Sunday, October 4, 2009

R.I.P. Saturn Car Company

The economy, UAW and General Motors are about to throw the dirt over the first new automobile company in America in seventy years. Saturn was a separately run, separately incorporated arm of General Motors. It was designed as a competitor for Honda and Toyota at the low and middle end of the automobile spectrum. But more importantly, it was an experiment in labor-management relations and reduction of production costs while producing a car that the American people would want.

The Saturn company was a noble experiment, successful in many areas, weak in others,and it remains unclear whether or not it was ever actually profitable. But it is a study in how a company can be made to work, how it can learn, how it can improve, and how it can be killed by direct and indirect forces before it reaches its stride. The company's death blow came on Wednesday of last week when the deal set up by Roger Penske's group abandoned its plan to buy Saturn from GM and run it as an independent company. That was only the final blow, and the company might not have survived anyway.

The indirect cause is, of course, the failing economy. Yet Saturn was still in better financial and organizational shape than Chrysler, a victim of its own fecklessness in a time of economic downturn and credit crashes. Under its original structure, it was also in far better shape than parent General Motors. So why did a company which was marginally profitable and had a loyal and devoted clientele base (it was practically a cult-object) offer up its spirit to the economic gods?

Let's first take a look at what made Saturn modestly successful in its early years. First, there was the separation from parent General Motors. The first plant was set up in Spring Hill, Tennessee, a small and sleepy town forty-five miles south of Nashville and sufficiently far away from Detroit to have a good chance of success. That alone would not have been enough. But in one of those rare moments in American labor-management relations, the profligate executives of General Motors and the grasping, demanding leaders of the United Auto Workers were able to reach an accommodation. The new company was kicked off by mutual agreement on January 8, 1985.

GM Chairman Roger B. Smith (the object of Michael Moore's ire in "Roger and Me") announced that Saturn had an historic mission: "To affirm that American ingenuity, American technology and American productivity can once again be the model and the inspiration for the rest of the world." Said UAW head of the GM department Donald Ephlin: "Detroit's automakers and the UAW had to change from confrontation to collaboration." The two signed a memorandum of understanding which stated: "We believe that all people want to be involved in decisions that affect them, care about their jobs and want to share in the success of their efforts." As the Wall Street Journal put it: "Saturn became not just a company, but a cause."

The mission statement was more than mere rhetoric. Many of the outrageously restrictive work rules endemic in GM/UAW contracts were eliminated. A bolt-turner could now also install a fuse, something normally unheard of in a UAW shop. The workers became "technicians," and received base pay equal to only 80% of other GM workers, but would share in Saturn's profits. That was a previously unknown form of entrepeneur/labor melding, and gave the technicians plenty of incentive to produce a good product at a good price. For every Saturn executive, there was a union counterpart, and they shared equally in decision-making.

This kind of peaceful arrangement was not going to go unchallenged by the firebrands in the United Auto Workers union. Early on, the "more pay, less work, bigger retirement" activists in the union began to attack the arrangement as "Ephlinism," preferring to attack their one reasonable officer rather than go after Saturn or GM. Ephlin finally gave up, and resigned in 1989, and Smith retired a year later under fire for his poor performance at the main GM operations. The two architects were out of the picture before the first car rolled off the assembly line.

The original products were quite mundane. Honda engineers disassembled one, and found it well below Honda's high standards. But engineers alone do not a successful company make. Saturn conducted a brilliant advertising campaign. The ads emphasized the labor/management cooperation, the true Americanism of the plant operation in bucolic Spring Hill, and the uniqueness of the product. In a pastoral media blitz, the ads showed a technician patting his Irish setter while saying "What's happened here is something I'd like my grandchildren to know about."

In 1993, Vice President Al Gore visited the Saturn factory, and declared that he wanted to "Saturnize the federal government." Nobody knew what that meant (including Gore, most likely), but it was a great boost for Saturn. The Wall Street Journal describes it as "the Age of Aquarius meets the automotive assembly line." Saturn hit its peak production of 286,000 in 1995.

And then the trouble started. By now, the UAW had elected one of its old guard, take-no-prisoners, labor-is-everything officers as president of the union. Say hello to Stephen P. Yokich, a lifelong organizer and business-hater, who despised everything about Saturn. Yokich constantly attacked the profit-sharing, flexible work hours, and unrestrictive work rules at Saturn. Meanwhile, he strong-armed GM into producing a new Saturn model in Delaware instead of Spring Hill, and staged an ouster vote against UAW Local 1853 (Spring Hill) president Mike Bennett who had been an Ephlin protege.

But don't lay all the blame at the union's door. By 1992, GM was so badly managed that it was skating on the edge of bankruptcy. In a good economic move but a bad day for Saturn, GM provided no money for research, development and production of new automobiles. By the time the money was restored, Saturn had ceased to seem so unique and innovative and its sales had fallen badly. The work rules were becoming more and more like those of the other GM/UAW plants, and finally in 2003, reduced by the chipping away of the initial agreement to being mere workers again, the Spring Hill employees voted to scrap the whole plan and go back to the same contract as all other GM plants.

Despite the almost messianic loyalty of Saturn customers, and a series of very well-done commercials touting Saturn's well-produced, innovative and much-improved product (which ran until early last week), Saturn was in its death throes. After the U.S. President who had never run a business in his life turned over the economy to tax-cheats and leftist economists, GM was now run by an executive team that looked like the old team at GM, only not as bright, and owned by the UAW in joint tenancy with the federal government, at the expense of the original shareholders and the company's creditors. Ironically, Saturn was the one arm of GM which was actually close to producing the type of product that would satisfy overly-rigid government standards while at the same time a product that was attractive to the American consumer. Even Saturn's SUV would fit into the rear compartment of a Cadillac Escalade, and got 25 miles per gallon. All for naught.

Penske's deal probably wouldn't have worked anyway, sad to say. His plan was to own the company name, but have the cars produced by erstwhile competitors such as Toyota, Fiat and Renault. One by one, the deals fell through, largely because the other companies could not see the benefit in producing a car for a competitor which was in the same price range as their largest-selling models. The name of the company which last turned down the deal remains undisclosed, but it was the end for the Penske deal, and for Saturn.

Although it was never on the same numerical scale as the enthusiasm that Ford generated with its Model T, Saturn developed a fierce customer loyalty. The Model T represented American ingenuity, the creation of the full-blown assembly line, company-dealer intertwining, and a car Americans could afford. Saturn had some of the same charisma. The idea of a car which could take on the Japanese imports on their own turf of quality and price was extremely attractive. Saturn's campaign of "a different kind of car company" resonated with a segment of the American population. And by the mid-nineties, Saturn was keeping up with its promise to produce cars that matched up against the Toyotas and Hondas.

Another truly unique annual event accompanied that customer loyalty. During the summer each year, thousands of Saturn owners would trek to the Saturn plant in Spring Hill for the "reunion" that the Houston Chronicle describes as a cross between a Fourth of July picnic and a revival meeting. The Chronicle concludes: "The 'new GM' owes it to its benefactors--American taxpayers--to conduct a detailed post-mortem and learn from it. Clearly, Saturn did a lot right. It will go into the books as a worthy effort."


LL said...

I would have been far more comfortable if they shut down GM and left Saturn (under the original concept) intact.

At present I refuse to buy a GM vehicle because of the Obama/Govt. take over. One day when it becomes a public company again and not a National Socialist experiment, I'll buy GM again. It's a matter of principle to me.

LawHawkSF said...

LL: I'm sure a lot of us feel the same way.

AndrewPrice said...

Lawhawk, It's hard to shed a tear for GM or the UAW. Bad executives and a rotten union deserve the failure and unemployment that they get. Sadly, we're being made to support them with tax money, but that will change and they'll pass into the scrapyard of history.

And frankly, at this point, Honda is more American than GM.

LawHawkSF said...

Andrew: I don't think too many Americans are shedding tears over GM, and if it fails, there will be those pleased at the downfall of the UAW and Obama's Government Motors. But poor little Saturn started out so well, and ended up getting screwed by the parent corporation and the union thugs before being done in.

And you're right, Honda, Nissan and Toyota all provide good cars, many of which provide jobs and money right here in the USA. And to a certain extent, their success is based on the same model as Saturn's original plan. So much for sustainable American ingenuity.

Tennessee Jed said...

Hawk - thanks for a nice tribute to Saturn. I have toured the Saturn plant and used to drive through Spring Hill/Columbia every Thanksgiving week on my way from Philly to spend Thanksgiving with the in-laws in Lawrenceburg (home of Davy Crockett) during his battles with Big Foot Mason (see Fess Parker in the Disney episode "Davy Crockett" goes to Congress.")

Of course your post also serves as a reminder of why I was never a fan of big labor and why Democrats always harm the economy.

LawHawkSF said...

Tennessee: In my travels around America during my youth, I missed that entire area of the country, but I hear it's beautiful.

I was actually considering a Saturn for my next car, but since I won't be needing one for some time (after I move back to Southern California), it's now out of the question.

Pittsburgh Enigma said...

LL: I agree with you. My previous car was a GMC, and my current car is a Jeep, and I will never buy a GM or Chrysler again. For the first time in my life, I may consider a Ford, Toyota, Subaru or even Hyundai.

LawHawkSF said...

PittsburghEnigma: I had a bad experience with Ford years ago, but in the past few years I've driven several as rentals to visit my kids in Southern California and was quite impressed. The last two times, I very happily rented a Focus sedan. Very good gas mileage, decent acceleration, quiet, and plenty of amenities. I come from a family which never owned anything that wasn't a Chrysler product, or a German sports car (the first car I ever drove was my mother's thireen year old De Soto--fluid drive, with concealable headlights).

I'm with you on Chrysler and GM now.

StanH said...

But Lawhawk, the Messiah has failed this can’t be.

It’s just a matter of time and GM will follow IMO. I have two Fords they’re great cars, and Ford resisted the government takeover so I feel good about that.

I feel bad for all of the people that will loose their jobs but remember UAW “pigs get fat hogs get slaughtered.”

LawHawkSF said...

StanH: I was thinking of reliabiilty and looks, but believe me, the fact that Ford told Obama to stick it is a major factor in my favorable impression of Ford.

Pittsburgh Enigma said...

LawHawk: Yes, I can still hear echoes of my Dad saying about Ford: "Fix Or Repair Daily". We'd always been a GM family, and starting in the late 90s, we ventured into Chrysler territory. But the fact that Ford doesn't have Obama's fingerprints on them will make me consider them. It's exactly the same reason that I will never consider GM or Chrysler again.

I also seriously considered taking advantage of "Cash for Clunkers" this year, but the more I thought about it, the more I just couldn't stomach the idea of my perfectly good Jeep being crushed by an Obama bureaucrat.

LawHawkSF said...

PittsburghEnigma: My sentiments exactly. I got the fix or repair daily mantra from my father, who thought MoPar was some sort of ancient god. And he always bought Dodge trucks for his business. Bought an International Harvester just once, and complained the whole time he had it. For some reason, they never even considered GM, but in college I bought a new'67 Camaro SS 350 with a 4-11 differential and a Hurst short-shifter. It would pass anything but a gas station. So naturally, it got stolen.

Writer X said...

My brother's girlfriend only buys Saturns. I remember her saying that it was so easy to buy a new Saturn: You pretty much saw a price tag on a car on the lot and that was about it. No haggling. It's too bad that a good business model became ruined. Throw in government oversight and you might as well write its obituary.

LawHawkSF said...

WriterX: The "one price, no haggle" policy was one of the things Saturn owners loved. The Saturn fans never found themselves going to a Saturn rally, only to find at least three other people had paid substantially less for the same car than they had. Saturn dealers seemed more like friends than salesmen.

patti said...

as much as i hated to hear this news, i felt it was inevitable.

and those reunions always made me uncomfortable. just seemed odd in so many ways.

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