GM Creating Saturn Division to Build and Market New Small Car
In a dramatic break with tradition, General Motors Corp. said Tuesday that it will create a separate auto company with its own manufacturing plants, management structure, labor contract and dealer network to produce and sell GM’s new Saturn small car in the late 1980s.
At a press conference at GM’s technical center here, Chairman Roger B. Smith said GM is in the process of setting up Saturn Corp., a Detroit-based, wholly owned subsidiary that will sell Saturn subcompact cars, adding a sixth nameplate to GM’s car lineup later in the decade.
Saturn will, in effect, become GM’s sixth passenger car division alongside Chevrolet, Pontiac, Buick, Oldsmobile and Cadillac, and will mark the first time GM has created a new car division since 1918.
Joseph Sanchez, 54, previously the general manager of GM’s Oldsmobile division, was named president of Saturn.
However, unlike the other car divisions, Saturn will also build its own new manufacturing facilities, negotiate separately from the rest of GM with the United Auto Workers, establish a new distribution system and develop a new franchise network, which will have separate facilities from existing GM dealerships.
Smith said Saturn will eventually have assets of about $5 billion and employ about 20,000 workers, including 6,000 at a massive, state-of-the-art assembly and component manufacturing complex to be located at an undecided location in the United States.
GM eventually expects to sell between 400,000 and 500,000 Saturn cars a year, Smith added. GM President F. James McDonald said that GM doesn’t expect Saturn to steal business away from GM’s other divisions, noting that Saturn’s objective is to dramatically increase GM’s share of the small-car market, a segment where the company has historically been weak.
The new organization, along with the two-door and four-door cars it will build, is an outgrowth of GM’s 2 1/2-year-old Saturn project to develop from scratch a new U.S.-built small car to compete with the Japanese in both cost and quality.
Smith and other GM executives have said repeatedly that GM’s plan to import hundreds of thousands of small cars from Japan and Korea over the next few years is an attempt to fill the gap in the small-car market while GM takes its time finding ways to build small cars in America that can compete with the best from Japan.
GM is also building a car with Toyota at a GM plant in Fremont, Calif., in a joint venture that is planned to last 12 years. That venture, GM has said, is intended to give it a chance to study Japanese manufacturing techniques on U.S. soil. The car produced at Fremont is slightly larger than the Saturn.
Smith stressed Tuesday that the goal of the Saturn project is to eliminate the $1,500 to $2,500 cost advantage Japanese auto companies typically enjoy over American auto makers in small-car production.
From the start of the Saturn program in 1982, GM has been trying to take a fresh approach to small-car development by using a separate staff to work on the project outside of GM’s normal organizational channels. The decision to set up a separate subsidiary to build and distribute the new cars seems to take that strategy a step further.
Smith said GM’s directors approved the plan to create a separate company in a meeting Monday in New York.
“We’ve taken this unusual step because the different technology, systems and organization developed by Project Saturn require a new structure distinct from GM’s other automotive operations,” Smith said Tuesday.
“Basically, they (GM) have recognized that if they are really going to do this thing right, they have to separate themselves from the internal restraints of the existing system and corporate culture of the rest of the company,” observed David Cole, director of the Center for the Study of Automotive Transportation at the University of Michigan. “I give GM credit for doing what had to be done.”
The Saturn project was originally known within GM as the “no-year” car because GM wanted the Saturn staff to have the time to find and apply the most advanced technology and most efficient design and production methods available without being pressured by corporate deadlines.
In turn, GM officials say many of the new production techniques developed for the Saturn project are already being used in the rest of GM’s manufacturing system. Smith says the Saturn project will eventually become a model to be used to help transform and modernize the rest of GM’s operations.
“The fact that we set up an organization with the ability to think freely and far ahead has helped feed ideas into the rest of the company,” McDonald said.
According to GM officials, the production methods planned for Saturn could be innovative enough to mark the end of the traditional automotive assembly line in the United States.
GM expects to develop a “modular” manufacturing process in which teams of workers will complete major sections of a car away from a moving assembly line.
“There will be a lot more automation and a lot less in the way of moving assembly lines than the classic assembly plant,” GM Vice Chairman Howard H. Kehrl said.
Although Smith declined to say exactly when the first Saturn subcompacts will be introduced, the time required to build new production facilities and order new tooling and automated equipment means that the car won’t appear before 1988 or 1989.
However, Smith, who drove a prototype of the car following the press conference, did say that he expects to be able to drive a production model before he retires in 1990. Kehrl said the car, which will be smaller than GM’s current Chevrolet Cavalier, will offer mileage ratings of 45 miles per gallon in the city and 60 mpg on the highway.
Smith said the company will conduct a nationwide site-selection process to determine where to build the highly automated Saturn manufacturing complex, and state and local officials around the country are expected to vie to attract the facility.
“All of the states that have a reasonable chance of luring a GM plant are trying for it,” said Walter Sorg, a spokesman for Michigan’s Department of Commerce. (However, California state officials contacted in Sacramento on Tuesday said they are not familiar with the Saturn project.)
To outsiders, the most visible effect of the move to set up a separate company will likely be the creation of a new dealer network.
Smith and McDonald said existing GM dealers will be given priority in bidding for Saturn franchises, but they added that new dealership facilities will have to be built for Saturn. (Saturn dealers might also be able to sell cars built by other GM operations, McDonald said.)
