Why The Saturn Brand Was Destined To Fail

It's doubly depressing to see Saturn make its final bow. Depressing, because it's always hard to watch loyal employees lose their jobs. Depressing, too, because many of the brand's newly written obituaries completely miss the real reasons behind Saturn's demise, and the real damage the brand did to GM.

To understand why Saturn was destined to fail you must travel back to a freezing cold January day in 1985 in Warren, Michigan. It was there that GM Chairman Roger B. Smith proudly announced its first new nameplate in more than half a century. Saturn was conceived as a specific response to the growing threat from the fuel-efficient and affordable cars being launched into America from Japan. In other words, Saturn is a classic example of a fighter brand — a brand created to take on low-priced competitors. Smith admitted as much at the launch event, telling journalists: "In Saturn we have GM's answer — the American answer — to the Japanese challenge."

The first Saturns hit the market in 1990 and quickly achieved some of the highest repurchase rates and customer satisfaction scores in the industry. By 1996, orders actually exceeded Saturn's production capacity, and the brand's fighting prowess was further confirmed when dealer research revealed that 50% of these orders were from individuals who would otherwise have bought a Japanese import. Many commentators look back on this period of Saturn's operations and wistfully recount it as evidence of the brand's once great success.

Only one snag: like many fighter brands designed to take on low-priced competitors, Saturn was wildly unprofitable from the outset and totally unsustainable as a result. Its initial setup costs of $5 billion were soon extended as Saturn's sub-compact prices failed to cover the huge costs of a dedicated plant with massive operating costs that produced cars that shared very few parts with other GM brands. By 2000, Saturn was losing $3,000 on every car it sold.

But an even bigger cost for GM was the time it lost building a brand it believed could fight off its Japanese rivals. The enormous strategic shifts that GM has been forced to make over the past year should really have been made back in the 1990s. If only Roger Smith had not believed that Saturn was the "key to GM's long-term competitiveness, survival, and success as a domestic producer," the company would have moved faster and earlier to fix its core business. The notion that another brand, rather than fewer brands, was the way forward turned out to be a colossal distraction.

Weep not for the loss of Saturn. The brand should be remembered as a failure from the start for three reasons. First, it failed to deliver on its mission to fend off the Japanese imports that now dominate the US market. Second, it managed to lose billions of dollars at a time when GM needed every penny it could muster. Third, Saturn represents perhaps the single biggest explanation for GM's current precarious situation. Saturn's demise did not take place on Wednesday of this week. It started on a cold morning in Michigan a quarter century ago with the launch of a business model fatally flawed.

(Pictured above: Bob Lutz kisses the Saturn brand goodbye)

 

Courtesy of: Marketing Magazine

Sponsored By: Brand Aid

Comments

[Jwo]

Sadly, and like most GM cars, Saturn's fate was sealed when the cars became just cosmetically tweaked versions of other GM cars vs. completely new platforms with its own reason to buy or unique competitive advantages.
And they fell into the chasm that was the 120+ models GM ballooned to and so poorly managed. As Steve Jobs and Honda has taught us, it's a more effective strategy to make a few models profitable done right, than many that are done half-assed. The "we'll make it up in volume approach" finally caught up with GM. Futurecast: It will be interesting to see how Toyota manages its ballooning fleet...or Dell.

[David Mooring]

It's also worth noting that Saturn attracted numerous young, loyal customers but failed to provide either high-end or large vehicle models, leaving their customers with nothing to grow into. Once the young Saturn buyers got married and had kids, they moved on to minivans and SUV's built by Saturn's overseas competitors. From there they could move from Honda to Acura or from Toyota to Lexus, never needing to return to Saturn. I agree, Saturn was doomed to fail all along.

[Ciprian Patrulescu]

What would you, as GM's CEO, have done in the 1990's to position Saturn and return it to profitability knowing that it was losing $3000 a vehicle?

[Mark Ritson]

Ciprian asks a key question in his comment (above)

What would I have done in 1990? Killed it and saved some of the $10 billion that were subsequently lost on Saturn and prevented some of the damage that it would later do to GM's long term prospects. Sometimes the most positive marketing move is to kill not create or rescue.

Let me tell you about the most impressive rodent on the planet - Rattus Norvegicus - the brown rat. The brown rat is an amazing creature that originated in China but now thrives all over the world. The secret of the species' success is infanticide. A typical brown rat litter consists of between six and 12 pups. It is common for the mother rat to kill, and eat, several pups in their first hours. Research suggests that the mother identifies the smallest and weakest for slaughter.

This abhorrent act (in human terms) is actually the secret of the Brown Rats success. It also illustrates what GM should have done with Saturn in the 1990's. If the mother rat tries to wean too many pups, she risks underfeeding all of them, thus leaving herself and the brood vulnerable to predators. By reducing the number she has to feed, she also rebuilds her reserves to ensure that her remaining pups get the maximum possible support and the best chance of making it.

GM is a mother rat fatally wounded because she tried to raise too many pups. Chevy and Cadillac are the potentially successful pups now drastically underweight and vulnerable to enemies because they have not been fed enough distinctive products, ad dollars and managerial time. In the nearby Rat hole another mother rat called Toyota brought up just two strong rats called Toyota and Lexus- which are going to take all of Chevy and Cadillac's food. Next door is another mother rat who is busy dispatching all her weakest runts to focus on the strongest of her brood - that increasingly strong rat is called Ford.

Too many marketers grow attached to the brands in their charge and fall into the trap of assuming that every brand deserves life. You have limited time, money and expertise. Focus these crucial resources on as small a group of brands as possible. GM's VP of sales Mark LaNeve once told BusinessWeek: 'Do I think we have too many brands? No, but we have to manage them a lot better'. It never occurred to LaNeve that the two issues were directly correlated.

GM is a tragic, enduring lesson in how not to do Branding. You have to be even more cold-blooded than the brown rat. Your question is not which brands to kill, but which are worth keeping in the first place. If that means killing off the old, the young, the weak brands, so be it.

In marketing, every year should be the year of the rat.

[Ciprian Patrulescu]

Very insightful Mark. Thank you.

[Julie Saturn]

"Pictured above: Bob Lutz kisses the Saturn brand goodbye". Nice try. If you had your facts straight, you would know that Bob Lutz hasn't been near a Saturn Astra in over a year, which is the last time they were produced. You would also know that pictured above is actually Bob Lutz taking advantage of a photo op for a contest dubbed "Kiss My Astra" that featured similar pictures of participants from across the country.

It's easy to write the little guy (Saturn) off as a huge failure. But what so many people fail to realize is that GM has always treated Saturn as the red headed step child of their organization, making them destined to fail from the beginning. It's one of those self serving, self fulfilling prophecies. GM ignored the brand for years, then made a last ditch effort to "save Saturn" and dumped a bunch of money into new models, but it was too little, and way too late. And they weren’t different anymore. They were GM’s cars, not unique Saturns like in the past, and not built in the Spring Hill, TN plant that represented so much to Saturn owners. It seems like it was all just so GM could finally say, "See! We told you it wouldn't work! Look how much money you cost us! Let’s just build more of them high dollar, gas guzzling trucks!" Only to lose their rear ends on those same gas guzzlers later. If GM had paid attention to and allowed Saturn to advance over the years as the small, economical, competitive car that it was meant to be, instead of diluting the brand over the years, just think where Saturn would be now?! It's a brand that with the original S-series had always prided itself on being "Green" and being almost 100% American made, which are 2 things this country could really use right now.

They're also two reasons that made me so proud to own one and to later work for Saturn. And 8 years later, I still do. Saturn was never given a chance by GM. The fact that it cost GM $3000 a car is GM’s own doing.

Saturn should be the best green American car that truly is a competitor to the foreign makes. But GM killed that notion years ago, by focusing on the truck and SUV fad which was very short sighted. Now sadly, GM can definitively say that the little guys don't usually make it- but they'll leave out all the parts they contributed to help us get there. It's very sad for many of us who wanted to believe, like the little engine that could, that we could and would make a difference by putting as many Saturns on the road as possible. And that maybe sometimes, the little guy might win. Don't blame Saturn for the demise of GM--it's the other way around.