General Motors Corp. is pumping $1.5 billion into its sagging Saturn unit and will add up to four new vehicles to the division’s lineup in the next four years.
Once touted as GM’s success story of the 1990s, Saturn Corp. has struggled with a limited line of passenger cars competing against hot-selling trucks and Japanese models.
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The first of Saturn’s new vehicles will be a small sport-utility vehicle. And the division’s chief said GM is committed to giving Saturn the resources to branch out into other segments of the U.S. market.
“If a company is willing to invest $1.5 billion, it’s a pretty strong vote of confidence they are committed to the brand going forward,” Cynthia Trudell, Saturn’s chairman and president, said in an interview Tuesday.
Saturn sales were flat last year despite record industry-wide sales and the addition of a new mid-sized L-Series cars, which have struggled to make inroads against the top-selling Toyota Camry and Honda Accord.
Industry analysts said GM’s investment in the product-starved division is long overdue.
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By GlobalData“My feeling is that this announcement should have been made five years ago,” said David Healy of Burnham Securities. “They have totally missed the huge move into light trucks.”
Trudell vowed that GM’s cash infusion will spark a turnaround. The automaker has targeted $1 billion to update Saturn’s factory in Spring Hill, Tenn., and another $500 million to make a new four-cylinder engine at the plant.
In addition, GM said a future Saturn model will get a new, high-tech V-6 engine from Honda as part of a recent engine-swapping agreement between the two automakers. It will be the first GM model to use a Honda engine.
While Trudell wouldn’t identify Saturn’s future products, she said the options include a combination sport-utility/pickup truck, a hybrid SUV/minivan or a mid-sized sport-ute.
“Those are all fair game,” said Trudell, a former GM plant manager who took over the top spot at Saturn last year. “The market is being fragmented and consumer tastes are changing.”
Promoted as a “different kind of company,” Saturn was built from scratch as GM’s import fighter with a consumer-friendly sales approach and enlightened labor relations.
While it has attracted young import buyers, it’s biggest impact has been the retail sector where its no-haggle, soft-sell approach has been widely praised.
But Saturn’s U.S. market share slipped from a high of 1.9 percent in 1995 to 1.4 percent last year. The division was banking on its new LS sedans and LW wagons to boost it share, but the new cars have gotten off to a slow start.
In the first three months of 2000, Saturn sold just 18,898 of the L-Series models while Toyota sold 110,648 Camrys and Honda sold 89,377 Accords.
The new Saturns’ lackluster launch has been blamed on bland styling, lukewarm reviews, misdirected advertsing and below-average ratings on some government crash tests.
Slow sales have prompted three production cuts at the division’s plant in Wilmington, Del.
“Everybody likes the car, but nobody loves it,” said Jim Hall, an analyst with the AutoPacific market research firm.
Trudell said the investment in Saturn’s Tennessee plant will give it greater flexibility to produce a variety of models based on market demand.
“If Saturn can get the product out in a reasonable time, they can still ride the growing wave for products that blend cars and trucks,” Hall said.
Saturn needs a hit to regenerate enthusiasm in the brand when it debuted in 1991. After several years of strong growth, sales began declining in 1995 as its models aged and consumers became infatuated with light trucks.
Sales of its small sedan, coupe and wagon were off 10 percent last year as the overall market soared nearly 9 percent. Production was cut, although no workers were laid off.
