By Chris Haak

02.20.2009

Wednesday night, GM’s Saturn division sent letters to approximately 1.5 million Saturn owners to alert them that even in the face of GM announcing that it would likely close down the Saturn brand, Saturn would not necessarily fade into the sunset in 2011 when the current models’ life cycles ended.  Somewhat surprising, however, was the concept that the letter put forth of Saturn continuing beyond 2011 by distributing vehicles built by either GM or other manufacturers.

Saturn Distribution Corporation, or SDC, already exists as a subsidiary of GM, and is the entity with which Saturn dealers have their franchise agreements.  Saturn General Manager Jill Lajdziak noted in the letter that any future Saturn vehicles – whether or not they were sourced from GM – would be “fuel efficient, safe, reliable, and affordable.”  GM has asked Saturn retailers to not make any decisions about their franchises for 60 days to allow the company adequate time to study the spinoff alternative.  A working group consisting of Saturn dealers, GM employees, and independent consultants is conducting the due diligence to determine what would be needed in order to spin off Saturn.

A spinoff of the Saturn brand would have several advantages to General Motors.  First, GM won’t incur the the prohibitively expensive costs of shuttering a division.  The cost of Oldsmobile’s demise in 2004 was estimated to be $2 billion (which sounds like chump change now, and in fact is the same amount that GM had to pay Fiat just to break up their joint venture a few years ag0).  With fewer Saturn franchises than there were Oldsmobile franchises, but another five years of inflation, it’s unclear how expensive shuttering Saturn would be.  Saturn showrooms are among the most modern in the GM universe, and are – according to the franchise agreement – required to be standalone stores.  That means a more difficult transition to a different brand, but a consistently good and well-regarded customer service experience if there could be a way to keep the stores open. Continue Reading →