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Lexus vs. Saturn 17 January 2005 Saturn and Lexus started out with similar goals and used very different approaches to achieve them. Lexus got it right; Saturn did not. Now General Motors is shifting, and Saturn will become more like Lexus. Is it too late for Saturn to succeed?
Saturn’s Sky – coming in 2006
A bit of history
Saturn and Lexus were both launched in the early 1990s. GM and Toyota both wanted new brands to target new customer segments. Roger Smith, then the Chairman of General Motors, drove the first Saturn off the assembly line at Saturn’s new factory in Spring Hill, Tennessee, on 15 July 1990. The first Lexus, the LS 400, came out of Toyota’s Tahara plant in early 1989.
Lexus has soared since its launch. It has become a luxury standard and has continually broken sales records. In July of 2004, for example, the company posted its best-ever sales for the month, up 8 percent from the previous year, which was also a record. By July of last year, Lexus vehicle sales were up 14 percent calendar-year-to-date.
Saturn, on the other hand, has stumbled badly. Vehicle sales for 2004 are down 22 percent from 2003. Sales in 2003 declined three percent from 2002. The company is withdrawing the L-300 sedan at the end of this year. At that point, Saturn will sell only four different models, making it hard to support independent dealers. By contrast, Lexus has nine models, and is expected to add some high-end sports models to compete with Mercedes and BMW.
“Somehow we believed that if you got a reputation for wonderful dealer service, then the product didn't matter.” Robert Lutz, GM Vice Chairman and Head of Product Development, quoted in The New York Times
Saturn’s customers represent one of its few assets. Of all the brands in GM, Saturn buyers are among the youngest. The average age of a Saturn buyer is 46 years old; for Buick, on the other hand, it’s 66.
The new Saturn
Lutz and GM CEO G. Richard Wagoner, Jr. want to make the most of these customers. So, in Mid-July of 2004, GM’s board approved a $3 billion plan that would reposition Saturn with beautiful and sporty cars.
For example, Saturn’s Sky, pictured above, is a 2-seat roadster that previewed last week at Detroit’s annual auto show. It’s scheduled to launch in 2006.
Business Week’s Detroit Bureau Chief David Welch found the Saturn Aura to be the best production car under $25,000 in the Auto Show. Here’s a picture:
Saturn Aura – coming in 2006
Saturn will no longer be an outsider in the GM family of divisions. Instead, Saturn’s fortunes will now be closely tied to European automaker Opel, who has also recently been struggling. Both of these brands will share designs and parts, but not dealers, with other GM brands.
This close affiliation across brands has been the Lexus approach from the start. While Saturns have been produced at a Saturn-only facility in Spring Hill, Tennessee, Lexus models are made in factories that also produce Toyotas.
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In 1983, Apple Computer famously created its Macintosh using a development team that was removed from Apple’s corporate structure. At the time, Steve Jobs literally raised a pirate flag over the building housing the Mac development team – a clear signal that the Mac was going to be very different from its corporate parent.
Perhaps GM was influenced by Apple in choosing to create Saturn as an independent division. After 15 years, however, it’s clear that this autonomous structure doesn’t work for automobiles, and Saturn is regrouping and re-affiliating with other GM brands.
Will Saturn eventually regain some measure of success? A number of analysts think not. The new Saturn models are going to cost 50% more than the existing Saturn line and the brand has been losing the cachet that it once had. “They’re nuts,” Art Spinella, of CNW Market Research, told Business Week.
Personally, I expect that Saturn’s repositioning will be successful. The Division’s current predicament is a situation that Bob Lutz knows something about – he worked a similar gameplan with Chrysler in the 1980s and early 90s. Saturn will build some beautiful cars, and people will want to buy them.
But there’s no doubt that Toyota’s approach with Lexus, stressing operational integration over separation, has so far been much more successful than General Motors’ approach with Saturn. It’s been expensive and difficult for Saturn to operate autonomously. We’ll see if re-integration, combined with the Lutz touch, can bring Saturn back.
More Information:
http://www.businessweek.com/@@SxsCE4QQqvXeyAwA/magazine/content/05_03/b3916095_mz017.htm
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