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Technology Stocks : American Automobile Industry: Can it survive? -- Ignore unavailable to you. Want to Upgrade?

To: stockman_scott who wrote (264)	9/30/2009 7:41:33 PM
From: Glenn Petersen	Read Replies (1) \| Respond to of 431

Mr. Fix-It walks away from the Saturn deal: G.M. to Close Saturn After Penske Pulls Out of Deal By NICK BUNKLEY New York Times October 1, 2009 DETROIT — General Motors said Wednesday that it now planned to close its Saturn brand after the Penske Automotive Group abruptly called off an agreement to acquire the division. Penske said in a statement that it could not proceed with the purchase because another auto manufacturer, which it did not identify, rejected plans to build vehicles that would be distributed under the Saturn name. The deal, which Penske had hoped to close as soon as this week, had called for G.M. to continue building Saturn vehicles only until 2011. “Today’s disappointing news comes at a time when we’d hoped for a successful launch of the Saturn brand into a new chapter,” G.M.’s chief executive, Fritz Henderson, said in a statement. “We will be working closely with our dealers to ensure Saturn customers are cared for as we transition them to other G.M. dealers in the months ahead. I’d also like to thank every G.M. employee and Saturn retailer who worked so hard to try to make this new beginning happen for Saturn.” The stunning announcement, which was not preceded by any indications that the deal was off track, means an end to a brand that G.M. started in 1985 in the hopes of better competing against the small, fuel-efficient Japanese sedans that had become popular. A headline in Tuesday’s edition of The Detroit Free Press read, “Penske-Saturn deal nearly done.” “We’re all stunned,” Mary McHugh, an executive with Saturn of Schaumburg near Chicago. “We didn’t get any communication from Saturn, we just heard it on the news. We’re going to have to obviously wait and see what the powers that be decide to do with the dealerships.” Todd Ingersoll, the dealer in Connecticut that was in the “We’re still here” ads for Saturn this year, did not want to comment. The Saturn situation marks the second major deal that has been sticky for G.M. The company tangled with the German government over a selecting a buyer for a stake in Opel last month, before going ahead with plans to sell a controlling interest to the Canadian auto supplier Magna International, and the Russian bank Sberbank. The Saturn deal, like G.M.’s original agreement with Magna, was reached before the Treasury Department announced new directors for the G.M. board. Mr. Penske reached agreement to purchase Saturn on June 6, less than a week after G.M. sought bankruptcy protection. Since then, about half the board has been replaced. At that time, Penske said in a statement that the two had “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.” Penske is led by Roger Penske, a prominent Detroit businessman and former race-car driver. Mr. Penske envisioned guiding Saturn to be the success that it never was under G.M.’s ownership. Winding down Saturn would mean the closure of Saturn’s 350 dealerships across the United States. The stores are known for their no-haggle, low-pressure sales approach and focus on customer service. None of the stores sell vehicles made by another G.M. brand. Under the deal with Penske, the dealers were to continue selling three vehicles: the Aura sedan, Outlook crossover vehicle and Vue sport-utility vehicle. Two models, the Astra compact car and Sky convertible, were being discontinued. Penske had already sent the dealerships new two-year franchise agreements to sign. G.M. said it now planned to stop building all Saturn models at the end of the 2009 model year, meaning almost immediately. Sales of the brand were down 58 percent this year, through August. Penske, which owns a chain of dealerships and already distributes Daimler’s Smart car brand in the United States, had been in exclusive talks with G.M. for Saturn since June, beating out proposals from several other bidders, including a private-equity firm tied to a Saturn dealer in Oklahoma. On Wednesday, Penske said its deal with the company it planned to buy future vehicles from was rejected by that company’s board. “Without that agreement, the company has determined that the risks and uncertainties related to the availability of future products prohibit the company from moving forward with this transaction,” Penske said in a statement. G.M. said it will honor the warranties of all Saturn vehicles through other G.M. dealerships. Saturn is one of four brands that G.M., which spent about six weeks in Chapter 11 bankruptcy protection several months ago, plans to eliminate in the United States. It is shutting down Pontiac by the end of this year, recently sold Saab to a company in Sweden and has a deal to sell Hummer to a Chinese manufacturer. Copyright 2009 The New York Times Company New York Times story link