GM to shut down Saturn after deal with Penske falls apart

After months of negotiations aimed at saving the Saturn brand, General Motors said Wednesday it will stop making Saturn vehicles this year and wind down the brand by the end of 2010.

Saturn's last hope, a sale to Penske Automotive Group, fell apart Wednesday afternoon. A Penske statement said it was notified that its tentative deal with an undisclosed automaker to supply vehicles to sell as Saturns had been rejected by that company's board.

A deal signed in June for GM to sell the brand to the dealer chain run by entrepreneur and former race driver Roger Penske called for GM to supply Saturn's current Aura, Outlook and Vue vehicles for two to three years. Penske was responsible for finding another supplier for vehicles after that.

"You can probably hear it in my voice that this is very, very disappointing," said Anthony Pordon, Penske's senior vice president. "When we sat back and looked at everything after they rejected the deal, we felt there were too many risks involved to really move forward with this transaction."

Tom Pyden, a spokesman for GM, said dealers now have until October 2010 to wind down. GM has stopped making the Aura and will halt Outlook and Vue production before the end of this year.

Saturn sales slipped from a peak of 285,600 vehicles in 1995 to 188,004 in 2008. GM spent considerable effort and money in 2004 to try to revive the brand — launched with fanfare in 1990 — after years of starving it of new products. Experts had for years predicted a Saturn rebound, but it never came.

Saturn has 350 remaining dealers in the 50 states. When GM announced this year that it was looking for options to shed Saturn, dealers lobbied for a shot at operating the business themselves with a partner that would finance manufacturing products.

"This is very disappointing news and comes after months of hard work by hundreds of dedicated employees and Saturn retailers who tried to make the new Saturn a reality," GM CEO Fritz Henderson said in a statement. "Today's disappointing news comes at a time when we'd hoped for a successful launch of the Saturn brand into a new chapter."

Finding another automaker willing to make cars to sell as Saturns was always a long shot for Penske, says Paul Melville, a partner at Grant Thornton Corporate Advisory and Restructuring Services.

"It was always going to be a tough one to pull together in this time space," Melville says. "And it's a shame, because (General Motors) really poured a lot of money into the brand."