Such adoration is more than just hype. Since General Motors launched the car three years ago Saturn has had one of the best customer-satisfaction ratings of any automobile on the road. Conceived a decade ago when Saturn Corp. was founded, the car has become a role model for service and marketing. And after a $4.5 billion investment by GM, the automaker’s first built-from-scratch division has finally broken into the black.
But will Saturn fulfill its mission of being the vehicle of the future for troubled GM? Surprisingly, the answer is still unclear. For all of the car’s popularity with customers, it hasn’t revolutionized the industry the way GM once envisioned. Many experts view the Saturn experiment as too little, too late. And with competitors like Ford and Chrysler, GM officials are debating whether to expand the Saturn subsidiary. Says auto analyst Maryann Keller: “The Saturn has become a cult car. But from a manufacturing standpoint, it hasn’t even come close to its original goal, which was to produce a small car at a cost competitive or better than the Japanese.”
A decade ago Saturn seemed like GM’s ticket to prosperity. The company was losing market share and was in the process of laying off 170,000 blue-collar workers. GM had tried for more than a decade to make changes that would improve productivity, but as William E. Hoglund, GM’s executive vice president, told NEWSWEEK, “there was too much damn baggage to get a change on the shop floor.” The solution: create a separate entity that the unions and the company would embrace as a prototype for change. Located in Spring Hill, Tenn., Saturn has since become a model in the industry, emphasizing vertical integration, teamwork and the Japanese idea of giving workers a voice in every aspect of the operation.
All the management techniques in the world haven’t seemed to bolster the company’s bottom line. Saturn earned a profit–$7 million–for the first time this May, GM’s 84.5 billion investment notwithstanding. But if Saturn can’t show a “reasonable rate of return” on its proposed expansion, says Hoglund, “we’re not going to send any more dollars down there.”
To achieve the kind of return Hoglund is hoping for, the company must sell considerably more cars. It is currently considering opening a new plant that would dramatically decrease its production costs per unit. Saturn president Richard G. (Skip) LeFauve says Saturn can sell 200,000 more cars a year, but no decision has been made on the expansion. Company officials, however, have considered several possible scenarios. One possibility: Saturn would use an underutilized plant in Bowling Green, Ky. Another option: it would retool one of several idle assembly plants in Michigan. But the most likely plan would be for GM to build a second plant on the 2,400 acres it owns in Spring Hill, a move that would eliminate the need to line up new suppliers. Says LeFauve: “When you make a decision to spend more money, you’ve got to be darn sure you’re right. And we’re really making sure we’re right.”
GM may still be able to rev up Saturn’s engines by expanding the subsidiary’s product line. Industry sources say the company plans to redesign the car over the next two years. But analysts say Saturn will have to produce larger, more profitable cars if it hopes to prosper. Saturn officials say no plans for larger models are in the offing. One reason: that would put the automaker in direct competition with GM divisions like Oldsmobile. Saturn has already cannibalized sales of GM’s Chevrolet line, exacerbating Chevy’s market-share decline and fomenting discontent among employees. “Many of our dealers felt the money, capital and resources that were directed toward Saturn should have been used to sustain Chevrolet for the long pull,” says Chevy general manager Jim Perkins. “There was a huge amount of emotion around that issue.”
The fear is that competition will wear even more thin with Chevy dealers, who have lost about 14 percent of their customers to Saturn. Dealers were particularly demoralized to see Chevrolet workers who received discounts on GM cars head straight for Saturn dealers. In the end, says Keller, Saturn’s popularity will mean little if the car does not produce tangible benefits for its parent company. “Somebody has to figure out what is best for the overall corporation so that an investment in a new Saturn will have the least impact on GM and greatest impact on GM’s competition.” And that, unfortunately, may have little to do with what even the most devoted Saturn consumers think.
