June 6, 2009 in Business

GM’s dismantling opens new roads

Tom Krisher And Colleen Barry Associated Press
 
Associated Press photos photo

Team owner Roger Penske looks on during a May 8 practice for the Indianapolis 500 auto race at the Indianapolis Motor Speedway. Penske has reached a deal with General Motors Corp., to be finalized in the third quarter, to buy the troubled Saturn line. Associated Press photos
(Full-size photo)(All photos)

Coming Sunday

Still in the game: The Inland Northwest’s Gee Automotive looks forward after surviving nationwide reductions.

Retooling the message: GM’s marketing campaign emphasizes reinvention. Whether it allays consumers’ fears remains to be seen.

Business, Page E1

DETROIT – Roger Penske is inventing a new business model on the ruins of General Motors Corp. The auto racing magnate and mega dealership owner is snapping up Saturn and opening his expanded sales network to foreign automakers looking to sell cars to Americans.

The deal announced Friday is another example of how the cataclysm that hit Detroit’s three carmakers is reshaping the global automotive landscape in profound ways, reducing their worldwide influence and – if Saturn turns out as Penske envisions – opening new markets to smaller companies.

“There’s no doubt that the automotive deck chairs are changing,” said Michael Robinet, vice president of CSM Worldwide, a Detroit-area auto industry consulting firm.

Yet industry experts are doubtful that the flurry of mergers and alliances will be any more durable than failed marriages of the past, proving to be just one big distraction from the underlying issue that made them so vulnerable in the first place: making more cars than people can buy.

Penske, who already runs Penske Automotive Group Inc., the second-largest U.S. dealer network, thinks his business model is different enough to be successful.

GM and Penske expect to close the Saturn deal in the third quarter, with the wounded Detroit automaker continuing to build three models for Saturn to distribute.

Key to its success, though, will be the ability to sign on other global manufacturers to make cars for Saturn, giving it a diverse portfolio of vehicles that will sell whether gasoline prices are high or low.

But by opening the door to automakers not now in the U.S., such as France’s Renault, Penske could alter the market here, allowing smaller automakers to compete against Detroit.

Penske, in an interview with the Associated Press, said foreign automakers would be key to his business model, but they will have to match GM quality standards before Saturn’s 350-dealer network will distribute their products.

Penske said he expects to begin making money immediately on Saturn, which has never been profitable for GM.

“I would expect that the model that we’re putting together, the distribution model, will be profitable Day One,” he said. “We’ll have less costs. We’ll not be in the manufacturing side of it.”

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