Wheels Come of GM-Penske Deal to Keep Saturn Alive

An effort to save the Saturn brand from oblivion failed today as talks between General Motors, founder and owner of Saturn and The Penske Group have fallen apart.

Announced shortly before the close of trading this afternoon, the failure dropped Penske's stock from a high of $19.18 to its current $17.25.

According to information supplied by Comcast.com/financial, The Penske Group was concerned about continuing production, once GM backed away from the marque.

Introduced In 1990

The result of this failure is that it is the end of the road for Saturn, a vehicle that whose birth was loud and joyful in 1990, when the lineup was rolled out by then-GM Chair Roger Smith. Today, the mood was anything joyful as Fritz Henderson, GM's CEO, announced the cessation of talks.

In a written statement, Henderson noted that the end of Saturn and its dealerline was very "disappointing." He was upset that the "months of hard work by hundreds of dealership employees and Saturn dealerships who tried to make the new Saturn a reality" proved "very disappointing news."

The spokesman for Penske, Arnold Pardon, told Comcast.com/financial their decision was independent of any interaction between GM and Saturn. He explained that the whole deal rested on the ability of a third manufacturer to pick up the slack when GM cut Saturn loose. Until that point, GM was to have continued production of Saturn cars.

Pardon explained that the wheels came off the deal with the third manufacturer when Penske's board rejected the terms and conditions of the deal. Pardon would not identify the manufacturing comping with whom they were working. He indicated there were too many uncertainties for the board and that due to this picture, the Penske board acted.

Too Many Risks, Uncertainties

In his own written statement, Pardon indicated that the Penske board weighed the uncertainties and "determined that the risks and uncertainties related to the uncertainties of the availability of future products ... prohibited the the company (Penske) from moving ahead with this transaction."

General Motors and Penske had been involved in talks about Saturn and its dealership network for at least three months. Their negotiations had gotten to the point where GM agreed to continue producing Saturns until the new entity was ready to take over and build them. Industry observers, indeed, had expected the deal to be completed shortly, if not this week.

Instead, the deal is now in tatters and the Saturn line looks like it will soon be history. Saturn owners will still be able to take their products to any currently open Saturn dealers for service. After Saturn closes down, customers will be able to take their vehicles to any certified GM dealership for service work.

Penske stock had been climbing in recent days in anticipation of the Saturn takeover. At one point the stock reached $19.18 following a jump of $1.93 yesterday. However, the firm's stock settled back by $1.72 on news of the failure of the talks.

Source: Comcast.com/financial; throttleblips.dailyradar.com