Thursday, October 8, 2009 at 6:00AM Saturn's story should encourage students of business
GM's Saturn is a classic case of how many businesses are run--poorly.
As a business professor I am constantly reminded of students'--and by extension, the public's--naive assumption that businesses that exist are businesses that are run well. Last week the technical time of death of GM's previously popular brand, Saturn, was the most recent case of exactly why that belief is not not substantiated. Let me explain.
Frequently when my students are assigned a big case to "solve" in one of my courses, one of the first inclinations they have is to go to the library or--these days--to Google and see what the company decided in terms of the problems at hand; they do this sort of as a check against or, better yet, a validation of, what they should propose or what they might have decided as to the central recommendations stemming from their analysis and handling of the case.
When I discourage them from doing this in the first place--or worse yet--when I minimize the news of what they discovered the firm actually did--as reflected in their search for what "the answer" was in what they consider the real world of commerce, they are crest-fallen. And that's precisely my point: What's done in the real world of commerce is sometimes so far removed from what constitutes sound business decision-making or good management, what the firm actually decided to do in the case my students might be focused on versus what should have been decided under the circumstances represents, frequently, two very different realities.
Saturn as a car brand is by all pronouncements in the media declared to be at an end. This is despite it's widespread acceptance and popular success in the marketplace as the insignia of a good, decent-quality line of vehicles, best valued for it's no non-sense promotion, no hustle of prospects [frequently female], and no-haggle pricing policy--especially appreciated among most customers who wished to buy a car with a shopper's dignity that is rare in an industry where buying an auto is more often than not akin to buying a Persian rug in a third-world, open-air marketplace.
The line is not reported to not have been profitable, but that is almost certainly attributable to the extraordinary legacy costs of GM's mis-management of the UAW of the course of 80 years. Allocation of overhead as well could easily have pushed Saturn into red ink, when in reality the line was by all popular indicators a well-received brand.
It should be noted by all--and I will remind my students the next time they are eager to get a sense of the "right answer" to a case by checking what the company did--that Saturn was a great brand concept that was over it's lifetime mismanaged in ways that were not readily apparent to outside observers, nor even to customers for a while. But GM's failure to run the business well over the years--including the decision to short-circuit an orderly Chapter 7 breakup of the firm--all led to an enfeebled car line and then a dead one.
The life and then decline of Saturn is a story who's point is well-worth repeating: the way apparently successful firms manage frequently has much to be desired; it is safe to say that most firms are commonly operated in a sub-optimal fashion. This, in turn, should give students of business, those both in and out of formal university studies, much to hope for and little to fear in terms of trying their hands and minds at improving how commercial affairs are carried out! May Saturn RIP.
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Reader Comments (2)
Great post Keith - as the owner of a Saturn, I'm shocked and sad to see the line go. I did a report on GM in 2005 for my undergrad work and the writing was on the wall then. I don't remember the exact figure, but to cover their pension and health care costs, it pretty much made almost all models unprofitable with the limited margins GM was attaining at the time (and presumably still today) and excessive overhead costs.
I expected GM to end a different brand/line in lieu of Saturn, especially with Saturn's high customer loyalty and brand recognition. However, with the Chevy Volt due to launch sometime in 2010 (or at least that's what is being said now), I wonder if GM might have fallen victim to sunk costs instead of simply making it a Saturn Volt or something similar.
Amber...Wow--a first hand customer who verifies the story from a customer's POV! Yeah, it's really incredible how much dissembled at GM in the later years. It's a shame with respect to the SATURN brand--but likely some other car company will pick up on the segment that SATURN served and "imitate" it sometime down the road. Great comment. Thanks--Keith.