Penske-Saturn New Direction for Auto Industry

The announced sale of GM's Saturn brand to businessman and racing team owner Roger Penske could mark the beginning of a new direction for the global automobile industry. A key component of Penske's plan for Saturn is outsourcing the production function. Plans call for finding global sources that could make Saturn vehicles to specification. Penske's logic is that in some cases significant cost savings could be realized if production occurs in locales like China or India. Moreover, the ability to shop around for producers will result in shortening the cycle time from a car's design to its appearance on the showroom floor.

The Penske plan essentially transforms the marketing function for an automobile company and becoming more like the apparel industry. Saturn becomes a marketing organization, involved with the design, distribution, and promotion of its brands. Manufacturing will be handled by sources outside the company. The same model has spread to the personal computer business effectively.

What would be the limitation for Saturn's implementation? Quality perceptions. A clothing marketer can contract with various manufacturers to produce products, and if a supplier has a problem maintaining the brand's quality standards that supplier may not be hired in the future. Sources for manufacturing autos are not as plentiful, and the reputation of the manufacturer is an element of an auto brand's identity. Saturn will have lean on its already established reputation initially. Once cars are produced by external sources the marketplace will decide if their quality is consistent with Saturn's reputation. Ultimately, consumer evaluation of Saturn will determine if it succeeds, not cost savings on manufacturing.

USA Today - "Penske-Saturn Deal Could Change How Cars Are Sold"

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