Saturn Makes Its Debut At Gm

By John S. DeMott

The last time a new name plate appeared at General Motors was 1926, when the company introduced the Pontiac. Last week another one was added. Chevrolet, Pontiac, Oldsmobile, Buick and Cadillac suddenly got a baby brother. In GM's boldest plan yet to counter Japanese imports, Chairman Roger Smith announced that it would set up an entirely new company, called Saturn Corp., to produce its long-planned line of subcompact cars. Smith called Saturn "the key to GM's long-term competitiveness, survival and success as a domestic producer."

GM describes its new offspring as a "clean sheet" operation. While wholly owned by GM, the company will have its own network of dealers, its own labor contract with the United Auto Workers, its own factory, engineering and design staffs, and even its own president. He is Joseph J. Sanchez, 54, a former Oldsmobile division boss and head of GM Latin American subsidiaries. Sanchez will operate much like the chief executive of a totally new and independent company. Said Smith: "We are not going to handicap him with a lot of preordained rules." Freed from the heavy, established GM structure, Saturn's managers are supposed to move swiftly on several fronts to make cars that are, in both quality and cost, competitive with Japanese models. Currently, for example, Japanese automakers can turn out a vehicle for about $1,500 less than GM, Ford or Chrysler. At the same time, though Detroit's products are rapidly improving, the Japanese reputation for quality, as surveyed in publications like Consumer Reports, is generally higher among buyers.

Saturn Corp. will begin life with about $150 million in capital, but it is expected to spend $5 billion during the next three to five years. About $3.5 billion of that, said Smith, will go toward building a vast factory of & approximately 4 million sq. ft. at a site not yet determined by GM's planners. The plant could be built in a little more than two years, with cars rolling off the assembly line and into showrooms by the fall of 1987. Says an impatient Smith: "I don't like to wait long for anything." The effort could create as many as 20,000 jobs and turn out 400,000 to 500,000 cars annually. That would make it bigger than AMC, the fourth largest domestic producer. Says Sanchez: "I would like to be Chrysler's size as soon as possible." The car will initially come in two models, a four-door sedan and two-door coupe. Other models will come later. The first Saturns may cost about $8,000.

Saturn is part of the complex GM strategy for competing in the small-car market. While American automakers are fairly efficient in building large models, they are less successful in turning out small cars, where the profits are not great. Many auto-industry executives believe that because of higher costs and a foreign-exchange rate that favors Japanese exports to the U.S., it is now almost impossible for an American auto company to build a car in the U.S., sell it for less than $7,000 and make a decent profit. GM imports some subcompact models for sale in the U.S. from Japan's Suzuki and Isuzu, and it has plans to bring in more from its South Korean partner, Daewoo. GM is also manufacturing small cars in a venture with Toyota in Fremont, Calif.

The first model of the new car is unprepossessing. Clean of line, with a spare interior, the Saturn displayed last week looks a bit like a Honda in front, with the distinctive raised rear trunk of GM's popular mid-size cars such as the Chevrolet Celebrity and Pontiac 6000. Its new four-cylinder engine and new transmission will deliver 45 miles per gal. in city driving, 60 miles per gal. on the highway. One clever innovation is an ignition lock linked to the floor-mounted gearshift stick, instead of the steering wheel, making the car harder to steal.

Of all Saturn's innovations, the way the car is made will be the most important. Says Smith: "We hope this car will be less labor intensive, less material intensive, less everything intensive than anything we have done before." Saturn will borrow some production techniques from what GM is learning in its venture with Toyota. The new firm will use the latest automated methods, in which preassembled car sections are put together on a relatively short assembly line in a factory with as few as 6,000 workers, vs. ^ 21,500 at the Oldsmobile plant in Lansing, Mich. The whole process, says Smith, will be set up so that "nobody can make a mistake."

GM is expected to use Saturn to establish an entirely new relationship with the U.A.W., one in which work rules are less restrictive, so that productivity can be higher. Japan's Mazda Motors, which plans to build a plant in Flat Rock, near Detroit, already has such a deal with the U.A.W. Union Vice President Donald Ephlin warned that the U.A.W. will not tolerate a "cut-rate operation" at Saturn, although it might go along with some bending of work rules.

Saturn is also expected to set up a new system for selling autos. Says Maryann Keller, an auto analyst with Vilas-Fischer Associates in New York City: "The current dealer organization is cumbersome, inefficient and as difficult to change as the labor agreement." Unlike McDonald's, which dictates every aspect of a franchise, GM has little control over the training of sales and service people, or even how dealers sell cars. GM wants to streamline its entire auto-marketing system to give better and more consistent service. If this turns out to be successful, the methods could be transferred to other divisions.

Saturn Corp. is a stunning move for Detroit, and for Smith, who has been pounding away at GM traditions since he took over as chairman four years ago. Last year, for example, GM made its first major purchase outside the auto industry by buying Electronic Data Systems of Dallas for $3 billion. In Smith's grand scheme, E.D.S. computer services will provide the complex software needed to run Saturn's thoroughly computerized manufacturing and sales operations. The idea, said the chairman, is to "run the corporation without paperwork. We can eliminate a lot of reports telling you a lot of things you don't want to know anyway. Maybe we won't even have a mail boy."

Some analysts were skeptical, noting that Detroit's past attempts to make small cars in the U.S. have not been entirely successful. But Smith is determined to succeed this time, so that the world's biggest automaker can leap into the next generation of auto manufacturing ahead of the Japanese. In the process, GM might also teach the rest of American industry a thing or two.

With reporting by Paul A. Witteman/Detroit