The resurrection of Saturn: what it learned here should help GM as it tries to revive its other divisions.

The most recent North American Auto Show created some genuine (not PR staff-induced) excitement about the vehicles displayed by the traditional Big 3. Nowhere was that excitement more justified than at General Motors. For the first time, GM had a display demonstrating the phenomenal impact of Bob Lutz on GM's portfolio. From the newly launched Lambda-based crossover SUVs (Saturn Outlook, GMC Acadia, Buick Enclave) to the unique hybrid Chevrolet Volt concept vehicle, GM showed it finally understands that success is all about the product.

The transformation of General Motors is particularly evident within the Saturn brand. The history of Saturn is a microcosm of why the "old" General Motors was failing and why the "new" General Motors has a chance to regain its position as one of the world's leading car companies. For readers old enough to remember, Saturn was launched with great fanfare when production began in 1990. Touted as a "different kind of car company," GM spent hundreds of millions of dollars positioning Saturn as its answer to the Japanese. From creating completely separate showrooms to promising "no-haggle selling," GM set out to establish the Saturn brand as the next evolution of GM, and, amazingly, it worked! It created a dealer network dedicated to the Saturn concept and, equally important, a group of GM employees in Spring Hill, Tennessee, that fervently believed they were part of a different kind of car company. Everyone associated with Saturn thought of themselves as the future of GM and believed that they could create products that would successfully compete with the Japanese.

Killing the Golden Goose 

So, what did GM do with all of this hard-fought success? In typical 1980-2000 GM fashion, it worked as hard as possible to screw it up. It started when the financial analysts reviewed how much GM had spent on Saturn through the early 1990s. Rather than look at this as an investment to reposition GM in the mind of the American consumer, they looked at it in terms of the cost to date spread over the number of vehicles sold. The numbers looked horrible, so GM began to put the brakes on additional spending, and--for the next eight years--Saturn was on a steady decline.

Initially, Saturn was starved for cash but was able to maintain its autonomy within GM. Then GM made the brilliant decision to save money (and further rein in Saturn) by putting Saturn's new product development back under the traditional GM product planning system. At the time we wrote an article pointing out how this demonstrated that GM did not have a strategic marketing bone in its corporate body. Here was a division that successfully repositioned itself with the American consumer and, rather than build on this success, GM was starving Saturn for product.

The late 1990s began Saturn's dark days. It was forced to rely on one product, the Saturn S-Series, that started out as a competitive small car capable of taking on the Japanese. Yet, as GM moved away from its Saturn differentiation strategy toward a pure profit motive, each successive iteration got worse. The larger Saturn LS, introduced in 1999, was based on the taut European Vectra, but was so bastardized by the time it came here, no one wanted to buy it. GM went to great lengths to turn the suspension to mush, and retrofit it with plastic body panels in order to "Saturnize" it. By the time GM replaced the S-Series with the horrible Ion in 2002, it appeared Saturn had come to the end of the line. What no one inside GM seemed to appreciate was that customers were not buying Saturns on price alone. They saw themselves as part of Saturn's brand identity.

So how did Saturn survive? Thank its dealer network. It became the "little engine that could," and continued to rack-up strong customer approval ratings. Customers loved the no-haggle pricing approach and that the salesperson focused on the customer and product, as opposed to spending an inordinate amount of time on price, rebates, coupons, and discounts. Customers were willing to forgive many of the product shortcomings because they felt connected to the Saturn concept and were phenomenally loyal to their local dealer. This customer support was so strong that, beginning in 2000, Saturn dealers would consistently rival Lexus, Toyota's flagship marque, in consumer satisfaction and loyalty ratings. Given the inferior product, it is not surprising that Saturn received some of the highest marks in the industry for its service department.

Enter Bob Lutz.

When Bob Lutz arrived at GM, it did not take him long to look at the situation and come to a very logical conclusion: GM could either spend a lot of money and time resurrecting the image of an underperforming division--like it now is doing with Chevrolet--or it could take a division that had great consumer ratings and give it new products. As a result, off came the plastic cladding, and in came a vibrant new product line-up at Saturn. As the lifecycle table demonstrates, Saturn's product line expansion has been truly amazing.

Twelve Months ago, Saturn really only had two products, the Ion and the Vue. By the end of 2007, Saturn will have five products--a 150% increase--that is some of the best that GM has to offer. The Opel Vectra-based Saturn Aura should appeal to buyers of Japanese and European vehicles, and is one of the first examples of GM successfully adapting a European platform for North America. Similarly, the Saturn Sky Roadster, an extremely attractive two-seat convertible, will draw needed attention to Saturn dealerships. The Saturn Outlook crossover is just hitting dealership lots, and we believe it is one of GM's best new products. Next, GM will bring the compact Opel Astra over in the first half of this year, and--except for badging--the Saturn variant will deviate little from its European brother. Topping it all off is a new Saturn Vue, which will arrive in Saturn dealerships early this summer. The result of this infusion of new product is a steady growth in sales for Saturn.

IRN's forecast reflects all of this product activity, as we expect U.S. sales of the Saturn brand to be up 35% this year and approach 350,000 units by the end of the decade. Saturn dealers have to be excited. They finally have something to talk about, and should have no shortage of interested people coming through their doors. For once, GM made a lot of the right marketing decisions with Saturn, something that should help all of its brands as they work to resurrect their reputations with the American consumer.

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Kim Korth and Erich Merkle

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Kim Korth, President, IRN, Inc. and Erich Merkle, Director of Forecasting, IRN, Inc.

Saturn Investment in New Product

Models             2006     2007     2008  2009     2010

Sky                All-new
Aura               All-new
Aura (Next Gen.)                           All-new
Outlook                     All-new
Vue                         All-new
Astra                       All-new
Astra (Next Gen.)                          All-new
Activity Wagon                             All-new

Source: IRN Inc.