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They call him The Captain at the racetrack, where his team has won the Indianapolis 500 a record 15 times. But at heart, Roger Penske has always been a consummate repairman, one who excelled at rebuilding used cars as a teenager and later deftly overhauled troubled businesses as an automotive entrepreneur.
Now, at age 72, the silver-haired former race car driver is about to take on the ultimate problem child of the auto industry — G.M.‘s Saturn division.
Since its creation in 1985 as what G.M. anointed “a different kind of car company,” Saturn has been one of Detroit’s biggest disappointments. Instead of a shining example of G.M.‘s foresight, it ended up epitomizing the slow, downward spiral of what was once the world’s dominant automaker.
“It may well be the biggest fiasco in automotive history since Ford brought out the Edsel,” said Jerome York, a former G.M. director and an aide to Kirk Kerkorian, the investor who has made and lost hefty sums investing in G.M., Chrysler and Ford. “Saturn has been a huge money loser for G.M. for a long, long time.”
In Mr. Penske’s view, however, Saturn is a potential jewel to be plucked from the scrap heap of G.M.‘s bankruptcy.
By early next month, his company, the Penske Automotive Group, is expected to complete its acquisition of Saturn from G.M. After that, it plans to try to reinvent the brand as an independent chain of dealerships. That experiment hinges on attracting a foreign car manufacturer that will supply Saturn with vehicles after G.M. stops producing its current line of Saturns in 2011.
MR. Penske, citing the pending deal with G.M., declined to comment on his plans for Saturn. People inside G.M. who have knowledge of the transaction — but who requested anonymity because the negotiations are confidential — say that the acquisition should close early next month and that G.M.‘s new board of directors wants to move forward with the Saturn divestiture. Penske Automotive has already sent Saturn dealers two-year agreements to review and sign.
A G.M. spokesman, Thomas J. Pyden, says the automaker is eager for the deal to close. “We certainly remain hopeful that the sale will proceed,” he says. “In terms of Penske, we don’t think you could find a better buyer for the brand.”
Mr. Penske controls 40 percent of Penske Automotive’s stock, giving him a stake worth about $600 million. The company lost $403 million last year, on revenue of $11.6 billion, during a seismic downturn that slammed all sectors of the auto industry.
In earlier years, Penske Automotive was reliably profitable as it became one of the largest car dealers in the world, with 150 franchises in the United States and an additional 160 in international markets. Mr. Penske’s holdings also include several Toyota dealerships in California.
When G.M. put Saturn up for sale this past spring, there were few suitors. The idea, at the time, was that a foreign automaker without a presence here would snap up Saturn as a turn-key distribution channel. But with the American market in its worst sales slump in 25 years, there were no takers, especially for an already troubled enterprise. Saturn is on track to sell fewer than 100,000 cars this year, down from 286,000 in 1994.
The core of the Saturn lineup consists of three vehicles — the midsize Aura sedan and two S.U.V.-like crossovers, the Outlook and the Vue. None have captured the fancy of skittish car buyers. Through the first eight months of this year, overall sales for the division have dropped 58 percent.
It appeared that G.M. might be forced to shut down the division entirely. But Mr. Penske is intrigued by the potential of Saturn’s 350 dealerships, regardless of whether G.M. could supply them with cars indefinitely.
He envisioned Saturn as a larger version of the business model he first set up last year for Smart, the little, egg-shaped commuter car that Daimler, the German automaker, manufactures. With Smart, Mr. Penske assumed control of all aspects of sales, marketing and service, and contracted with Daimler only for production of the cars.
Saturn will theoretically work the same way, with G.M. supplying vehicles for a brief interlude while Mr. Penske acts as the middle man between the factory and the independently owned Saturn stores.
“This is a distribution business, not a manufacturing business,” Mr. Penske told auto analysts in a conference call in late July. “So, it’s similar to what we have at Smart.”
When G.M. announced it might sell Saturn to a foreign manufacturer, dealers worried that the brand would lose its unique connection with its devotees.
“I didn’t want that to happen,” says Mary McHugh, an executive with a dealership group that once had four Saturn stores in the Chicago area. Two of the showrooms closed this year, but Ms. McHugh says the sale to Mr. Penske offers hope for the remaining outlets.
“There’s trepidation on the one hand, but there’s excitement on the other,” she says. “It’s sort of a renaissance, going back to our original ideas. That’s the part that got watered down with G.M.”
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