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.

Pickup trucks are three of the Top Ten Selling Automobiles in the U.S.

I've written before about the Big Three Automakers bailout, and about their propensity to push pickup trucks and other high-margin vehicles on us. I think I wrote a thing or two about the "cash for clunkers" program, as well.

The Big Three are banking on our collective inability to remember things that happened more than three months ago. They continue to push pickup trucks and big SUVs on us. (Well, except for Hummer. GM finally pulled the plug on the Hummer brand after a Chinese buyer decided not to buy the division.) And although I hate to acknowledge the reality of it, the American public continue to buy pickup trucks.

Nobody seems to remember what happened to gasoline prices and truck/SUV sales in the summer of 2008: gas prices went way up, and truck/SUV sales went way down. Or perhaps they do remember, but either they don't care, or they have convinced themselves that it won't happen again. Hey, people! Summer's only three months away. Gasoline prices will jump again!

Pickups are especially prevalent here in the American West. Sometimes during my commute, I will count the number of pickups vs. SUVs vs. normal cars at an intersection in town. I'm amazed at the margin by which pickups outnumber normal cars, and SUVs outnumber both.

Okay, I would enjoy owning a pickup truck -- but I'm not willing to give up my commuter car for it. A pickup truck has its place, but it's not in the driveway or garage of a suburban home or on the dry, paved roads between home and work -- which is where most of them in this part of the American west spend most of their time.

And it's not necessarily in the mountains, either. In September 2008, I drove my little Saturn SL2 up a steep, rutted, gully-washed, mining road in the Rockies, to get to the Grays and Torreys Peak trailhead on the Continental Divide. I drove past a huge line of 4WD PUs and SUVs, all waiting for some brave soul to show them how to negotiate the road. After I went past, they all pulled in behind me and followed me up to the trailhead. After we had parked, several of the drivers approached me and told me that I was an inspiration to them: they weren't sure they could make it up the road until they watched me do it.

As for snow, well ... the missus and I still remember fondly a 60-mile drive to Denver in a snowstorm, when we counted 18 pickups, Jeeps and other 4WD vehicles -- and only 2 (two!) normal cars -- that had slid or spun off the interstate highway.

Executives and employees at the Big Three in Detroit have a derisive term for all of these pickup trucks they're selling: "air haulers." And I do mean derisive. They're glad to take your money, knowing full well that for 360 days out of the year, the bed of your pickup truck won't hold anything that couldn't fit into the trunk of a (smaller, cheaper, and more economical) Civic, Corolla, or even Impala.

Here is a list of the top ten selling automobiles in the United States in 2009, according to Reuters:

Rank	Make & Model	2009 Sales	2008 Sales	2008 Rank	% Change
1	Ford F-Series pickup	334,922	436,022	1	-23.2
2	Toyota Camry	285,069	379,270	3	-24.8
3	Chevrolet Silverado pickup	261,142	402,191	2	-35.1
4	Honda Accord	244,579	333,011	6	-26.6
5	Toyota Corolla	240,755	307,071	4	-21.6
6	Honda Civic	223,751	304,297	8	-26.5
7	Nissan Altima	169,435	241,529	9	-29.8
8	Honda CR-V	158,573	171,193	11	-7.4
9	Dodge Ram pickup	155,467	213,684	5	-27.2
10	Ford Fusion	148,045	128,381	20	+15.3

(I swiped the table from msn.com.)

Pickup trucks claim three of the top 10 slots, and two of the top 3 slots. Surprisingly, only one of the top 10 is an SUV, and it's not even a domestic SUV: the Honda CR-V. Japan's own Big Three have six of the top ten slots: three for Honda, two for Toyota, and one for Nissan. The only domestic non-truck vehicle that made the top 10 was the redesigned Ford Fusion, whose sudden rise in popularity vaulted it from 20th place to 10th place.

Now, I have some good friends who really do haul stuff in their pickup trucks, and they really do need their four-wheel-drive to get to where they're going. I say more power to them. One could even call them "legitimate" pickup truck owners. One of my friends has a beautiful old Dodge pickup. Most of the time, he uses it to haul old Dodge pickup truck parts. Like my dad said once, I'll buy a pickup truck when I have something to haul around in it.

Another automotive company bailout

They thought they could slide this one past us!

WASHINGTON (AP) - The House on Tuesday approved a "cash for clunkers" bill that aims to boost new auto sales by allowing consumers to turn in their gas-guzzling cars and trucks for vouchers worth up to $4,500 toward more fuel-efficient vehicles. ... Since the yearlong vehicle program is expected to cost $4 billion, lawmakers would attempt to find the additional money later this year.

This is a just plain bad idea. But the House of Representatives bought it, 298-119, and it will probably sail unopposed through the Senate as well.

Exactly what are Congress and the automakers trying to accomplish here? Reduce CO2 emissions? Stimulate auto sales (as they say)? Or give General Motors, Ford and Chrysler another handout?

Um, maybe buy votes in Michigan, Kentucky, New Jersey and every other state that stands to lose automobile-related jobs?

I don't know exactly what they're trying to do, but it's very clear what they're doing.

They're subsidizing people's poor decisions again.

They're rewarding past bad behavior and reinforcing current bad behavior.

And it's another bailout. A $4 billion bailout.

The Big Three pushed their gas-guzzling vehicles in past years. In fact, all three of them showed commercials touting their gas-guzzling pickup trucks last summer during the $4 per gallon gasoline mini-crisis, and in the fall and winter during the onset of the current financial crisis, and they're still doing it. American automakers have never been serious about selling more fuel-economical vehicles, and their advertising campaigns prove it.

So do their showrooms. Drive past any Chevrolet, Ford or Chrysler/Dodge dealer and compare the number of trucks, SUVs, and big cars with the number of small cars, hybrids and economy vehicles. That's right. They're pushing the big machines. It's as if nothing has changed in the last 12 months, as far as the Big Three automakers are concerned.

That's because that's where the big margins, and hence the big profits, can be found. It's all about money. For Detroit, it has always been all about money.

We must lay some blame on the consumers who bought these vehicles. They're the ones who had to suffer through the gasoline price crisis last summer, remember? I say, let 'em suffer. They chose to buy those big machines, now let them live with their choice.

But now the government wants to ease these buyers' remorse by subsidizing their purchase of more economical vehicles. These consumers are getting a government-subsidized $4500 discount, in addition to the trade-in value on their old cars, to buy new cars. (Okay, in some cases it's only $1500, but the article says "up to $4500," and that number shows up several times in the details. Live with it.)

Problem 1: Not everybody's gonna buy American.
Problem 2: Sellers are greedy.
Problem 3: Hey! What about the rest of us?!

Allow me to elaborate.

Problem 1: I predict that many people will dump their big American cars to buy smaller, lighter cars from Asia or Europe. I didn't read anything in the article that said the $4500 goes towards the purchase of an American car. So this won't help GM, Ford or Chrysler nearly as much as people think it will.

Problem 2: Car dealers won't be able to resist the temptation to jack up the price of the vehicles they're selling, to get their own piece of that $4500 pie. They won't be satisfied with just moving more vehicles through their lot. Don't be surprised to hear about salesmen negotiating with the buyer to "split the difference," so the buyer ends up paying $2,250 more than he should for a new car.

Problem 3: Once again, the good people of the United States are getting screwed. Let me explain that one in more detail.

First, it was home prices: those of us who bought houses within our means, who went responsibly through the traditional loan approval process, have seen our home values plummet because of the irresponsible actions of the borrowers, lenders, and investment entities who are really at fault for the current financial crisis.

Then, it was jobs: as the economy tanked and corporate profits fell, over 13 million hard-working Americans lost their jobs, while the executives who were truly responsible for the losses in corporate profits held onto their jobs, fired those 13 million, collected undeserved bonuses for their actions, and did absolutely nothing to relieve the suffering of their former employees. Do you know how many production workers you can keep employed if you replace an overpaid CEO with one who's willing to take a smaller bonus?

Then, it was tax dollars: while no politician has yet had the audacity to raise taxes on us, the politicians have been happily writing checks against our (future) taxes to pay for so-called "bailouts" for private industry: first the banks, and then the automakers.

(You may or may not remember, but when Congress said "no" to the Big Three the first time, General Motors tried to disguise itself as a bank (GMAC, its financing arm) and sneak in the side door, to get a piece of the bank "bailout" funds. Congress finally gave GM and Chrysler some money, but not as much as they wanted.)

Now, it's tax dollars again: this latest move by Congress is another attempt by somebody to give Detroit the rest of the money they wanted. If this plan works the way it's written, then every person who buys a new car under this plan will be shoveling more government money, $1500 to $4500 at a time, to the carmakers.

Hey! That's my money! Don't you go giving it to that Hummer driver! He's got more than enough money to replace that Hummer -- if he really wants to replace it.

Not only that, but: Hey! When are you going to reimburse me for my purchases? While so many other people have been buying trucks, SUVs, Caddys, Lincolns, and muscle cars, I've been driving economy vehicles since 1984! No government entity has ever given me a nickel for my good citizenship. Just like with the mortgages and everything else, the government is punishing good behavior and rewarding bad behavior.

GM is no longer "too big to fail." And Fiat almost gave up on their Chrysler acquisition because of meddling by the feds. I say, let 'em fail. Let the market sort it out. Enough with the government "intervention," already. You're making things worse, not better.

If you are as outraged as I am, please send this article's URL to your friends. Then print this article (yes, on paper) using Internet Explorer, and snail-mail a copy of it to your Senator, Representative and President. Make sure to include a cover letter expressing your outrage, and including your name and address so they know you're serious.

American automakers think we're stupid

Okay, the American economy is in meltdown. After 12 months, the experts finally decided to call it a "recession." Maybe this time next year they will have decided that it's not a recession, it's a depression. Those of us who are out of work must be smarter than those experts, because we already know it.

Credit is hard to get right now, because most of it is tied up in those "toxic securities" -- secret code for "bad mortgages," which the lenders and investors might as well write off and forget about, and start over.

The domestic automobile industry, at least that overweight segment of it known as The Big Three, has been in Washington D.C. twice begging for money to "bail them out," because they're too incompetent to bail themselves out of the mess they created. For years now they've been ignoring the signs of the times, the writing on the wall, the metaphor of your choice for the consumers who abandoned the Big Three in favor of Toyota, Honda and other Japanese (and Korean!) brands.

Detroit ceded the market for medium, small and subcompact sedans to Japan without a fight, choosing instead to concentrate on "luxury" cars, muscle cars, SUVs and manly pickup trucks. When gasoline jumped to $4 per gallon this summer and Americans suddenly stopped buying all those thirsty Detroit products, the Big Three's collective income fell far below their outgo, and they started losing money fast.

What Detroit should have done is instantly change their product mix and convert factories from making trucks and SUVs to making the smaller, leaner cars that Americans wanted. They should have noticed all the Priuses and Civic hybrids on the road and rushed to get their own hybrids into production. But they didn't have any smaller, leaner cars, and they didn't have any domestic hybrid options.

Actually, that's not strictly true. They didn't have any smaller, leaner cars that Americans wanted. What they offered for smaller cars was ugly and poorly put together. What they offered for hybrids got worse gas mileage than the Japanese non-hybrid alternatives, and again, they were poorly put together.

Our senators and representatives in Congress, bless 'em, were persuaded that giving Detroit zero dollars, while it would have been a bold and courageous move, might not be the right thing to do, but they were able to see past the Big Three CEOs' self-serving arguments and pare down their request to something more, um, realistic. I'd still like to see Congress try something bold and courageous for a change. But at least they got it down from over $30 billion to under $15 billion before the proposal got snagged on a tree branch.

In the meantime, while the car companies are crying to the government about all the money they're losing, Dodge aired a TV commercial this evening that makes one slap one's forehead and cry, "What in the world are you thinking?"

This was an advertisement for what Dodge called a "luxury truck": a dual-cab monstrosity with leather seats, built-in WiFi, a backup camera, built-in toolboxes, a really thirsty engine and a suspension that would do the Army proud.

Hey! Dodge! Which Americans are you trying to sell these air haulers to? Haven't you been listening to the majority of the American public? We don't want luxury trucks! We want vehicles that take less gasoline (or diesel), or no gasoline (or diesel) at all! These ain't them!

Dodge wants to push this "luxury truck" for one reason only: because of the profit margin. They make more money per sale on "luxury trucks" than on more sensible vehicles. I guess they don't expect people who need car loans to buy these things, do they? Because, according to the news and the CEOs themselves, car loans are hard to come by right now, so the buyers of these beasts will need cash.

The commercial, naturally, emphasizes the manliness of the truck, and appeals to the buyer's need to feel manly. The commercial goes over the top in an attempt to get the buyer's insecurity (or need to compensate for perceived deficiencies elsewhere) to override his caution and the frugal attitude so vital in this economic climate.

This truck is the reason why the majority of Americans don't want to give the Big Three one red cent of their money. It's symbolic of everything that's wrong with Detroit right now.

The first thing the Car Czar should do, once he's appointed and the Big Three get their bailout money, is fire the sorry idiots at Chrysler who approved the design and construction of the "luxury truck," and the sorry idiots who approved this advertising campaign, and the sorry idiots who signed the contract with the advertising company, and the advertising company itself.

After that, it wouldn't be a bad idea to go after the associated idiots responsible for the Cadillac Escalade, the Ford Excursion and supertrucks, and the Hummer product family.