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GM to close Saturn, dealership network as Penske deal fails

DETROIT - General Motors Co. will close Saturn and wind down its dealership network after a deal to sell the faltering brand to Penske Automotive Group collapsed, the automaker said yesterday.

The deal with Roger Penske, a former race car driver who has become an auto dealer magnate, was supposed to be finalized yesterday.

But the end occurred when his company, Penske Automotive Group Inc., was unable to find a manufacturer to supply vehicles for the brand's dealerships. GM had agreed to keep building Saturn models like the Aura, Outlook, and Vue through at least 2011, but after that, Saturn would have to come up with its own products.

"This is very disappointing news and comes after months of hard work by hundreds of dedicated employees and Saturn retailers who tried to make the new Saturn a reality," GM CEO Fritz Henderson said. He said Saturn and its dealership network will be phased out by October, 2010.

The sales price was never disclosed, but Penske Automotive was to get Saturn's roughly 350 dealerships and promised to retain 13,000 employees.

Penske spokesman Anthony Pordon said the company had reached a tentative deal with another automaker to make cars for Saturn, but that company's board of directors rejected the agreement. He would not identify the other automaker.

Renault SA acknowledged that it had been in talks with Penske to supply cars, parts, and technology for Saturn.

The Saturn announcement came on the same day GM and Chrysler met on Capitol Hill with dealers and lawmakers as talks began on the companies' plans to close around 3,000 dealerships. GM is cutting 2,400 dealerships from its 6,000-dealer network by the fall of 2010. Congress is weighing legislation that could force the automakers to reverse their closure decisions.

GM will stop making Saturns as soon as possible, but no layoffs are expected, said spokesman Sherrie Childers Arb.

GM already had stopped production of the Aura sedan at its plant in Kansas City, Kan., and will not resume assembling them. Production of Saturn products near Lansing and in Ramos Arizpe, Mexico, will be phased out as soon as possible, she said.

"Those plants produce products for other brands, and we think we can increase volume on those products that will meet market demand," Ms. Childers Arb said.

Saturn owners can still go to Saturn dealers for service. They would also be able to go to a certified GM dealer once Saturn dealerships close, GM said.

The news left many dealers across the country stunned and fearful of being left with nothing to sell.

Carl Galeana, owner of two Saturn dealerships in suburban Detroit, said he has heard nothing from GM or Saturn, but if the plan is to phase out the brand and cut products, he'll have to find other options.

GM Chairman Roger Smith first unveiled the Saturn brand in November, 1983. The brand did not officially launch until 1990. It featured the iconic tag-line "a different kind of car company" and attracted buyers with its "no haggle" pricing.

GM's hope was that Saturn would attract younger buyers with smaller, hipper cars to better compete with Japanese imports. It built a plant in Spring Hill, Tenn., devoted to Saturn vehicles.

Despite a cultlike following that drew thousands to annual reunions in Spring Hill, the brand never made money for GM. The company has never disclosed how much it invested or lost. The Tennessee factory stopped making Saturns in 2007.

Although it was retooled to build the Chevrolet Traverse crossover, production of that vehicle will be switched to Delta Township, Michigan, near Lansing and the Spring Hill assembly plant will be closed and placed on standby if demand for GM vehicles increases.

Saturn began to languish in the late 1990s. In 2006, car buyers began to find Saturn's new models more appealing. But after a good year in 2007, sales dropped 22 percent last year.

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