GM to wind down Saturn after failed talks

General Motors Co will close Saturn, the brand created 24 years ago to emulate successful Japanese carmakers, after Penske Automotive Group Inc broke off discussions to buy the unit.

Penske, operator of 310 auto retailers, backed out because of concern that the Saturn brand wouldn’t have access to cars and sport-utility vehicles after 2011, when GM was due to stop supplying them, Penske said in a statement yesterday. Renault SA’s board rejected a deal to build cars for Saturn, a person familiar with the talks said. The person asked to not be identified because the discussions were private.

Penske’s exit forces GM to adjust how it will execute its post-bankruptcy plan to cut in half the number of brands it offers in the US It intended to sell the Saturn, Hummer and Saab units and close Pontiac. The Detroit-based automaker said in June the Saturn sale would save 13,000 jobs and 350 dealerships.

“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,” GM Chief Executive Officer Fritz Henderson said in a statement on the company’s Web site.

Saturn dealers will have until October 2010 to wind down operations, John McDonald, a GM spokesman, said in an interview.

Penske, based in Bloomfield Hills, Michigan, had planned to import vehicles carrying the Saturn label from a maker such as Renault Samsung Motors Co, a South Korean unit of France’s Renault that doesn’t now export to the US

“Renault has been in contact with Penske to supply cars, parts and technology to Saturn through an OEM agreement,” the Boulogne Billancourt, France-based automaker said in an e-mailed statement, using the abbreviation for an original equipment manufacturer. “The conditions for an agreement have not been found.”

Renault rose as much as 99 cents, or 3.1 per cent, to ¤32.85 and was up 2.9 per cent as of 9:08 am in Paris.

Penske likely could have found another company to supply vehicles, said Stephen Spivey, an auto analyst with Frost & Sullivan in San Antonio. By choosing to close the brand rather than sell it, GM loses the proceeds from the sale, while possibly reducing competition that could have been created between its remaining brands and the new Saturn, he said. “I’m a little surprised that there was no plan B here,” Spivey said. “It’s surprising to me that Penske had no idea that this might not be accepted.”

GM established the Saturn brand in 1985 as an initiative to overhaul the way it built and sold cars. Its factory operated under a different contract than the national United Auto Workers union agreement, and its dealerships featured no-haggle pricing and customer celebrations.

Deliveries peaked in 1994 at 286,003 units, according to Autodata Corp, a Woodcliff Lake, New Jersey-based industry research firm.

Sales have declined 56 per cent this year through August from a year earlier.

“It was shocking and disappointing,” said David Fischer, owner of a Detroit-area Saturn dealership. He said he had looked forward to working with Roger Penske, whom he called an “automotive icon.”

Penske, 72, who started his automotive career as a racer and Chevrolet dealer, holds interests including a truck-leasing business and the exclusive right to distribute Daimler AG’s two- seat Smart minicar in the US He has won the Indianapolis 500 a record 15 times as car owner.