CHAPTER 2:
WHAT THE MEDIA MISSED: "SATURN - A DIFFERENT KIND OF COMPANY, A DIFFERENT KIND OF CAR" (NOT ANYMORE!)
The Saturn is generally accepted as General Motor's turnaround small car. Its quality is felt to be far superior to anything else you can buy in its class. It is the only painless purchase in the automotive industry. Its "no haggle," feel-good buying experience is one of the best things that can happen to a consumer. Are you sure all this is true?
We have heard and seen all of this reported in the media for years. Its TV commercials testify to the truth of our impressions. We see the cars on the road, so all must be right with the world. But perhaps not!
Could it be possible that all this isn't so? Business books now use Saturn examples of new trends in the theory and practice of management. Team Saturn, the clean-sheet-of-paper approach, Saturn quality, "no haggle" marketing, are becoming accepted norms.
The Saturn story was missed big time by the media. Because they had no idea of what it all meant, they didn't even notice that it just didn't add up.
The automotive industry insiders figured out what was going on but no one asked them, and besides, what benefit was it for them to educate the media? None.
This is the story the media missed. The different kind of company and car make a far better story than what was reported, and you can learn far more from it than the Saturn buzz words in the management texts.
Little did I realize just how different Saturn was when I first looked into their operations in 1990. In early October of that year, I had never even seen a Saturn. Not being either an automotive writer nor a car buff, I vaguely knew that G.M. was working on a car of the future. It was to be an attempt to win back a part of the one-third of the U.S. market that had been taken over in the preceding ten years by the Japanese. G.M.'s market share in North America had fallen from roughly 45% to 35%, a loss of 1.5 million cars and trucks annually. Roger Smith, the G.M. chairman, was presiding over one of the biggest negative market shifts in U.S. history. Between the energy crunch of the seventies and the deteriorating quality of G.M. products, plus a finance-motivated "G.M./generic" product mix that had all models looking alike, it was not hard to list the many sins of omission and commission that could be laid at the door of the chairman. Compounding the problems at G.M., the Japanese were starting to get the feel for the U.S. marketplace. They played the quality and economy cards at exactly the same time as the G.M. product hit an all-time quality low and gas consumption high. Timing doesn't get any better or worse than that, depending upon from which side you are looking at it.
All of this was happening in extreme slow motion. A ten-year slide by the world's largest corporation whose products are on every street and in almost every garage in the country is a highly visible event. If we are to learn anything from Saturn-and there is a great deal to learn, no matter what business you are in-you should at least have a feel for the mood of the times.
David Halberstam's book, The Reckoning, written in 1986 about Ford and Nissan, documents the automotive period with only passing mention of G.M. Ironically, G.M. was the role model for Henry Ford II. He was trying to emulate G.M. in every way, and while both giants acted as if they were in a two-horse race, their overseas competition was offered a golden opportunity to enter the U.S. marketplace in a big way. And enter it they did.
The culture at G.M. under Roger Smith and his predecessors was one of finance. Cars were only a means to make money. Amazingly, customers were nowhere in the mix. Henry Ford II tried to create a mirror image of G.M.'s finance hierarchy to attempt to beat them at their own game. The bottom line was what counted. They were both playing the wrong game. Someone else was winning.
The Japanese decided that while all this was going on it might be a good time to build some very good cars. Given what their competition was doing, it was hard for them to fail.
Detroit is the classic company town. Its single industry is so inwardly focused that it is easy to see how even a ten-year trend could sneak up on The Big Three (a term of the times).
But even as the gods of finance produced bottom lines and stock multiples that made Wall Street content with their performance, the American consumer was anything but content with the cars they were buying and attempting to maintain in inflationary times.
As all this began to come home to roost, there were some big red faces on some of the biggest egos in the Motor City. The biggest of them all, heading the biggest company of all, was Roger Smith. Roger Moore's classic independent film "Roger and Me" held Smith in the glare of full national public ridicule. He began to take a pounding in the press for his performance. The biggest man in town who had spent his entire career ascending to that position was taking his lumps, and not taking them well. After all, he was making money, and that's what he felt the stockholders were paying him for. Yes, there were problems, but the labor unions were producing sub-standard quality, and somehow he would do something about it. Amazingly enough, he appeared to be out of his depth in the car business he had been brought up in. His strength was in the numbers, not how they were generated. A single-discipline top manager is a dangerous person to have running anything, let alone the world's largest corporation. A company that only promotes from a single discipline will sooner or later pay the price. G.M. was about to pay one of the biggest prices in business history. Roger Smith was attempting to buy his way out of trouble. Saturn was going to be how he was going to do it.
There are many bright people at G.M., and at Ford for that matter. But the leader calls the tune, and if the music is the wrong song for the times, the best of players must follow the conductor or go elsewhere.
A comfortable place to work with steady raises, bonuses and stock options is not easy to leave, nor is it easy or wise to make waves. At G.M., it was even difficult to be fired. You had to know somebody! The hope is always that momentum will carry the rough spots in the road. Momentum, unfortunately, also contributes to downward trends.
Detroit executives were accustomed to looking out the windows of their office towers, seeing parking lots full of U.S.-made cars, and feeling that the statistics were less real then they appeared on paper. The media may have been aware of all this, but they didn't understand how the big picture affected what was about to happen.
Saturn began to enter a tiny corner of the big picture for the first time in mid-1982, eight long years before its appearance in show rooms. Its code name, which eventually was adopted for its products and the name of the company, was selected by Phil Garcia, chief designer, Advance Studio, G.M. Design Studio. It refers to the Saturn rocket which beat the Russians to the moon in the space race of the sixties. Saturn was to be a small car that would beat the Japanese in the small-car race. A race is definitely a media event. That race may have already been over by the time Saturn was conceived!
The project was announced November 3, 1983 by Roger Smith.
With resources similar to those of the U.S. government, Roger Smith was going to spend whatever it would take to win this race. He would show "them" what he could do. This was going to be a big show!
Knowing nothing of all this except having recreationally read The Reckoning some years before, I was at a business lunch in New Hampshire on October 27, 1990, when a friend brought up what he felt was a curious aspect of a New York Times story that had run that day and the day before. He pointed out that G.M. was announcing the launch of a new car called Saturn but, strangely, they were disassociating the car from G.M. and taking considerable pains to point out that it was more of a Japanese than a G.M. car.
Over the next few days, he clipped stories from local newspapers that all reflected the same approach. Later we discussed all of the articles and felt that if the same material showed up in all these different publications, it must reflect a G.M. marketing strategy. This was the strangest media approach imaginable. Something wasn't right. This isn't how business works.
We started looking for the logic in this questionable reasoning. The media was buying in with no reservations and no comments.
The news reports all agreed that Saturn was an effort to create an American-built car that was as good as a Honda Civic or Toyota Corolla. They said that, according to G.M.'s plan, the Saturn feels and drives very much like a Japanese car. They said that Saturn's windshield wiper wand, radio and gauges do not resemble those used on every other G.M. car, and indeed give the impression that one is driving a Japanese car.
They also reported that the G.M. logo did not appear anywhere on the car and will not appear in its advertising material. Why? "The shifter on the Saturn coupe went through the gears with the buttery smoothness of a Honda, which is regarded as the world's standard by many in Detroit." A Saturn executive was quoted as saying, "We were testing the car out on the street in Fort Lauderdale and some guy drove by yelling 'Buy American!' We got a kick out of that." Why? G.M. justified all of this by saying that "they wanted Saturn to sell at least 80 percent of its cars to customers who normally would buy imports like the Toyota Corolla and Honda Civic."
Having been in sales and marketing all of my life, I had never heard or seen such a new product launch. "We are going to make you think you are using the competition"? Well, if that is so, why not buy the original rather than a mutation or imitation? That seemed like a logical question.
On October 4, 1990, I posed the same question to the readers of The Wall Street Journal's "Manager's Journal" column, or rather to David Asman, its editor. He thought it was worth asking and changed my working title, as is the editor's prerogative, from "General Motors to Introduce An Imitation Japanese Car!" to "Is GM's Saturn Roger's Revenge?" On Monday, October 15, 1990, the piece ran in all five U.S. editions (possibly in Europe and Asia as well, but I never determined that) It is reprinted in the Appendix. The story was just beginning.
On Tuesday morning, October 16, my phone rang. The caller said he was from Saturn and his name was Skip something and he had read my article. He said he didn't agree with all of my views and asked if I would come visit Spring Hill, Tennessee to get the full Saturn story. (I thought that it might be interesting to see an auto assembly plant, as I had never been in one before.) I said, "What do you do down there at Saturn?" He said, "I am the president." I replied that I hoped I would get a chance to meet him. He said I could count on it. I was going to get a chance to solve the Saturn mystery.
An hour and a half later, I received a call from Jim Farmer, Vice President of Company Communications at Saturn. He said he understood I had talked with Skip and would be coming down to visit. I asked if he could send me some material on Saturn to look over so I would have their side of the story in detail. A few days later the package arrived with all their press releases and a twenty-five minute video titled Spring in Spring Hill. He had sent me a piece of advertising history.
Produced at no cost to Saturn, Hal Riney & Partners of San Francisco shot Spring in Spring Hill on 35 mm theater-quality movie film. It told the Saturn story through the eyes of the G.M. workers and managers that had moved to Spring Hill in what many felt was a career gamble or a last chance to make something worthwhile. They had all signed agreements that they would not be able to transfer out to any other G.M. division in the future. The "Riney touch," described as sentiment-laden messages replete with references to Americana and family, was evident. Other emotional Riney campaigns were created for Alamo rental cars and Gallo wines. No Saturn cars appeared in the video. The photography and direction were breathtaking! Some of the footage, less than forty-five seconds of it, was later used in broadcast commercials. Spring in Spring Hill was reportedly used in Riney's pitch to gain the estimated hundred-million-dollar-per-year Saturn account. Some said that the cost to produce Spring in Spring Hill was close to one million dollars. Although that kind of up-front investment caused a stir in the advertising industry, it was evidently well spent. Riney has the account to this day, and judging by the frequency of current TV commercials, it may be worth more than $100 million per year. This big money aspect of the story started to add color to what was going on. All the stops were out on a little car. Why?
I was later told that the decision to award the business to Riney was, in the new Saturn management fashion, made by a committee which included production workers. Why a committee? What could they know about advertising? If nothing else, Spring in Spring Hill affirmed everyone's decision to go with Saturn and wrapped the American flag all around the company. It was a world-class "Riney touch" effort. And I still hadn't seen a Saturn, either live or on video!
That was soon to be remedied. Late in October, I flew from Manchester, New Hampshire to Chicago to Nashville, Tennessee, and coming down the escalator to the baggage area, there in all its glory, was my first live Saturn. Jim Farmer was nowhere to be seen, so I took the wait time to get a close look at G.M.'s five-billion dollar car. (The numbers were scattered throughout many of the news stories.)
The maroon four-door sedan model sat on its display platform with no special lighting or identification. It was finger marked and had travel trash accents on the floor next to it, and the literature rack was empty. So much for first impressions. It was smaller than I expected, but then again it was in the small-car market segment and meant to look Japanese. Actually, it looked a great deal like a slightly scaled-down Oldsmobile.
Later, trying to pick Saturns out on the highway, I repeatedly mistook Olds for the four-door and the Geo Storm from Chevrolet for the Saturn two-door coupe. I asked about this later in the day and received some surprising answers. Evidently there was so much hype and mystery, the industry was speculating on whether the car would even have wheels. No need to worry. G.M. ran true to form and provided a conservative middle-of-the-road design. They would have liked to have won big, but opted rather not to lose big. The go-for-it-big-time Ford Taurus, admittedly in another size class, is a contrast in business philosophy. G.M. had too much going on Saturn to do anything aggressive, thus the Olds/Geo look. I was starting to get the unreported real story.
Jim Farmer paged me and we were soon in his Pontiac compact on the way to Spring Hill. No Saturn? I had come in dress-blues Class A business attire (I was going to meet the president), and Jim was in polo shirt and sweater. I was soon to find out why. Just about everything at Saturn has a reason! Big companies often miss the big picture, but they always get the little things right.
As we passed through security and approached the modest gray and red headquarters building, I noticed a group of telephone poles with a roped confidence course attached. All Saturn managers are asked to volunteer to take this Rambo training! (More on trends like outdoor rope training in Chapter V.)
On to the office of the president. Six or seven top executives were introduced. All were in slacks and sweaters. Dress-down days were years in the future, and I felt even more out of place when Richard G. "Skip" LeFauve (pronounced "La-Foe") arrived in a leather bomber jacket and slacks. (I knew from press releases that he was a former Navy pilot.)
As we walked downstairs to the cafeteria for lunch, I was told that no Saturn managers ever wear suits and ties. Everyone is a team member. Their I.D. badges have first names in enlarged block letters that can be read at considerable distance, so everyone greets everyone by name as if they were at a perpetual convention or trade show. Farmer had told me on the ride in that all team members were voted on before they were offered Saturn jobs, and that included managers as well as production workers. He said he felt lucky to be selected by his team! Didn't this sound funny to anyone but me? How did the media miss all of this far-out stuff?
I was beginning to see just how different Saturn the company, if not the car, really was.
Skip and I chatted over a bowl of soup as he called everyone by their first name. In the center of the headquarters cafeteria was what looked like a college book store, only without the books. It had racks and shelves of red Saturn apparel, key chains, mugs, hats, and even Saturn belt buckles. The schedule was tight and I didn't get a chance to browse.
Skip said he understood I was interested in a plant tour. I said yes, and asked him if I would see him before I left, as I had written up a research paper on the materials I had used for my W.S.J. piece and wanted him to have a copy so he could see the fairness of my assessment. He said, no problem, he would take me on the tour himself. And he did!
Back out to the cars, still no Saturns, and off to the plant. You can't see it from the headquarters building, and in fact you can't see it from anywhere except from the air! It was explained to me that to be environmentally friendly, they had purchased "the Old Haine's place," retaining the stately ante-bellum mansion/farmhouse as a conference center, and then built the 4.5 million square foot factory (400 or so internal acres) on the back land. There are eighteen miles of external concrete roads constructed in the complex, to put this in perspective. Saturn may be a small car, but nothing else at Saturn is. Why such a big deal?
How do you hide a gigantic car factory? Simple. You dig a big hole, build the plant in the hole, then take the dirt you took out of the hole and build hills around the building. You also buy electricity from TVA, so there are no smoke stacks.
We arrived at the plant parking lot, entered at roof level, across a trestle, and took the elevator down three floors to the production area. Skip had an eight-passenger golf cart waiting. He introduced me to the production manager who looked like a rough-and-tumble, up-through-the-ranks type, and the head of the U.A.W. Union for the plant who looked like a Harvard MBA. Reverse casting as well as manager-worker cross-dressing is the Saturn norm. Everyone acted as if all this was normal.
Skip drove and we were off. For almost two hours we went at speed up and down the aisles. I was told we could stop anywhere I wanted and I could talk to any worker. Not being a reporter, I didn't know exactly how to do interviews, but this seemed a good place to learn. At the dashboard assembly area we stopped, got out, and approached the workstation team. Saturn dashboards are bench-assembled as a unit and then inserted into the cars complete. This was a unique method, I was told, and was much easier on the workers.
I approached my first ever automotive worker (with president, U.A.W. head, and plant manager in tow). I asked the lady how she liked working in Spring Hill. She said she loved it. I asked where she had come from. She said, "Nineteen years at Cadillac." For the five thousand Saturn jobs, there were eighteen thousand internal G.M. applicants. No one from Tennessee works at Saturn. I asked her what was the difference between Cadillac and Saturn. She said at Cadillac the rule was "get it out the door." At Saturn she said it was "get it right." And so ended my first ever reporter-type interview! It may not have been a profound question, but it sure was a profound answer.
Back into the cart and on and on we went. I asked Skip, as we approached the robotic welding line with its photogenic and impressive flying sparks, if this would be considered a state-of-the-art, highly automated operation? He surprised me by saying that no, it was only moderately automated, and it was a long way from the "lights out" (almost no workers present) Japanese factories. The answer made me (again) wonder what were the real economics behind the Saturn operation and, more importantly, did they make sense?
Saturn was designed for the workers in more ways than one. The story was beginning to come together. Much of Saturn was a reaction to the labor dilemma G.M. faced throughout its entire operation. Saturn had a different kind of labor contract. All workers were on salary (plus bonus). All were team members. All were selected to work harmoniously! Saturn is without a doubt G.M.'s Potemkin Village, and I was in "Happy Valley" on tour. The little plastic-clad Saturns going by on conveyers and moving elevated assembly pallets (where the workers move with the cars, then get off and get on another pallet) seemed almost secondary to the Love Boat atmosphere.
The production line, by the way, seemed to be moving very slowly. When we stopped at the central command post (filled with more Digital computers than I had seen at Digital Equipment Corporation itself, whose demise will be dissected in the next chapter), I asked what I thought was a small-talk question: "When will the line be at speed?" All eyes turned to Skip. I got a big smile and an almost Clintonesque reply (two years before we all were to learn what that really was). He said that "no line speed would be achieved until it's time!" Everyone collectively breathed a sigh of relief. Evidently, line speed is a very sensitive issue.
Indeed it was, because later I read that when Saturns were in short supply the line speed was increased. The workers halted production briefly in protest, saying that they couldn't maintain quality, and the line speed was reduced accordingly. The spirit of the U.A.W. may be muted at Saturn, but it was far from tamed.
As the final stop on the tour, a Saturn was set up in a quality section of the plant for me to drive. Skip and I got in. Embarrassingly, I couldn't get the key to turn in the ignition. Consternation reigned supreme. Did we have the right key? Was the car defective? Blessedly, a sweater-clad manager exchanged places with me and started the car. I hadn't taken the tension off of the locked steering wheel, and therefore the key wouldn't turn. ("Must be typical of a Japanese car," I thought later.) To the relief of all, myself included, we successfully drove fifty feet and I had my first (and last) Saturn test drive. No one has ever been under more pressure in a car this side of Indianapolis.
The tour done, I gave Skip my research paper (it ran twenty-two pages, double spaced, and was done in appreciation, for better or for worse, for the trip). We said good-bye, and Jim had me in Nashville en route to Chicago and home in about forty-five minutes. It was some day.
I wrote thank-you notes to both Skip and Jim, my new Saturn friends, and promised I would send a detailed trip report in a few days so they could have the benefit of a first-impression visit.
On November 16, 1990, I mailed a three-page, single-spaced "Impression of Spring Hill" letter. I never heard back from them on either the research report or the "trip report."
Saturn was selling in the market. I had taken a critical shot at the launch and now the jury was out. Would Saturn (and Skip) save G.M.? Would the ten points in share, or a portion thereof (Saturn could only make 500 cars a day), be regained? Time would, and did, tell. To some, it was a mixed message. Saturn cars did sell, but there was a nagging question of whether Saturn could make both cars and money. The Saturn story was not designed for the six o'clock news. It was going to be around for a while, and the media soon lost interest.
Soon the years caught up with Roger Smith at G.M. and he turned over the reins to his hand-picked successor, Bob Stemple. Roger remained on the Board at a million a year until 1993 when the numbers caught up with both him and the company. Things began to unravel at G.M., and Saturn seemed to be one of the details that didn't quite add up. I had many more facts than the business press, but what they were beginning to mean unfolded very slowly.
Monitoring all this from afar was not difficult. I did make one more trip to Spring Hill incognito. I saw the design line speed of the plant, and was also witness to the unreal industrial atmosphere of all the happy auto assembly workers waving and smiling at the tour tram as if they were attractions at Disney World. I have been to happy factories before, but the ten-hour, three-shift, six-day-a-week Saturn rotation is not the things dreams are made of. Yet, considering the G.M. alternatives, maybe they are! Spring Hill's Saturn plant is a media event. At least on the day shift.
Saturn grew in age and grace. The happy, smiling dealers in the TV commercials were accused of price fixing because of the "list price only" policy, but the potential litigation was dropped in favor of the free market caveat emptor. Dealer profit, reported to be the highest in the industry, increased as Saturn prices crept upwards. The key question was how could all that G.M. treasure be invested for so long in Saturn, and at what point would there be a return? Most industry experts estimated never! The dealers were making money, but G.M. might not have been. How could they sustain all of this?
Saturn, as a wholly-owned G.M. corporation, had no obligation to break out its numbers. G.M., on the other hand, is a public company and questions were beginning to be asked.
The Riney commercials and print ads continued their winning ways with Saturn cars appearing only in postage stamp flashes. The feel-good Saturn fraternity was featured and the cars sold. To sell a pricey product of average design in a competitive market is no small feat! Riney was delivering.
The moment of truth was fast approaching. As expected, the Spring Hill complex, even at three shifts, was only marginally operationally profitable. The terms of its profitability seemed in dispute. The project from the beginning had been termed "the Saturn experiment." The rationale was that all the R & D was going to benefit the entire corporation, and therefore those costs should be amortized or absorbed by all operating divisions or accepted as corporate overhead. "Experiment" is not a business accounting term. It was reported as if it were.
Costs are costs no matter where you put them, and revenue is revenue no matter where it comes from. The art of business is to decrease one and increase the other while attempting to determine the causes of both. The journalists couldn't fathom this. It is not a small point, especially when things are in the billions.
Saturn was a special case because of its high visibility. In 1993, it began to make the news. Not only was Roger Smith gone, but Bob Stemple was out and Jack Smith was charged with getting G.M.'s house in order.
Saturn announced it needed a second plant, an additional billion dollars, and some new models to maintain its momentum. That's $4.7 billion in 1985, an additional $1.9 billion in 1988 from the State of Tennessee industrial revenue bonds for plant and equipment (sold to G.M. at an undisclosed rate), and now $1 billion more to press on.
As the saying goes: a billion here, a billion there, and pretty soon it starts to add up.
Early in 1994, Saturn declared it had reached "operational break-even" in 1993 and thus qualified each of its 8,500 employees for a $5,100 bonus (some of which was awarded for quality goals). What kind of legerdemain was this?
It seemed that Saturn had cut its ad budget 40% in mid-summer of 1993 and at the same time increased dealer prices. These actions triggered a six-month slide in retail sales. Saturn counts its sales as delivery to dealers, and by year-end (bonus time) a one-hundred-day supply of cars was on the lots. Saturn cut its work shifts from ten hours to seven hours (at full salary for all) and ordered a one-week, unscheduled plant shutdown after the holidays for model retooling (and no doubt to cool down dealer inventories). Once the year-end numbers were met, Riney was turned back on and, blessedly, in a few weeks sales began to climb back to pre-cutback levels. This was not tied together in any news story, but came out only in minor items or as sidebars.
Needless to say, the new G.M. management did not kick in the asked-for billion, nor the second plant. Times had changed.
On Monday, April 4, 1994, while this decision was still under consideration, I once again convinced David Asman that it would be a good Manager's Journal column to point all of these independently reported facts out to the readers of The Wall Street Journal so they could begin to see the logic of what was going on.
Late that afternoon, an angry Skip was on my answering machine. I erased his emotional message and decided not to return his call.
Later in the week, I did return the call of Thomas Manoff, Saturn's vice president of finance, whom I had quoted in the article. His public relations person took the call and asked if he could stay on the line. I said, "Sure," and Thomas came on. Did he ever! For thirty-five minutes by the clock, and by my phone bill, he took issue with every word and comma in the piece. As an experienced sales professional, I allowed him to vent. The toll charges were a small price to pay. He did have a point or two, but so did I. Finally, I agreed to a debating draw. I asked if the P.R. person was still on the line. They said, yes they were. I asked them if smoke was coming out of their hand set as it was coming out of mine. They said, indeed it was. We all chuckled a bit, and the call mercifully ended on a cordial note.
G.M. finally moved to solve its Saturn dilemma.
On October 4, 1994, the plug was pulled on Roger's pet project. G.M. announcing its fourth reorganization in ten years unceremoniously rolled Saturn back inside the walls from whence it emerged with such great fanfare and pomp nine years and seven months earlier. Citing excessive costs in the manufacturing process, Saturn was to become part of the Lansing automotive division along with other small cars such as the Chevrolet Cavalier and the Pontiac Sunfire. In typical G.M. fraternal style, Skip LeFauve was to assume the added job of group executive in charge of the small-car group. The deaf, dumb and blind business press reported these facts somewhere deep in print sections and nowhere on TV.
Early in 1997, Skip was reassigned to a staff job coordinating world wide G.M. technology. At age 63, the good corporate soldier (and former naval airman) was preparing to fade away. He did the best he could with what he was given. By the time he was made president of the Saturn Corporation, in February of 1986, the die had been cast. All Skip could do was attempt to pilot this labor-intensive, cost-heavy, little Behemoth to some kind of a safe landing in the distant future. He did his best, but Saturn never made it.
With so many billions invested (Riney now has its first Saturn billion in advertising billings), it was impossible to do anything but put good money after bad.
The heavy involvement of the U.A.W. in the initial Saturn design and manufacturing phase produced a labor-intensive car and a labor-intensive factory. In its classic strategy to "save jobs" the short-sighted union fatally wounded Saturn long before the first little car ever rolled off the Spring Hill assembly line. Saturn as a viable G.M. product was stillborn, and yet it lives (on financial life support) today. This is the real, unreported Saturn story. The long-gone G.M. management team that allowed all of this to transpire is, of course, fully accountable for the results.
Big companies can make big mistakes and still survive. No one else can, so be careful of the lessons of Saturn. Saturn did not exist in a vacuum. Other things were going on in G.M. at the same time, and these were perhaps of even greater consequence. They can be definitely related to the Saturn "experiment."
In 1992, G.M. woke up to find itself with eighty cars and trucks in its North American product line. Not a single one of those models was competitive with the Toyota Camry, the Honda Accord, or the Ford Taurus.
The Saturn billions had been invested in a small car ego trip while the base of G.M.'s mid-size market had gone elsewhere. Roger Smith aimed well behind a moving target.
Jim Perkins, the Chevrolet general manager at the time, was given the mission, and a scant one-billion-dollar budget, to produce a competitive car at one-third the labor cost and in an accelerated five-year time frame. He recycled the Malibu nameplate from the 1964 Chevelle and began the game of catch-up. Ten years late into the marketplace with a product is a big price to pay for Roger Smith's missing the big picture in the early eighties.
Saturn will be with us for a long time to come. There is a great deal of brick and mortar invested in signature-designed Saturn dealership buildings all across the land, to say nothing of Saturn's Warren, Michigan, headquarters and development center and the plant on the "old Haines place" in Tennessee.
Overspending an unlimited budget is well within the skill set of the average manager. In a union environment, this activity is detected early and corresponding labor demands are put into the mix.
When the standard for a manufacturing complex is Henry Ford's River Rouge plant where the iron ore boats from the Masabbie Range delivered the raw materials at dockside and Model A Fords came out the other end, it is easy to see how Spring Hill came to be. No one seemed to think it was unreal. It is!
Billions spent in advertising, public relations, customer service survey ratings (J.D. Power & Company), and the highest of high profile product launches is no substitute for asking the simple questions: "What is this going to cost?" and "Who is going to pay for it?"
All of this was not lost outside of G.M. The Dodge Neon went to school on Saturn, retooled an existing plant, and produced a very competitive, stylish small car that reportedly is designed to be profitable.
This prophetically self-proclaimed "different kind of company" can teach any student of management some substantial lessons. It would have been nice if all of this wasn't lost somewhere by the press.
Emotional responses to competitive pressure at any level have to be re-evaluated in the cold light of day The numbers must add up. Roger Smith, the finance guy, figured he could bury anything inside G.M. (and he did). He just wanted to show 'em!
Launching a five- or six-billion-dollar project and calling it "an experiment" telegraphs the fact that even in concept something was very different, and that it was common internal knowledge that the numbers would not work. No one in the media questioned any of this.
Unlike Ford's Edsel, Saturn performs as advertised, and while its nineteen-eighties design, engine and styling are getting a bit long in the tooth, it can't be discontinued. Edsel was made from a cobbled together group of existing parts at existing assembly plants. Its dealerships easily converted to the Comet name plate, and other than entering the lexicon as a simile for lemon, Edsel did little lasting damage to Ford Motor Company.
Saturn, on the other hand, is a white elephant of colossal dimensions. You have to see the Spring Hill complex to believe it. It is an integrated plant with engines, transmissions and completed cars all made under one roof. It can't be converted back to anything. The Saturn name plate and image itself requires one hundred million dollars a year to maintain its sales numbers, and the hundreds of free-standing dealer buildings can not reasonably be shifted to other makes or models.
General Motors is doing its best in an untenable position. We may never know the complete Saturn story, but we know enough to know what made the difference between success and failure. The emotions of a single, single-discipline chairman, the inability to deal reasonably with organized labor, the so-called clean sheet of paper approach, and the casting of all of this in brick and mortar built on a foundation of creative accounting are enough elements to construct the biggest business school case of all time. Perhaps some day some astute researcher will uncover all of this and let us in on the full story.
Recent news reports announced a seventeen percent reduction in fourth quarter 1997 Saturn production. The little car that couldn't make a profit is slowly being left behind by marketplace events it can't adjust to.
This might be one of the biggest business blunders of the century. The media still feel good about Saturn. Hal Riney and partners were recently acquired because of its highly profitable Saturn account. Good timing, Hal.
Connecting the dots in the business press is something we all must learn to do. Journalists don't even seem to see the dots, let alone know where they are or what they might mean. That's a cold negative story that most likely won't get much ink or air time.
When David Asman at The Wall Street Journal in October of 1990 made the prophetic title change in our Manager's Journal editorial page feature, I am sure he had no idea that G.M.'s Saturn would indeed haunt the corporation for years and years to come and would, in fact, become Roger's Revenge.