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GM's Biggest Strategic Blunder

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GM's CEO, Rick Wagoner, has opined that the automaker's biggest blunder was to walk away from the electric car.

In my view, however, GM's biggest strategic blunder was its failure to view Saturn strategically—and as a consequence not allowing it to fulfill its destiny as a domestic competitor to Toyota, Nissan, and Honda that could actually win.

As the company makes hard decisions in the struggle to survive, the challenge to GM will be its ability to learn from—and not compound—that mistake.

Introduced in 1990, Saturn was for many years surpassed in JD Powers ratings by only Lexus, Infinity, and Cadillac—much more expensive brands. It attracted a host of best-car awards. But it was the customer experience that made Saturn stand out.

For starters, there was a "no-haggle" price policy, made possible because adjacent dealers were sister companies with common ownership. In each dealership, customers were greeted by a salaried sales agent who would answer questions about the car in a relaxed atmosphere. Buyers would be treated as part of the family; they would see their picture on the wall and be invited to monthly cookouts.


Saturn could deliver this experience because it was truly was, as its ads said, "a different kind of company."

At its outset, a team of 99 people created a new culture based on teamwork, partnering, and treating the customer with respect. The new plant in Spring Hills, Tenn. had a simple labor contract that consisted of a few paragraphs rather than the volumes of legalese elsewhere at GM.

What was truly remarkable was the intensity of loyalty that Saturn generated among its customers. People got married in their Saturn. They acted not only as advocates but also as sales consultants to prospective buyers. And over 30,000 of them came to Spring Hill for a party in 1994. (Shades of Harley Davidson.)

They were proud of the fact that an American company had made a quality car and created a customer relationship based on friendship and respect.

So what did GM do with this gem? It let 10 years go by with no product investment in Saturn outside of cosmetic changes. GM invested instead in Oldsmobile!

It created from scratch the Aurora, introduced in 1995, which lasted only four years, except for an abortive attempt to revive it in 2001. The Aurora was intended to save Oldsmobile... although, ironically, GM tried to eliminate any connection with that model because of its problem image. The Aurora failed in creating a brand following, largely because it simply was not a very well made car.

If the Aurora investment had been channeled to Saturn, the car would have been of superior quality—the Saturn family would have made sure of that.

Here's what can be learned from Saturn and applied today.

First, GM had too many mouths to feed, all lining up and saying "my turn." It was Oldsmobile's turn for a new model, and even though the Oldsmobile brand was in trouble GM could not then bite the bullet and do away with the brand.

Second, there was a preoccupation on short-term profits and a lack of strategic vision and scenario planning, a problem not at all unique to GM.

I once gave a presentation about Saturn, and a GM board member in the audience said that Saturn's ROI was inferior—implying that it was an investment mistake. He was right. The ROI was inferior given its substantial investment in product and plant and the relatively low prices of this class of car. However, it should have been clear, as it was to those who conceived the Saturn concept in 1985, that it provided a platform to fight the Japanese brands, a platform that could be key to the survival of GM, especially in the event that customer support for the gas guzzlers were to wane.

In short, strategic vision was either absent or trumped by short-term-ROI prospects.

Clearly, GM needs to prune its line, but Saturn should be a candidate to live on. Even today, the brand image, customer loyalty, green association, and dealer network constitute a platform that could be leveraged as GM competes with the Japanese brands in the automobile environment of the future.


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David A. Aaker is vice-chairman of Prophet (www.prophet.com), Professor Emeritus at the Haas School of Business, UC Berkeley, and executive adviser to Dentsu. His latest book, his 14th, is Spanning Silos: the New CMO Imperative. Reach him at daaker@prophet.com.

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  • by Kevin Horne Tue Mar 10, 2009 via web

    Agreed. What a squandered asset. A case for future MBA classes to ponder...

  • by Doug Pruden Tue Mar 10, 2009 via web

    I’ve always wondered who at GM sold the company on the Saturn concept. They likely fell out of favor within a few short years leaving the brand an orphan without a highly influential voice to protect and defend the long term vision, and soon without adequate funding to expand and freshen the product line. Without such continued support the downfall was inevitable.

    The Saturn business model would have/should have been the GM solution to long term business success in competition with the Japanese auto manufacturers. It could have been a great case history for those of us who truly believe that a brand can develop loyal customers and advocates by providing the kind of Total Customer Experience -- good quality product, a good sales and service experience, and good value for the money – and the high perceived value it creates in the minds of customers.

    Then again perhaps we should have seen it coming from the outset. When you provide that positive Customer Experience in a category with a long re-purchase cycle it’s inevitable that payback won’t be realized for a number of years. With the pressures from investors to generate ever better profits each and every quarter, short-termism can be an overwhelming force.

  • by Mark W Tue Mar 10, 2009 via web

    Let me start out by saying that I completely disagree with this article. I don't see why GM needed to create "A different kind of car company' (Saturn). If it couldn't sell cars with what it had, creating something new wasn't going to fix their numerous problems. The existing structure will still be the drag. It eventually fell victim to the same thing that nearly every GM brand / product has experienced. GM needs a fundamental shift.

    You also failed to examine the cost structures associated producing GM automobiles; the very same structure that Saturn falls under. The company isn't making money. Chevrolet is GM's halo brand. If they were failing with Chevrolet how could they possibly succeed with the Saturn brand? Saturn's footprint is microscopic compared to Chevy's.

    In regards to Oldsmobile, that brand, at best, was a twilight brand. The demographic for the Oldsmobile brand dissolved. The Aurora, Bravada and Alero were all last ditch attempts to revive it. Even if the product investment had been diverted to Saturn, what might Saturn have done with it? Add three more pedestrian products into its portfolio, or invest more heavily into one of its existing pedestrian products. Honestly, who remembers Saturn L or S series cars from the 90s against the Camry, Accord, Altima, or even Ford Taurus?

    Personally, I never found Saturn very compelling. If anything, to go up against the likes of Honda and Toyota, GM should have leveraged the strength of its brand, and built better cars. But, trying to mask its deficiencies under the mask of another car brand is pointless, and ultimately cost more in the long run.

    GM needs to focus on its core products and get back to building solid cars that have longevity. Even Buick should have been jettisoned There's so much overlap between Buick and Cadillac that it's not necessary to have them both. Buicks are very popular in China. They should sell the marque to a Chinese company and focus on 3 core brands; Chevrolet (Mainstream), Cadillac (Luxury), and GMC (Trucks and commercial).

  • by Bill M. Thu Mar 12, 2009 via web

    It goes beyond just brands, high-level support, squandered marketing and opportunities....it goes to the fundamental financial idiocy created by Wall Street (gee, where did THAT get us)?
    Combine it with unions who screamed bloody murder when a $10 copay for health insurance was introduced, and it's a very simple recipe for disaster.

    Toyota and Honda had 25-year marketing and penetration plans. The Australia wine industry had a 5-year game plan. When companies cater (then crater) to quarterly shareholder and analyst demands, you can never have a long-term focus nor strategy.

    All were supported by their governments in one form or another, much to the chagrin of our trade deficit statisticians. Hmmm....a keiretsu-type model from Japan that actually worked. Interesting....

  • by Ed Mon Apr 20, 2009 via web

    The Saturn example could be extended to many U.S. companies. Products that have long-term potential, but lower ROI than other products, need to be protected and given the resources they need.

    Saturn could indeed have become - and perhaps still could become - the fuel efficient/electric car platform GM needs for its post bankruptcy reemergence. In any case, I agree with the author that GM did squander the Saturn opportunity.

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