Thursday, March 25, 2010

Saturn: How General Motors Screwed Up a Good Thing

This posting started out as a request for somebody to write a book with this title. I didn't intend to write a posting about it. I can imagine that Saturn: How General Motors Screwed Up a Good Thing, written by an industry insider, would make the nonfiction bestseller list.

Actually, a more appropriate title might append the word Again to the title, as GM has screwed up several times in the last few decades.

Moreover, GM has screwed up so many times that their mishandling of Saturn Corporation might end up being a single chapter (or three chapters) in a book with a simpler title: How General Motors Screwed Things Up.

General Motors Corporation have accomplished a lot in their corporate history. They are responsible for bringing many automotive innovations to the mass market, for use by the common man. And indeed, they have led the way with innovative features in their more elite market segments, such as the Corvette and the haute-luxury end of their Cadillac line.

But GM have had more than their share of screw-ups, too, one of which was their mismanagement of Saturn.

Saturn Corporation was an innovative way to run a car company, and the Saturn was an innovative product line. After the initial model release in 1985, Saturns attained popularity quickly, because they were perceived as something newer and better than the same old stuff Detroit had been churning out. But GM required Saturn Corporation to sell their models at a loss in order to build market share, so the subsidiary didn't show a profit (did it ever?). They could have jacked the price up to par or to a slim profit, and people would have paid the extra -- the cars were that good. But they didn't.

When it started in 1985, Saturn offered a different kind of car and a different kind of car-buying experience. The public loved the car, the no-haggle, no-pressure showrooms, and the customer-comes-first-and-we-treat-you-like-royalty service departments. As a result, the public bought lots of Saturns - and two bad things happened.

("Bad" depends on your point of view. These things were only bad from the point of view of other GM divisions, which, being much bigger, older, and more heavily invested than Saturn, had the ready ears of the executive suite and the boardroom. You'll see where this is going shortly.)

First, Saturn sales cut deeply into sales of existing GM product lines. That's no surprise, considering the unequivocal junk that Chevrolet, Oldsmobile and Pontiac were turning out in the late 1980s and 1990s.

Second, Saturn employees adopted a "snooty" attitude (GM's word, not mine) towards other GM employees. That's because Saturn employees, being nonunion, had to work hard for their success, and they had a lot of success to show for their hard work.

GM could have (and unequivocally should have) learned a lesson from both of these phenomena. They could have figured out why the public preferred the Saturn SL2 over the Chevy Beretta, for example, and either redesigned the Beretta to match the SL2's quality and features, or killed the Beretta, cut their losses, and consolidated their product line. Likewise, they could have taken a page from Saturn's playbook on no-haggle pricing and real customer service, and transformed GM's showrooms and service departments from a demeaning and distasteful experience into something enjoyable. Instead, they punished Saturn for their success. Rather than raise the rest of the corporation to Saturn's level, they lowered Saturn to the level of the rest of the corporation.

GM closed the dedicated Saturn factory at Spring Hill, Tennessee, and required all Saturn vehicles to be built on the same production lines as other GM cars, by the same people that built the other GM cars. Guess what happened to product quality? Yep: Down the toilet.

Then, rather than allow Saturn designers to design their own cars from scratch, GM imported designs from their European brand, Opel, and rebadged them as Saturns, thereby eliminating the uniqueness of the brand and the designed-in quality that had characterized the earlier models. Believe me, the public noticed the drop in quality, and while sales momentum held for a while based on the brand name, eventually sales dropped because the cars had become average.

(But the GM product line didn't completely regain its lost market share. Any idea who picked up the slack? It was Toyota, a resurgent Honda Motor Corporation, and a newcomer from Korea called Hyundai.)

The upshot of things was that while GM undercapitalized Saturn, they continued pouring money into crap like the Pontiac Aztek (and the entire Pontiac and Oldsmobile product lines) and excesses like the Cadillac Escalade and the Hummer product line.

Then, when the division was stumbling along, half-starved, without a loyal fan base, without direction and without the qualities that made it unique, GM announced that they were getting rid of it because it was no longer profitable. The executives and the board of directors at General Motors were directly responsible for meddling and mismanaging Saturn to death.

1 comment:

Zyzmog said...

Remember how, at the top of this entry, I said that somebody should write a book called How General Motors Screwed Things Up? Well, only six weeks after I said this, that very book hit the bookstores.

The title's a little different: It's called Sixty to Zero: An Inside Look at the Collapse of General Motors--and the Detroit Auto Industry, written by Alex Taylor III, a writer for Fortune magazine with an inside track into the Big Three.

The book was released May 4, 2010 and sold so well in hardback that it was released in paperback April 26, 2011. It's not in the local library, so you'll have to wait until I buy a copy to read a review of it, right here.