Saturn Case Study Analysis

Saturn is a company that prides itself on producing economical, quality automobiles, offering innovation and practicality, which was supposed to give it a high rating of customer satisfaction in its industry. It borrowed many of GM’s strategies and applied them to create a Saturn’s business model. However, things haven’t gone as planned. In fact, Saturn has been something of a fiasco. “I view Saturn as a failure,” says George Magliano, director of automotive industry research for Global Insight. “It hasn’t done what they expected it to do.

Saturn has had two or three incarnations, and none of them has worked. ” I read two articles on Saturn. Most of the recent articles about the state of the company are 4 to 5 years old. This tells us that the current state of the company or the brand is now just lumped in with GM. The articles gave us a look into Saturn from 2004 until the present time. In 14 years of operation, Saturn has built a gigantic new factory, introduced three all-new models, conducted massive ad campaigns, and cost its parent company billions of dollars.

Saturn’s attempt to make low-margin small cars proved totally unworkable, and competition from Japan, and later Korea, has proved to Saturn it cannot be competitive. GM has invested a grand total of $15 billion into Saturn and the division has not turned a profit. Its auto operations in North America and Europe are both in the red, and it has run up unfunded retiree pension and health-care obligations. GM has taken away the special status and made it into a plain division of GM, with the same centralized engineering and marketing as all the other brands.

Unlike the original models that were developed by Saturn engineers, not to mention designed by Saturn designers and built in dedicated Saturn plants, the new vehicles are coming from GM’s development system and will be built in GM factories. Rick Wagoner, GM’s chairman and CEO, likes to say that the simplest way for GM to boost its profits is to stop selling cars that lose money. Saturn is one of those cars that is losing for GM. Yet GM still wanted to keep this brand alive and a new transformation began. Due to Saturn utilizing the same platform as other GM cars there entry into the minivan market was hurt as well as other lines.

Saturn’s roadster, named Sky, which arrived in early 2006, is built from the same architecture as Pontiac’s Solstice. This takes from the original philosophy of “A different Kind of Car, A different Kind of Company. ” Saturn is no longer different. Another thing buyers will notice about the new models is that the plastic body panels are gone. Saturn used to promote the panels heavily because it had little else to sell, featuring them in commercials that showed them fending off dents from trash cans and bicycles.

Some had argued that they were integral to Saturn’s brand identity, but there was no room for them in GM’s complex global product-development system. Lutz says tapping into GM’s global resources “is exactly what will deliver the variety of product Saturn needs. ” But with Saturn sharing components with other GM divisions, there is a danger that it may cannibalize other models’ sales. Saturn executives say they expect to boost its volume from the 215,000 units forecast for 2004 to 400,000 in 2007.

Since GM’s market share has been declining for 40 years, a bump up in Saturn volume could mean a downturn for other GM brands. As we fast forward to today, Saturn is now on the chopping block. We all have been listening to the news and understand that the automobile industry here in the United States is in shambles. In my opinion there are many reasons why the auto industry is in the shape that they are in. When Saturn was first born the concept of this was to be genuinely different for the concept of car design and sales. The problem GM ran into was not truly making if a different company.

They lost focus on what the original mission was. For the first decade or so Saturn lived by its mission, but then slowly moved away from it and just became another part of GM. As we look at the fall of the US auto market you can see how they ran into problems. In US Congressional hearings on December 2nd, 2008, General Motors announced its intentions to only focus on four core brands (Chevrolet, GMC, Buick, Cadillac), with the sale, consolidation, or closure of Saturn and the remaining brands. This makes my analysis of the future of Saturn very simple.

They will no longer be in existence and therefore speculation of the company is easy, they won’t be a part of GM and probably will lose the Saturn brand and that is not a bad thing. The big three’s survival will be dependent on management and how they plan to restructure their respective companies. They need to transform the past and move into the present. This will enable them to better compete with companies like Toyota and Honda. One of the first places for GM to start is by filing for bankruptcy. This will enable them to restructure the current contracts they have with the unions that are not favorable.

When you compare other car companies like Toyota to GM you will find they do not have unions at their factories yet there is no problem with job security, benefits or pay. Toyota offers the employee’s profit sharing, and due to the efficiencies there the employee’s actually make more money than the employee’s at GM. The second suggestion for GM would be to get rid of the current management team and bring in a specialist who knows how to turn a company around. Why a company’s board of directors would allow the same people to stay in charge who drove the company into the ground does not make sense.

If the shareholders and board of directors decides to keep them in charge they deserve to go under and out of business. The last thing GM might want to consider is to actually break up the company as it stands today and sell each brand. This will accomplish all of the above suggestions. By breaking up GM and selling each brand you will still have an US automobile industry, just with 4 or 5 mini companies. Each one will have its own management team and will be able to structure in the most profitable way possible.

You also solve the problem of millions of people losing jobs due to the fact each company will still need to rely on the suppliers. The automobile industry is in shambles and will not exit as it does today. Unless the big 3 can figure out a way to become profitable they will no longer exist. With careful reorganization and better management it is possible they can stay in business. The unfortunate part is how the whole country is affected by the poor management and decisions that were made by these companies. We will be stuck with the 14 billion dollar bill when they cannot pay back the loans.