Saturn's dead: Good riddance

It looked like a great idea when it was born, but it was just another symptom of the hubris that helped bring GM to its knees.

By Alex Taylor III, senior editor

Former GM CEO Roger Smith wanted to start over with Saturn. Instead he stuck the automaker with another dud.

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NEW YORK (Fortune) -- The demise of Saturn is a good thing for the new General Motors.

It was a living, breathing reminder of the arrogance that permeated this company for years, in the belief that GM brains, combined with an endless supply of money, could solve any problem.

It wasn't true then, and it isn't true now. GM needs to learn its lesson from Saturn and say goodbye.

Saturn was the creation of Roger Smith, who, in his tenure as chairman and CEO from 1981 to 1990, caused much of the damage that current CEO Fritz Henderson is trying to undo.

Smith called his big ideas "lulus," and Saturn was a lollapalooza. Frustrated and impatient with trying to cure GM's manufacturing, engineering, and marketing woes, Smith decided to start over again with a clean sheet of paper. So he created Saturn as a way to reinvent GM by doing everything differently.

Smith tried to do it all at once. He tried to bypass GM's balkanized manufacturing system by combining all of Saturn's factory operations in one place. He tried to whitewash GM's sorry union relations by giving workers a piece of the action in exchange for more cooperation.

He tried to solve GM's perennial small-car problem by creating a new division that would do nothing but make small cars. And he tried to create a cohesive and responsive dealer network by awarding dealers exclusive territories so they wouldn't be forced to compete against each other.

As the famous ads would proclaim in the early 1990s, Saturn would be a different kind of car company. It really was a noble idea that had tremendous appeal. As GM vice chairman Bob Lutz said much later, the Saturn experiment was an attempt to answer the question "Why can't we have it both ways? Let's have wonderful dealers and consumers who are enthusiastic about the product."

And parts of the original concept proved durable. Saturn did go on to set new standards for satisfied buyers and to form remarkably strong bonds with its customers. "The Saturn experience," which started with the dealer sale and ran through the life of the car, became the talk of the industry.

But even with a clean sheet and a blank check, Smith couldn't produce a winner. In its two decades of operation, Saturn built a gigantic new factory, introduced several all-new models, conducted massive ad campaigns, and consumed billions of dollars of GM's money. But it was all in vain.

The notion of a tiny "independent" American company like Saturn making low-margin small cars and trying to sell them profitably proved totally unworkable. The Saturn cars just weren't good enough, and GM couldn't charge enough for them.

Meanwhile, competition from Japan, and later Korea, proved much tougher than anyone expected.

Exactly 20 years after it opened for business, GM put Saturn up for sale to the highest bidder as part of its bankruptcy proceedings. By then, Roger Smith's concept of a new way of making and marketing cars was already dead.

Wednesday's collapse of the Penske deal, which was always a chancy proposition, kills the Saturn brand. Will it kill GM's historic arrogance? Critics see the same mentality that led to Saturn in GM's zealous promotion of the Chevy Volt.

As one observer pointed out recently, after the Volt's batteries have been discharged from 40 miles of driving, its performance will be reduced by half. In other words, the acceleration time of this $40,000 car under its gasoline engine will double, making maneuvers like merging onto a highway and passing pretty risky.

That's hardly likely to be a strong selling point for a car that GM is promoting -- as it did with Saturn -- as a revolutionary game changer. To top of page

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