Sunday, February 1, 2004

GM removes independence that made Saturn different

By Scott Reeves
The Associated Press

NASHVILLE, Tenn. - Saturn, once billed as "a different kind of company" making "a different kind of car," is losing its distinct identity and becoming just another division at General Motors Corp.

GM is forcing Saturn to adopt common practices for design, production and labor - a change that had to happen, analysts say, to cut costs and make Saturn competitive.

But it means the end of Saturn as a separate entity, an experiment launched in 1990 to compete with low-cost imports like Toyota, Honda and Nissan.

All Saturn cars were made in the small town of Spring Hill, about 30 miles south of Nashville, and more importantly, about 500 miles away from Detroit.

The company had its own managers who reported to the Saturn executive board rather than to GM, and the United Auto Workers signed a separate contract with GM to create a cooperative environment between labor and management.

The cars - there was initially only one model - were offered at a fixed price, with no haggling. People loved the Saturn experience, and the company developed a reputation for customer loyalty that rivaled higher-priced brands.

Cris Thomas, who runs the computers at a private school in Cambridge, Mass., is on his third Saturn and has put down a deposit on the new Ion sedan without even a test drive.

"I've got to have the Ion," Thomas said. "I'm attracted to the vehicle. I like the looks of the older S series, especially when compared with Honda and Toyota. I think Saturn is more reliable than the Japanese cars."

But after a promising start, Saturn let the car's look and technology get stale. New models were finally introduced to mixed results, and the company has plans for more.

Production of the new Relay minivan will begin next fall, but not in Spring Hill. Instead, it will be assembled at GM's plant in Doraville, Ga., using a standard GM frame.

Another sign of change is Saturn's new contract with the United Auto Workers, which was approved last month.

"It's a major stride for management and the union," said Laurie Felax, vice president of Harbour & Associates in Troy, Mich., who tracks the auto industry. "Saturn's plant in Tennessee needs to be as competitive as any in the world - that's how you secure jobs."

The contract calls for workers to receive a $3,000 bonus now and a 3 percent performance bonus to be paid next year, in addition to a 2 percent raise in 2005 and a 3 percent raise in 2006.

But the union also agreed to a transition to the national labor agreement with GM that would allow the company to lay off employees for the first time in its history. Workers approved the contract 2,953 to 317.

"I believe the contract will maintain our strength and the future of Saturn," said Rick Martinez, president of UAW Local 1853 in Spring Hill. "It allows GM to be confident in our structure - it's not dissimilar how they operate other GM facilities."

As part of the deal, General Motors promised to invest $90 million in Saturn for capital projects to help boost faltering product lines.

"They committed to seek significant improvements at the Spring Hill facility that will allow us to build multiple product lines, including non-Saturn products," Martinez said. "We can build other cars if that's what it takes to keep membership secure."

GM wants to create a global network of flexible manufacturing plants based on common practices to let the automaker shift production of different lines and models to various factories as needed.

To survive, Saturn had to become part of this strategy. And for the union, it was adapt or die.

"We didn't want to put all our eggs in one basket," Martinez said. "I don't think Saturn is being folded into another brand. I think we'll continue as a unique facility that allows union participation, but it won't be the 50-50 partnership we had before."

Some believe Saturn should be folded into GM's Chevrolet line and simply disappear. Last year, Saturn represented about 6 percent of the GM vehicles sold in the United States, and it has made money in only one of the last 13 years.

But Felax, the analyst from Harbour & Associates, rejects arguments that GM should abandon Saturn.

"GM has just as much ability to be competitive in this market as anyone," she said. "GM has made tremendous strides in improving operations and reducing cost. I would never back out of this market."

Sue Holmgren, spokeswoman for Saturn in Detroit, said the company is being repositioned - not being prepared for the chopping block.

"Saturn's future is secure," she said. "General Motors has supported Saturn. We have new products coming on line in the next 36 months. ... I wouldn't say this signals the end of the partnership at Spring Hill."

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