Can Penske Make The Saturn Profitable?
Penske Automotive owns a whole crap load of car dealerships. 310 in the U.S. and around the world. Penske Automotive sells over 40 different car brands – including the Smart car in the U.S.
Roger Penske is successful renting trucks and running racing teams. Can Penske Automotive sell Saturns? Yes.
Can he make a profit? Probably.
Will he still build Saturns in the U.S.? Doubtful.
He could form a venture with Nissan Motor Co., the Japanese affiliate of Renault SA, according to a source familiar with the talks. Automotive News, an industry trade publication, has reported that Penske plans to import vehicles made in South Korea by Renault Samsung Motors and sell them through the Saturn dealership network.
I wouldn’t bet on Penske Automotive in this deal.
- Because the $2,500 Tata Nano is coming to the U.S. in two years.
- Because he sells Smart.
- Because he sells 39 other car brands.
- Because Saturn never turned a profit in it’s whole existence under GM’s wing.
So GM invested billions to give Saturn independence. Saturn ran its own factory, employed its own engineers and made its own engines and transmissions. But the economies of scale never materialized. GM needed to sell half a million or more Saturns a year for this to all pencil out. In 1994, sales peaked at 286,000 cars.
- He just doubled the size of his network of dealers. Legacy dealers that used to sell Saturns and flopped.
Penske Automotive will have a two year deal with G.M. to buy Saturns. But then Roger can shop his car-building business around.
$2,500 Tata Nano
Tata doesn’t have a dealer network currently. But that probably won’t stop them. There is already a demand for the car in the U.S. (IF it passes gummit standards – and I’m betting the standards will be relaxed to make it so.)
We have had people ask us if the Smart was a Tata. We have had people tell us they can’t wait until the Tata comes to the U.S. These same people don’t have a clue that the Tata
- is put together with glue,
- has opening in the back (a “trunk),
- no air conditioning
- only three lug nuts per wheel (gummit standards dictate four)
- top speed of 43 mph
Many of these same people are concern that the Smart isn’t safe enough for them!
But that $2,500 price tag makes it very appealing to wedge in four teenagers and turn them loose or send Mama to church meetin’s.
Where will Roger Penske and Penske Automotive wedge the Saturns in the marketplace? If G.M. still designs and builds the cars, they won’t change much. If Penske Automotive takes the design/build to another factory he doesn’t own, does this mean Penske Automotive takes on a whole new level of overhead?
Am I willing to bail out Penske Automotive eventually?
I might if he let’s me drive one of his racers.
What a material of un-ambiguity and preserveness of valuable
experience about unpredicted emotions.