Saturn goes into Penske orbit
BY RON HAMMERTON | 8th Jun 2009
And Penske says he has no shortage of international motor companies wanting to sell their products through the Saturn network across the US.
However, Wall Street has raised concerns about Penske Group’s high debt levels, with Standard & Poor’s placing Penske’s ratings on CreditWatch due the company’s “very high” gearing.
Although no price has been announced for the Saturn purchase, a Bloomberg News report put the figure at between $US100 million ($A125 million) and $US200 million ($A250 million).
Saturn is the second GM brand to be off-loaded in a week, with Hummer being sold to little-known Chinese engineering company Sichuan Tengzhong Heavy Industrial Machinery Co on Thursday.
But, unlike the Chinese organisation, Penske is a household name in the US, with holdings in a huge number of interests, from a high-profile trucking company to diesel engine manufacturing and motor racing, in IndyCar and NASCAR.
Michigan-based Penske Automotive Group is the country's second-largest motor retail network, operating 310 dealerships representing 40 different brands in the US, as well as overseas, including the UK.
It is also the US distributor for Daimler’s Smart, but Penske says that brand will be kept separate from Saturn.
Under the memorandum of understanding signed by Penske and GM, Penske Automotive Group will obtain the rights to the Saturn brand, its parts inventory and access to the Saturn dealership network.
GM will continue to supply Saturn Aura, Vue (Captiva in Australia) and Outlook vehicles on a contract basis for at least three years. An extension to the supply deal could be negotiated beyond that.
In a statement announcing the GM deal, Mr Penske said: “We have agreed upon a framework that we believe will build momentum for the Saturn brand.
“Saturn has a passionate customer base and outstanding dealer network.
“For nearly 20 years, Saturn has focused on treating the customer right. We share that philosophy, and we want to build on those strengths.” Mr Penske said he was in discussions with “a number of worldwide manufacturers” to broaden the Saturn line-up.
Automotive News reported on May 25 that Penske Automotive wanted to import Korean-built Renault Samsung Motors vehicles to be sold through Saturn.
French automaker Renault owns 80.1 per cent of Renault Samsung, while South Korean credit card issuer Samsung Card owns the rest. The organisation has links with Nissan via Renault, and one of the vehicles made by the company is the well-regarded Renault Koleos, built on the Nissan X-Trail platform.
According to a report by the Edmunds news agency, Penske hopes to convince overseas manufacturers to eventually make cars for Saturn in the US.
The sale of Saturn ends a bold experiment for GM, which developed the brand to tackle head-on the threat posed by Japanese transplants in the US, particularly Toyota and Honda.
With innovations such as plastic body panels and fixed pricing, Saturn began selling cars in 1990 and, despite high customer satisfaction levels, never quite hit the mark as a mass seller as GM hoped it would.
In recent times, it has rebadged vehicles from GM Europe, including the Astra, in an attempt to lift its mass appeal.
However, with GM sliding into bankruptcy, the tough decision was made to offload the brand, which under customer-focused Penske could now develop as a major thorn in the side of the New GM.
The move seems to be a high-risk strategy for Penske, whose Standard & Poor’s corporate credit rating is B+ and whose debt last financial year was 7.5 times greater than pre-tax earnings.
S&P analyst Nancy Messer told Automotive News: “The Saturn transaction could exacerbate the company’s high leverage and reduce liquidity.
“We would likely view the responsibility for future vehicle product selection and manufacturing strategy as carrying significant execution risk.”
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