Thousands Of Jobs Will Be Lost As Saturn Comes To An End

Saturn’s end likely as Penske walks away
By Tom Braithwaite in Washington and Bernard Simon in Detroit
Published: October 1 2009 00:45 | Last updated: October 1 2009 00:45
Penske Automotive Group, the listed dealership chain, walked away from a deal to acquire General Motors’ Saturn unit on Wednesday in a decision that spells the end for the brand and threatens thousands of jobs.

Penske, founded by former racing car driver Roger Penske, said it was pulling out of the acquisition, which was agreed in June and due to close by Thursday, because of doubts about its ability to secure a long-term supply of vehicles.

EDITOR’S CHOICE
In depth: Car industry in crisis - Sep-29

GM bankruptcy documents - Jun-02

Audio slideshow: History of General Motors - Jun-01

GM had agreed to supply Saturn vehicles for a period but Penske was ultimately unable to conclude a follow-up deal with another manufacturer.

“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,” said Fritz Henderson, chief executive of GM, in a statement.

GM set up Saturn in the 1980s as a response to the challenge posed by Japanese imports. The brand operated relatively independently, and has sold more than 4m vehicles since 1990. However, its sales decline has been worse than the average at GM during the recession.

The sale of Saturn, part of a process to prune GM’s brands down to a core four, was expected to save 13,000 jobs at Saturn and its 350 dealerships. The cost of closing the brand will fall to GM, which is majority owned by the US government.

The bleak outlook for the dealers, who had been expected to be saved by Penske, comes as members of Congress are pressing both GM and Chrysler to reduce dealer closures that were already planned as part of the companies’ restructuring.

“I am pleased that both sides have put forward proposals and have agreed to work toward a solution,” Steny Hoyer, leader of the Democrats in the House of Representatives, said after a meeting that took place before the Saturn decision was announced.

Combined, the US and Canadian governments now own 72.5 per cent of GM and 10 per cent of Chrysler. The governments have lent the two companies a total of about $75bn and in spite of a pledge by the Obama administration to adopt a hands-off approach, Congress does not necessarily share that view when under pressure to save jobs.

“We all want to reach a non-legislative solution, which can only happen by reaching a deal that is reasonable and fair to both sides,” said Mr Hoyer.