Saturn Corp.

views updated

Saturn Corp.

founded: 1985

Contact Information:

headquarters: 100 saturn pky.
mail drop s-24 spring hill, tn 37174 phone: (615)486-5050 toll free: (800)553-6000 url: http://www.saturncars.com

OVERVIEW

Saturn is an American car manufacturer that takes great pride in being an American company for American consumers. It was created in 1985 to show that American small cars could equal or better the quality of foreign-made small cars. It also served as an experiment in company structure, borrowing heavily from Japanese and European management styles. With a strong emphasis on satisfying the needs of people—customers, team members, suppliers, dealers, and neighbors—Saturn has produced an almost cultlike following of pleased car owners across the United States.

COMPANY FINANCES

Saturn sales increased over the years, reaching a peak in 1994 with 286,003 cars sold. In 1997, however, sales dropped 10 percent from the previous year. In January 1998 sales were down 20 percent over the previous January.

For 1998, manufacturer's suggested retail prices increased an average of only 0.9 percent over 1997 prices, keeping Saturn ahead in the value-for-price area. In September 1997 automobile production was reduced by about 1,000 cars per week, removing about 15,000 cars from the year's planned original total. The reduction was taken in part to compensate for the drop in sales.

ANALYSTS' OPINIONS

Unlike many car manufacturers, Saturn has stayed away from buying incentives such as rebates, believing that quality, along with a no-haggle sales policy, is incentive enough. Analysts in Ward's Auto World blame this policy for Saturn's sales slump, but even comparable Dodge and Plymouth cars that offer discounts have seen slow sales.

The initiatives and strategies that molded Saturn and made it unique are coming under challenge from GM. Mike Bennett, manufacturing advisor for United Auto Worker Local 1853, says, "Publicly, the corporation says they are not tinkering with us, but internally it's a different story." He sees GM trying to assimilate Saturn into its own identity, leaving behind the lessons learned—lessons that resulted in consistent profits for Saturn as well as increased compensation for Saturn workers. In 1996 Saturn employees received an average of $10,000 over base pay for achieving productivity, quality, and training goals, compared to the $300 average profit-sharing check brought home by other GM workers.

HISTORY

Saturn was formed in January 1985 as an experimental independent subsidiary of General Motors Corp. According to Ward's Auto World, the company was the "grand vision of former Chairman Roger B. Smith, who was under heavy fire at the time for making deals to sell GM-badged Japanese-made small cars in the United States, and by inference 'giving up' on America and its workers' ability to produce world-class products." Smith called Saturn a "clean sheet of paper" approach to making profitable small cars in the United States, and allocated $1.9 billion for the plant and $3.5 billion overall for the project, which was to re-establish GM in the fiercely competitive entry-level auto market worldwide.

In 1982 Saturn was but a gleam in the eye of Alex C. Mair, then a vice president at General Motors. He convened a group of engineers to discuss the formation of a small car project. It was not until November 3, 1983 that Smith would release details of the project to the public.

Shortly after the January 7, 1985 unveiling of Saturn Corp., William E. Hoglund was appointed as the company president.

Throughout 1985 Saturn studied customer preferences and worked with labor to create the foundations of the company. Executives also mulled over numerous offers of sites from communities across the nation before announcing on July 30, 1985 that Spring Hill, Tennessee, would be home to Saturn's manufacturing plant. The first "Saturn team members" moved to Spring Hill in February 1986, including Richard G. (Skip) LeFauve, the new president of Saturn Corp. Later that year the first United Auto Worker technicians were recruited by Saturn and were offered permanent employment.

The year 1987 was a big one for the company, as parent company General Motors funded the construction of the facility. The board of directors voted to spend $1.9 billion for plant construction, equipment, and tooling. In February 1988 Saturn began recruitment of 3,000 workers.

It would be several years before the first of its retail agreements would be lined up. In early 1989 Saturn reached agreement with 26 retailers, and in mid-1990 Saturn executives said they would have more than 130 retail outlets within the year in 33 states. By 1998 there were 382 U.S. retailers, more than 70 Canadian retailers, and 11 Japanese outlets. The first four-door sedan was driven off the assembly line in Spring Hill on July 30, 1990 by Roger Smith and UAW President Owen Beiber. Cars began arriving at the dealers' doors in October 1990.

Saturn announced its first profitable month in May 1993. In 1994 the company announced that 1993 had been the first year in which the company had seen an operating profit prior to taxes and interest calculations. Profits continued into 1997, with Saturn being the only GM North American small car operation to operate profitably.

In June 1995 Saturn completed production on its one-millionth car. That year saw Saturn applying its newcar selling strategies to the used-car market, certifying its cars with a 150-point inspection and providing a three-day money-back/30-day trade-in guarantee along with a limited warranty.

FAST FACTS: About Saturn Corp.

Ownership: Saturn is a wholly owned subsidiary of General Motors.

Officers: Donald W. Hudler, Chmn. & Pres.

Employees: 9,667

Chief Competitors: General Motors created Saturn to challenge the foreign small-car market. Some primary competitors include: Honda; Toyota; Ford; Chrysler; Subaru; and Nissan.

Taking its commitment to the environment seriously, Saturn made available the EV1 electric car in limited markets in 1996, and by 1998, six markets in the western United States offered the vehicle. In 1997 Saturn entered the Japanese market, meeting head-to-head with the competition it was created to beat.

STRATEGY

According to a company news release dated August 1, 1997, the average Saturn buyer was a woman in her early forties with a college degree. To increase awareness among younger buyers and men, Hal Riney and Partners created a new advertising campaign for late 1997 that focused on Saturn's employees and philosophy rather than owners. Emphasis was on the lower cost of Saturn parts and insurance, and the cars' long-term value, issues consumers have said are important to them. Ads have also been placed in magazines aimed at attracting more male customers.

The Internet has also become part of Saturn's campaign to expand its customer base. Banners on general and targeted web sites have been designed to make the 18-48 age bracket more aware of Saturn products.

Saturn has followed its own hybrid management style from the start, with teamwork as the basis, and each team being self-managed and responsible for its own quality, cost, production, and people. Company philosophy is that the only way a company can grow and be profitable in today's global economy is through quality and productivity.

INFLUENCES

Saturn's individuality is coming under fire from parent GM, which wants to use a common global architecture for its small-car platforms. This is causing conflicts between Saturn people and those from other subsidiaries, such as Adam Opel AG, over engineering and assembly processes—conflicts not necessarily resolved in Saturn's favor. The UAW's Mike Bennet feels that Saturn doesn't fit into GM's new emphasis on common vehicle platforms, power trains, and processes.

CURRENT TRENDS

The mid-1990s saw car owners wanting larger, roomier cars to match their families and their busy, active lifestyles. Station wagons, sport utility vehicles, and minivans filled consumer need, but Saturn had no offering in this category.

CHRONOLOGY: Key Dates for Saturn Corp.

1982:: A General Motors (GM) plan to produce high-quality, affordable small cars to compete with imports is approved
1985:: Saturn is formed as an experimental independent subsidiary of GM
1987:: GM constructs the new Saturn plant for $1.9 billion
1989:: Saturn first starts lining up dealers
1990:: The first Saturn cars arrive to the dealers
1993:: Saturn makes its first operating profit
1995:: Sells its one-millionth car
1997:: Saturn enters the Japanese market

SPRING HILL'S CORPORATE GIANT

In 1985 General Motors announced the formation of Saturn Corporation, a small-car company that took its name from the Saturn rocket that carried Americans to the moon during the space race with the USSR. This Saturn was designed with the goal of defeating another kind of enemy: the Japanese and their success in the small-car market. The first Saturn rolled of the assembly line on July 30, 1990 with General Motors chairman Roger Smith and UAW president Owen Bieber at the wheel. This new company was supposed to be worker and customer friendly, with a no-haggling vehicle pricing policy. (Saturn also gives a flower to customers who bring their cars in for service.) By June 1995, the one-millionth Saturn rolled of the company's manufacturing and assembly complex in Spring Hill, Tennessee.

According to Newsweek, "Saturn president Donald Hudler insists Saturn can succeed without a roomier car; three out of four Saturn owners have another car, many of them minivans." However, to expand sales, he acknowledged that the company must meet that market demand or suffer the peril of the lost, and potentially large, market opportunity. Working with Adam Opel AG and Saab, Saturn intends to have a midsized car available for 1999.

PRODUCTS

The company makes cars for each model year, although there have been no radical changes in styling or offerings as of 1998.

CORPORATE CITIZENSHIP

Saturn takes its business philosophy "to meet the needs of our neighbors and communities" very seriously. During construction of the Spring Hill plant, the rural and historical surroundings were preserved as much as possible. Loading areas were designed to effectively contain hazardous materials in case of spills. The most advanced air-pollution control system was installed, and water-based paints, sealers, and adhesives were used. Recycling and reprocessing are an important part of the manufacturing process.

Saturn also works with a number of environmental groups, including the Nature Conservancy, Rails-to-Trails Conservancy, and the Environmental Protection Agency's Green Lights Program. To give back to the community, Saturn supports activities such as the Williamson County School Systems Harpeth River Project, Inner-City Youth Racing, and Saturn Playgrounds.

GLOBAL PRESENCE

Saturn was designed as a wholly American car company. In 1991 Saturn cars became available in the Canadian market, and the first export of Saturn vehicles in 1992 were destined for Taiwan. In 1997 Saturn began exporting cars to Japan.

EMPLOYMENT

According to one account in a publication by the Foundation for the School of Business at Indiana University, Saturn had to change organizational structure and management to achieve its goal of beating its Japanese competition. The consensus-based organization and management system is modeled on Toyota's so-called "lean" system.

Of course, Saturn's formation by General Motors presented some concerns to the United Auto Workers. The two organizations, both with the idea of creating and sustaining employment in the U.S. automotive industry, formed a group to study the process of building a successful automotive manufacturing team. The data was gathered by "The Group of 99," which consisted of GM and UAW plant managers, staff production workers, and union personnel.

Included among the tenets of success adopted by Saturn are giving all employees in the company "ownership," practicing equality, removing barriers to doing a good job, and giving union and management shared responsibility for ensuring success. The collaborative environment was studied by the Foundation for the School of Business at Indiana University, which made the following observations:

"This state-of-the-art union/management collaboration extends from the office of the CEO to workers on the assembly line. It is based on joint decision making from strategic planning to shop-floor problem solving. The agreement clearly sets new standards for industrial democracy in the U.S. auto industry, like those in Northern Europe. This joint GM/UAW decision-making process, for example, is similar to that found in the joint union-management development and operation of Volvo's Uddevalla plant in Sweden." Additionally, "Saturn improved the Japanese system by employing the North European concept of management-union collaboration in decisions at all levels to design and operate on an ongoing basis its integrated systems. The union-management partnership at Saturn, for example, designed and operates its comprehensive education and training center programs—called Saturn U.—to enable its team members to stay ahead of its technology. This is essential for autonomous teams engaged in constant improvement." Finally, "The compensation and incentive system for Saturn's UAW members is also unique. Saturn and the UAW have contracted to share in the rewards of the company's overall performance if jointly set goals are met, as well as put 20 percent of the workers' compensation at risk if these targets are not met. This risk-reward sharing system is designed to encourage teamwork and continuous improvement by providing common overall goals rather than facilitating conflict through individual or group performance goals."

In 1995 Ward's Auto World reported that workers were happy with their say in decision-making and with their $3,245 bonuses for 1994 (compared to $550 bonuses given to other GM wage earners). In March 1998 workers voted to keep their contract by a two-to-one margin, even though Saturn had suffered a recent sales slump.

SOURCES OF INFORMATION

Bibliography

bohl, don l. "case study: saturn corp.—a different kind of pay." compensation and benefits review, november/december 1997.

chappell, lindsay. "sales slip—so saturn slows down." automotive news, 8 september 1997.

———. "saturn union vote a reminder of evolution." automotive news, 23 february 1998.

cohen, andy. "it (sic) party time for saturn; event marketing." sales & marketing management, june 1994.

cummins, arthur j. "saturn workers vote to retain innovative labor pact with gm." wall street journal, 12 march 1998.

halliday, jean. "saturn's ads to focus less on folks, more on low cost." advertising age, 23 march 1998.

———. "saturn's new ads aim at younger buyers, men." advertising age, september 1997.

kerwin, kathleen. "why didn't gm do more for saturn?" business week, 16 march 1998.

"looking for the next set of wheels." advertising age, 2 february 1998.

mcginn, daniel. "time to shift to a higher gear; saturn fans are now asking for a choice of bigger cars." newsweek, 18 march 1996.

rehder, robert r. "is saturn competitive?" business horizons, march-april 1994.

"saturn cuts output; will not resort to incentives." ward's auto world, october 1997.

"saturn struggles with gm's global strategy (to derive most of its small car platforms off a common global architecture)." ward's auto world, september 1997.

saturn student packet. spring hill, tn: saturn customer assistance center, 1998.

white, eleanor. "relying on the power of people at saturn." national productivity review, winter 1997.

winter, drew. "saturn turns 10." ward's auto world, july 1995.