May 5, 2009 - Roger Penske and Saturn Car Company, Detroit MI

Roger Penske may make play for Saturn

Detroit auto tycoon Roger Penske is interested in tapping the Saturn brand's dealer network and possibly finding a foreign manufacturer to make new vehicles.

Roger Penske may make play for Saturn

Can The Captain Save Struggling Brand?

Detroit auto tycoon Roger Penske is interested in tapping the Saturn brand's dealer network and possibly finding a foreign manufacturer to make new vehicles.

In an interview on the Paul W. Smith show on WJR this morning, Penske said he does not want to make Saturn vehicles but rather views acquiring the brand as a distribution opportunity.

Two new suitors, including Detroit auto tycoon Roger Penske, have surfaced for General Motors Corp.'s endangered Saturn brand, according to sources familiar with negotiations.

Penske is the highly successful head of Bloomfield Hills-based Penske Automotive Group, Inc., which operates more than 300 franchises in the United States and internationally, selling 40 different brands. The billionaire Detroit booster, who oversaw the city's Super Bowl XL preparation, has accomplished almost everything in the auto industry, from racing cars to building engines as owner of Detroit Diesel Corp. to snagging exclusive U.S. distribution rights for the iconic Smart minicar. But buying a brand and building vehicles would pose a new challenge.

"We look at things all the time," said Tony Pordon, a spokesman for Penske Automotive Group. "We have been offered an opportunity to look at Saturn. It's very premature to assume anything will be done. I can confirm to you that we are looking at it." Ohio group also interested

Further details were not available Monday but Penske's interest surfaced along with that of an Ohio investment group that hopes to acquire the brand. The Ohio group is scheduled to meet with Saturn officials today to discuss its proposal to build vehicles using union workers at U.S. factories targeted for closure by the Detroit automaker.

The new suitors bring star power and diversity to a pool of candidates bidding to buy Saturn, a customer-friendly but underperforming brand that GM plans to eliminate this year unless it can be sold.

"(Penske's) a shrewd businessman and has proven himself time and again," auto analyst Aaron Bragman of IHS Global Insight said Monday. "He's a bit of a local hero the way he cleaned up Detroit for the Super Bowl, but what he can do with a brand like Saturn, I'm not exactly sure.

"I really don't understand how any group thinks they can make Saturn a success when GM, with all its skills and vehicles and brand power and marketing muscle, could not."

Last week, GM President and Chief Executive Officer Fritz Henderson said there were investors who had submitted "concepts" for acquiring Saturn and its retailer network.

Until now, only one potential buyer has been publicly identified: Telesto Ventures wants to partner with a foreign manufacturer and import vehicles under the Saturn name.

The group, which includes Oklahoma City-based private equity firm Black Oak Partners LLC and several Saturn dealers, submitted a bid last month, terms of which were not made public. Telesto proposes initially distributing GM-built vehicles through Saturn's 439 dealerships in North America and eventually offering small, fuel-efficient vehicles produced by several manufacturers, most of which would be sold under the Saturn brand.

The Ohio group is interested in buying North American factories that might close during the automaker's restructuring and make new vehicles that would be sold under the Saturn name.

"We will not export these jobs," said one of the Ohio partners, who did not want to be identified. "Some might criticize us and say this can't be viable, but we believe it can." GM prepares to review bids

GM is preparing to review proposals from several Saturn bidders and has hired an adviser to secure a deal later this year, the company said Monday.

The automaker hired S.J. Girsky & Co. to help with the transaction. The firm is headed by Stephen Girsky, who has been an adviser to the United Auto Workers and GM, and is a well-known former auto analyst for Morgan Stanley.

GM did not identify the other interested parties but will continue to look at proposals until early June.

The list will be narrowed to three or four in hopes of securing a deal by perhaps the end of the third quarter, Saturn spokesman Steve Janisse said Monday.

Janisse would not comment on any particular suitor.

"There are a number of potential investors interested in Saturn and we are having discussions with them," Janisse said.

GM, which is subsisting on $15.4 billion in federal loans, is shedding brands as it restructures. The automaker is focusing on four core marques -- Chevrolet, Cadillac, Buick and GMC -- and eliminating or trying to sell Saturn, Saab, Hummer and Pontiac. Ohio group has Big 3 ties

The Ohio group has a broad background in the auto industry and includes current and former senior managers from Detroit's Big Three automakers. The group also includes private financial backers, chemists and engineers who hail from Michigan, Ohio, Indiana and Florida.

The group is willing to work with the UAW and accept some legacy costs, which include such things as retiree health care and pensions, to ensure affordable and "highly fuel efficient vehicles with a good safety record" continue to be made by the union, the Ohio partner said.

"We believe there was a promise made to the employees of General Motors that provided a certain amount of benefits for retirees," the partner said. "To take that away is not only unprofessional and a violation of trust, but it's wrong."

The group would need to contract with GM to supply vehicles initially.

The investors have proposed using Saturn dealerships in North America, though perhaps on a smaller scale depending on the profitability and location of the retail outlet.

"There has to be a dealership-by-dealership review," the partner said.

The group also is looking at possibly acquiring factories that might be closed by Chrysler LLC, which filed for Chapter 11 bankruptcy last week.

"Not all of those facilities may be viable, but the idea of shipping everything from overseas is not us," the source said.

The group has started talking to people in Washington about possible assistance available at the federal and state level to keep the plants open. "We are very dedicated, first of all, to building a quality product," the source said. "It will be everything that Saturn was when it was being launched and more."

Selling Saturn is just one facet of a broader restructuring plan GM is rushing to finalize before June 1 or face a possible Chapter 11 bankruptcy filing. It is trying to get unsecured bondholders to agree to swap $27 billion in debt for a 10 percent equity stake in the company though bondholders countered and are seeking a 58 percent stake.

Henderson essentially rejected the counteroffer, saying the U.S. Treasury Department only authorized GM to offer a 10 percent stake.

"It's outside of what the Treasury has told us they would support," Henderson told the Associated Press on Monday. "It's about as factual as I can be."

Original Story - Detroit News

GM, Penske reach tentative agreement for Saturn brand

General Motors Corp. this morning announced a tentative deal for renowned Detroit businessman Roger Penske to acquire GM’s struggling Saturn brand and distribution network.

Penske’s Saturn will continue to receive GM-made vehicles for two years, and is looking for another manufacturer to make vehicles that will bear the Saturn brand.

“We will have a supply of vehicles for at least two years with existing brands, and we have been in discussions during this diligence period with a number of manufacturers on a worldwide basis,” Penske said today. “We would expect to have a line up going forward, which would be manufactured by a worldwide partner.”

Penske said he expects the vehicles to be manufactured in the United States if sales are sufficient.

Saturn will be wholly owned by the Penske Automotive Group. Penske said he hopes retired Chrysler President Tom LaSorda, who was advising Penske on the deal, will have a role with the company.

The deal is expected to close in the late third quarter. A price was not disclosed.

As part of its effort to narrow its offerings from eight brands to four, GM has been trying to find a buyer for Saturn. Earlier this week, the automaker said it had 16 interested parties.

A deal to sell Saturn caps a week of sweeping restructuring efforts tied to GM's bankruptcy filing, including the announcement that GM plans to sell Hummer to a Chinese manufacturer.

“We are bringing together two icons: the Saturn brand and the Penske organization,” said Jill Lajdziak, Saturn’s general manager. “When completed, this deal will save more than 350 dealerships and over 13,000 jobs in the United States.”

Saturn dealers will be offered a franchise agreement, Penske said.

The deal includes Saturn’s parts operation.

Penske called the dealer network “one of the best in the business.”

“There’s a brand value today in the way these vehicles look,” Penske said. “And I would hope that we would have this icon brand value and face across the product line as we go forward.”

The idea that Penske was closing in on a deal to acquire the Saturn brand and its dealer network appealed to franchise owners, who could have seen their businesses phased out.

In February, GM announced it would phase out Saturn after 2011 unless dealers could find a better option.

Then in late April, GM announced it was stepping up its effort to shed Saturn, saying it would close the brand down at the end of the year if a deal wasn't arranged.

"There's a lot of us that hope that's the deal because we know Roger Penske is a guy that's detail-oriented, who has capital and standing in the automotive community," George Nahas, president of Saturn of the Lakes in Tavares, Fla., said Thursday. "I think Roger Penske would be a great fit for us."

Saturn sold about 188,000 vehicles last year, down 21.7% from 2007. It has about 380 U.S. stores.

About 25 years ago, GM launched the stand-alone Saturn brand to be "A Different Kind of Car Company" in an attempt to better compete against Japanese brands. It gathered some of the industry's best car dealers to be franchise holders.

Analysts today say the value of Saturn lies with that dealer network, which gained a reputation for being consumer-friendly.

"The only real value in Saturn, frankly, is that distribution network. There is no discrete plant, there is no discrete model," said Aaron Bragman, an industry analyst with IHS Global Insight. "I can't imagine that GM is going to continue to make these vehicles much beyond selling the brand because they would be competing against themselves."

GM's Spring Hill, Tenn., assembly plant opened as a plant to build Saturn vehicles but no longer builds them and is among plants facing closure.

Penske has made a name for himself by taking struggling companies and fixing them, such as Hertz Truck Leasing in the 1980s and Detroit Diesel Corp. in the 1990s.

In 1999, he invested $83 million into United Auto Group Inc., now called the Penske Automotive Group. The group is the second-largest auto dealer in the United States and is the sole U.S. distributor of the Smart car.

Today, Penske said he would not be combining Saturn and Smart car operations.

Original Story - Detroit Free Press