachhead for General Motors. It had successfully invaded enemy territory, and now had a toehold where it could capture import buyers. And sure enough, Saturn was definitely bringing in customers who otherwise would never by any other General Motors' products.

Saturn walked away from its customer base.
Instead of telling Saturn it had to live off its own cash flow, GM should have poured whatever it took into keeping that beachhead. Had it done so, the results could have been far different. But in the end the effort to save Saturn was too little too late. Just like Oldsmobile.

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    • 1 Second Ago
      • 5 Years Ago
      Making people yawn for over 20 years.

      I have to admit I had hope when the Aura and Sky were introduced and GM started talking about making it a brand sourced from Opel products but, money ran out and they weren't a core GM brand so, board it up and move on. It stinks but, I suppose that's the car business these days.
      • 5 Years Ago
      Saturn did things right but if it ever became a true success it would undermine Chevrolet and therefore GM could never let Saturn thrive.

      Saturn could have been a great car company but the bureaucracy is what killed it. You had one company that made every major part for its cars at one place, THE WAY IT SHOULD BE. You had a labor contract which rewarded hard work and success rather than incompetence and seniority.

      Saturn was a different kind of car company but it could never be a success because it was owned by the old type of car company that should have gone bankrupt and stayed there.

      In five years GM is going to be in the same place it is right now. Too big for its own good and one month away from complete collapse. The company will have learned nothing because it didn't have to change to stay in business, only have friends in the right places. GM is a drug addict who had the dealers thugs paid off. The addict wasn't cured though, just had the debts paid off and still got to keep the stash. He might think about shooting up for a few days but once the pressure is gone he'll be sticking even more needles because he knows someone will be there to bail him out again.
      • 5 Years Ago
      My wife has a 2007 Saturn Ion (lease ends next year) and she said it's her favorite sedan she ever drove (compared to a 90's Civic and 2005 Hyundai Accent she used to own). She even prefers driving it over her moms 2005 Civic.

      The whole dealer experience impressed her as well (although the revealing of her Ion from under a cover with drum roll was a tad cheesy). There was no pressure whatsoever, the salesman actually knew what he was talking about (I knew enough about the car anyway) and he wanted my wife and I to push the car hard during the test drive.

      The Saturn "experience" was aimed at clients like my wife that are obsessed with imports and it worked. Is the Ion a class-leading car...no but for someone like my wife that wanted an inexpensive, decent sized, smooth driving car with electric windows, cruise, A/C and mp3 radio (all standard equipment), nothing came close in price.

      She test drove other cars (I wanted her to get the Jetta City as I love German handling cars...I have an e46) but she didn't like the engine noise and the lease price was insane for similar equipment.

      I sent my wife the link to this article and she is actually disappointed that Saturn is dead. Great write-up about a sad story.

      • 5 Years Ago
      Nice article but missing the most important point. As written many years ago by the Autoextremist and TTAC, Saturn was starved of product, internally by GM management, for the benefit of the other GM divisions and primarily Chevrolet. The failure was due to internal politics, which is also the primary reason for the complete collapse of GM we are seeing today.

      How could you not know this John?
      • 5 Years Ago
      well said! and we still give them more money to continue poor mgt practices.

      • 5 Years Ago
      I worked for Saturn for a long time, and I have to say things were good untill G.M. decided to get back into the game with them. Saturn lost alot of its own decision making and its overall foundation that made it what is was. It was really just a shame. I saw it coming, I got out a few months before all hell broke loose.
      • 5 Years Ago
      McElroy: "Salespeople were paid a salary, not commissions, so there was no pressure to hound customers into signing."

      That wasn't exactly true. I worked at a Saturn “retailer” in the 90’s.

      The "Saturn Way" was salary, but their definition of salary was not what you would think. A salesperson would be paid a flat rate commission on each of the cars they sold, but not get an additional commission if they up-sold the customer to a more expensive model. In some cases it was only a $100 per car commission. There were also bonuses for good satisfaction survey scores.

      Franchises differed in the way they paid their salespeople. Some even paid them the same way as any other dealership: by percentage of profit. So, up-selling did pay better in these cases. The funny thing was, some of the retail outlets that had the best satisfaction surveys paid their salespeople by true commission. Some of the ones that paid the new way did worse.
      • 5 Years Ago
      to be fair the first car I ever bought was a Saturn a SW1 in my teenager years...In fact I still own the car and it's parked in my garage alto I don't drive it anymore..It's the first car that got me into the grease monkey hobby lol...I know that car like the back of my hands to the point I bought all the equipment needed to paint a car and painted the bugger 3 times while I was learning how to paint a car lol, did an engine swap took me 3 weeks alone but I learned lol....not to mention I always loved the dent resistant panels lol....I was going to sell it but now since Saturn will be no more I think I def will keep it...
      • 5 Years Ago
      Ultimately, it's a good thing that Saturn is shuttered. Although it had good retailers, the brand was not a serious contender. As GM says "May the best car win".

      With its volume/luxury brand set up (i.e. Chevrolet and Cadillac), GM can go head-to-head with anybody. To devote resources to all these extraneous brands just dilutes the effort. GM needs to be hyper-focused, which it can be post C11.

      Allowing Saturn to continue under Penske would have created a competitor. So although GM said publicly it was hard to end Saturn, I'm guessing it was a rather easy business decision.
        • 5 Years Ago
        The cars *were* continuously improved, but it was incremental. I've got a 2000 SC2, and the difference between it and the 1995 SC2 is shocking... Even the 1996, when they introduced the new coupe body, there are numerous improvements in handling, road noise, etc.

        Unfortunately, GM not only refused to learn from Saturn, they refused to believe Saturn had anything to teach-- even now, Fritz will tell you they learned everything they needed to know from Saturn-- yet they appear to have applied absolutely nothing from Saturn to the rest of GM.
        • 5 Years Ago
        So sad, and so many GM stories followed the same basic arc: "GM gets half way decent idea, then screws it up royal with exceptionally poor management." Of course when you're a GM exec and get to keep your millions no matter what you can kinda see why it really didn't matter to them whether the company flourished or went bankrupt - six of one, half a dozen of the other.

        Meanwhile the execs who screwed up Saturn are golfing at the country club, and the line workers in Tennessee are applying for a Greeter position at Walmart.
        • 5 Years Ago
        I think the article clearly outlines that Saturn had lost its reason for being well before the recent bankruptcy and restructuring. If Saturn had been given the resources it needed in the early nineties instead of being starved of product it likely would still be standing, GM as well if had adopted similar practices within its other brands. Instead the money was redirected into Oldsmobile in a futile effort to save Oldsmobile.

        Given the level of success in its early years, GM had the opportunity to turn the industry on its head, but of course that wouldn't have made their existing dealer networks happy so that couldn't be allowed to happen.

        I've never heard of a person looking forward to the process of buying a new vehicle, sure the idea of a new car is great, but no one wants to deal with the actual act of purchasing the car. Saturn solved that and instantly attracted hundreds of thousands of buyers to buy a mediocre car. Imagine if the car was continuously improved as intended and complimentary product lines were offered.
        • 5 Years Ago
        I think the article was great. John does a fine job. The inability of GM to learn both good and bad lessons and not do anything about the lessons is remarkable, think NUMMI, Saturn, Oldsmobile. The point being they learned how Toyota did it with NUMMI, Saturn they learned what customers where looking for.

        And yet the corporation has a whole does not appear to have changed all that much, just gotten smaller.
      • 5 Years Ago
      Nice overview of the life and death of Saturn. Makes you wonder if Toyota got the idea for Scion from that. Of course, in the years since, Toyota has done all it could to keep older buyers from buying their 'young person cars' to the point of making them undesireable to everyone.

      No doubt there were some other reasons for letting Saturn die on the vine, but as with Toyota, both should have gone with the success they had, instead of trying to mold it's buyer base.
      • 5 Years Ago
      Yeah, that definitely sounds like the GM we all know. Each brand was its own little fiefdom, and they were continually trying to stab each other in the back.
      • 5 Years Ago
      Excellent summary of the birth of Saturn - I was looking for more insight into the death.

      My opinion is that Saturn was a bad idea from conception. GM completely missed the real reason people bought foreign cars and ignored applying that to their existing lineup. Creating a whole infrastructure to essentially birth another competitor. Just another disgraceful act of Smith's - worse than GM10 or empty factories full of robots. The creation of Geo was just typical GM insanity.

      They took two swings and missed. Finally at least hit the ball toward the end of the '90s but unfortunately it turned out to be foul - there are still too many people working there and too many dealers - and now with this shameful government take over. Foul.

      And I disagree that the initial success had anything to do with the product. The retail experience is what sold the car - that and the fact that people at that time (and even today) want to see GM succeed.

      I wanted to see GM succeed! Although I do not work for GM I come from a GM family and actually live in Flint, MI. As a college kid I worked summers at "Chevy in the hole" and saw the empty plants where my father and grandfather worked.

      In reality GM died with "old GM". What we have now is a government bureau.
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