GM To Pull Plug On Saturn After Deal Fails

DETROIT -- General Motors Co. said Wednesday it would shut down its Saturn division after an agreement to sell it to Penske Automotive Group Inc. fell apart. The Bloomfield, Mich. dealership headed by auto racing magnate Roger Penske walked away after it was unable to find a manufacturer to supply vehicles to it after a contract with GM runs out in 2011. A tentative deal for Saturn was announced on June 5. Penske was to get Saturn's 371 dealers and promised to retain the 13,000 Saturn employees. The proposed price was never disclosed. This marks an ignominious end for the brand that was supposed to revolutionize the way small cars were built and sold in America. GM Chairman Roger Smith first unveiled Saturn in November 1983, but the project was slow to develop and the brand did not officially launch until 1990. GM put more effort into making higher-profit SUVs and Saturn languished, never making money. Sales did spring up in 2006 and 2007 when gas prices rose, but then plunged along with other segments of the market last year. GM put the unit on the block this year as it battled the financial crisis that caused it to eventually file Chapter 11. GM CEO Fritz Henderson said in statement that Saturn and its dealership network will be phased out. "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," Henderson said in a written statement. Penske's announcement "explained that their decision was not based on interactions with GM or Saturn retailers." Shares of Penske fell $1.92 or 10 percent to $17.26 in after hours trading. They rose $1.32, or 7.4 percent to $19.18 in regular trading Wednesday. Penske said it negotiated with another manufacturer to make Saturn cars, but that company's board of directors rejected the agreement. Penske spokesman Anthony Pordon would not identify the other manufacturer. GM had agreed to keep building the Saturn Aura, Outlook and Vue models through 2011. After that Saturn would have to come up with its own products. Without another supplier in place before the deal was signed, Penske couldn't run the risk of taking on Saturn, Pordon said. It takes several years to design new vehicles or engineer foreign vehicles to meet U.S. standards. Penske would risk having no products to sell once the GM contract expired. "There's a pretty long lead time," Pordon said. "You've got to try to time this so as the supply of one ends and the other one comes on board." Pordon said there is little if any chance that the talks could be reopened. GM said Saturn vehicle owners can still go to their Saturn dealer for service and would be able to go to a certified GM dealer for service once Saturn dealerships are closed. It had been expected that GM would announce the completion of Saturn's sale to Penske in the coming days. The news left many of the 371 Saturn dealers across the country stunned and fearful of being left with nothing to sell. "I find this hard to believe," said Carl Galeana, owner of two Saturn dealerships in suburban Detroit. "Everyone's been saying we're right at the goal line." Galeana said he's heard nothing yet from GM or Saturn, but if the plan is to phase out the brand and cut the products, he'll have to come up with another options. "I assumed if you're at the goal line, those things would have been figured out," he said Wednesday. "We're going to try to put some plan Bs in place at this point." Galeana said he's concerned for his employees and still hopes the deal can be resurrected. "It's tough out there, but we'll keep fighting. That's all we can do." Saturn featured the iconic tag-line "a different kind of car company." GM's hope was that Saturn would attract younger buyers with smaller, hipper cars to better compete with Japanese imports. It built a new plant in Spring Hill, Tenn., devoted to Saturn production. Despite a cult-like following that drew thousands to annual reunions in Spring Hill, the brand never made money for GM. The factory stopped making Saturns in 2007 and currently builds only the Chevrolet Traverse crossover. Today, Saturn production is scattered at plants across North America. In the late 1990s, Saturn took a back seat as GM focused more on high-profit pickup trucks and SUVs. Then in 2006, car buyers began to find Saturn's new models more appealing. But after a good year in 2007, sales dropped 22 percent last year as the U.S. car market withered. GM has been trying to sell Saturn since earlier this year as part of its turnaround plan.

Copyright 2009 by The Associated Press.