Saturn leads GM's turnaround effort

To peek into the future of the General Motors Corp. turnaround plan, just look at Saturn.
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Last year, when GM's sales skidded 8.7 percent, Saturn's rose by 6 percent. By fall, the small brand that used to call itself "A Different Kind of Car Company" will have a lineup that's almost completely new, with no models older than 20 months.

Simply put, if Saturn falls from orbit with all its new vehicles, GM likely will follow.

"It's a no-excuses product lineup," GM Vice Chairman for Global Product Development Bob Lutz said in an interview with The Associated Press at the Chicago Auto Show. "I told the sales and marketing guys if this lineup doesn't work, I'm out of ideas."

Saturn, started in 1990 as GM's small-car answer to the Japanese automakers, is the canary in the mine for the company's desperate effort to make itself smaller, leaner and faster to better compete with the enemy, mainly Toyota Motor Corp.

Last year, GM's U.S. sales dropped to slightly more than 4 million vehicles from roughly 4.5 million vehicles in 2005. Toyota, which seemingly can do nothing wrong in the U.S., reported its best year ever in 2006, with sales up 12.9 percent to about 2.5 million vehicles.

Just two years ago, Saturn was the metaphor for all of GM's ills. It's products were old and tired, and what once was a hot brand had been allowed to languish as the company ignored cars and focused on big-profit trucks and sport utility vehicles.

At the same time, gas prices rose and GM didn't have many desirable cars while Toyota did. GM lost market share and buckets of money, $10.6 billion in 2005 alone. There was talk of bankruptcy.

All the while, GM was trying to fix itself. It started cutting costs, inducing upward of 34,000 expensive hourly workers to leave through buyouts or early retirement offers. By the end of last year, it had cut $9 billion in annual costs, about $2,000 from every car it sold. It has promised a profit in the fourth quarter, the first one in two years.

Roughly, 18 months ago GM also began to replenish Saturn.

Saturn got the Sky roadster, a sleek two-seat sports car. Later came the Vue small sport utility vehicle with a hybrid gas-electric version, and the Aura mid-sized sedan. The Astra, an Opel-based small car to replace the aging Ion, was unveiled Wednesday in Chicago.

Lutz said the new models will put pressure on Saturn managers to beat last year's 6 percent gain in 2007, even though the overall U.S. market may be flat or down.

"There is now not a weak sister in the batch," he said of Saturn's products. "Everything is top-notch from a design and execution standpoint," he said.

Mark LaNeve, GM's vice president for sales, service and marketing, said GM's products should all be substantially new in another 12-18 months. Key is the redesigned Chevrolet Malibu due out later this year to take on Toyota's Camry.

But it will take a while longer for the company to get its message to consumers as it rolls out competitive entries in the small and mid-sized car markets, LaNeve said.

"We're not going to have it solved in the next 12 to 18 months," he said.

David Cole, chairman of the Center for Automotive Research in Ann Arbor, said GM's cost-cutting efforts have enabled it to put more money back into products and be more disciplined on prices. He thinks GM's positive results will accelerate as more new products hit showrooms.

"I think we're going to see profitability that is going to surprise a lot of people," Cole said.

But David Koehler, a marketing professor at the University of Illinois at Chicago who has studied GM, said while its products have improved, it still has to overcome its old image of lacking fuel efficiency and quality.

"The story remains to be told if they are able to reposition that image," he said.

His students, Koehler said, still believe Toyota has the edge in quality and gas mileage, and that's the market GM must win over.

Lutz, a frequent critic of media coverage, said part of GM's difficulties is that the media portrays the company inaccurately.

Some media outlets, he said, always use the "gas-guzzling" prefix to describe GM vehicles, but fail to do so on large Toyotas that get worse gas mileage than their GM counterparts.

"People are starting to think a little bit before they automatically fall into the conventional, easy categorization of Toyota — wonderful, smart, consumer focused, energy saving. GM — dumb, insensitive, big trucks, gas guzzlers, don't give a damn about everything. We're starting to crack that open a little bit," Lutz said.

Toyota is well aware that GM has momentum. Its new cars are winning awards, and to Jim Press, president of Toyota Motor North America, the new Malibu was the top car at the big auto show in Detroit.

"You just go down the list of things to do right that they're doing, and to some extent you have to do those right things and then you hold on and you wait for the rain to stop," Press said. "And I think the rain is starting to stop."

At present, though, even GM concedes Toyota has consumer preference down.

"They're winning, no question," LaNeve said. "They're on a big roll the last year-and-a-half or so. But we've made great progress, so it's not like there can't be more than one successful car company in the world."