Penske Auto to Buy Saturn as GM Shrinks in Bankruptcy
By Katie Merx and Doron Levin
June 5 (Bloomberg) -- Penske Automotive Group Inc., an operator of car dealerships in the U.S. and U.K., won the bidding for General Motors Corp.’s Saturn unit as the biggest domestic automaker sheds assets in bankruptcy.
The sale will save 13,000 jobs and 350 dealers “in the near term,” said Detroit-based GM, which like Penske Auto wouldn’t detail the terms. The price will be $100 million to $200 million, said a person familiar with the talks, who declined to be identified because the deal isn’t complete.
Unloading Saturn is a step toward GM’s goal of disposing of four of its eight U.S. brands while reorganizing in Chapter 11. Because Bloomfield Hills, Michigan-based Penske Auto isn’t a manufacturer, it will have to find a supplier of new vehicles.
For GM, getting a buyer able to run a dealer network and market the vehicles “is like finally finding your puppy a good home,” said Jack Nerad, an auto analyst at car-pricing service Kelley Blue Book in Irvine, California.
“Penske is incredibly well-respected in the business,” said Stephanie Brinley, an auto analyst at consulting firm AutoPacific Inc. in Troy, Michigan. “It should help Saturn maintain the reputation it has for reaching the consumers.”
Supplying Saturns
Penske Auto plans to keep selling Saturns made by GM, which has said it’s willing to assemble the cars on a contract basis through 2011. Chief Executive Officer Roger Penske, 72, said he expects to line up a “worldwide partner” to produce future Saturns with an “ultimate goal” of building them in the U.S.
Retired Chrysler LLC President Tom LaSorda, who has been consulting with Penske Auto on the deal, will have a role in the new Saturn that hasn’t been set, Roger Penske said. The sale will close next quarter, and Saturn will become a wholly owned unit, Roger Penske said.
“I’m pretty excited. Roger has a track record of success,” said Carl Galeana, who owns two Michigan Saturn dealerships. “Roger’s a hands-on guy. If he’s interested in this happening, he realizes the brand is so strong you can do something with it.”
Penske Auto gained 55 cents, or 3.8 percent, to $15.15 at 12:48 p.m. in New York Stock Exchange composite trading. The shares touched $15.48 earlier, the highest intraday price since Aug. 11.
“Saturn has a passionate customer base and outstanding dealer network,” Roger Penske said. “For nearly 20 years, Saturn has focused on treating the customer right. We share that philosophy, and we want to build on those strengths.”
Saturn’s History
GM established Saturn in 1985, five years before selling the first vehicle. GM sought to lure customers who might otherwise buy European or Japanese vehicles, and offered no- haggle pricing to differentiate the brand from other GM marques.
Sales peaked in 1994 at 286,003 units, according to Autodata Corp. in Woodcliff Lake, New Jersey. This year, U.S. deliveries fell 58 percent through May.
The other bidder for Saturn was a group that was led by Oklahoma City-based private equity firm Black Oak Partners LLC and included some of the brand’s dealers.
GM said the jobs being preserved by the sale include the automaker’s own employees as well as workers at Saturn dealerships. Most Saturn dealers are standalone operations, according to GM.
GM, which filed for court protection on June 1, plans to sell Hummer to China’s Sichuan Tengzhong Heavy Industrial Machinery Co. and is dropping Pontiac. It says it will cut ties to Saab, which is in bankruptcy in Sweden, by 2010.
Penske Auto focuses on premium brands, which accounted for 65 percent of its inventory in the first quarter, according to the company’s earnings statement. The company operates 310 auto franchises worldwide, mostly in the U.S. and U.K.
Roger Penske has other auto-related businesses including Penske Corp. and Penske Truck Leasing Corp. A former race-car driver, he is the founder of Penske Racing Inc. and Penske Racing South Inc.
To contact the reporters on this story: Katie Merx in Southfield, Michigan, at kmerx@bloomberg.net; Doron Levin in Southfield, Michigan, at dlevin@bloomberg.net
Last Updated: June 5, 2009 12:50 EDT |
