Penske to buy Saturn from GM

Roger Penske has been a very smart businessman over the last few decades - I hope he does well with his newest venture. He's not getting any factories, but he is getting some good dealerships and the parts operation. He'll also have the right to buy models from manufacturers around the world and sell them as Saturns. A lot of companies make good products but don't have the financial muscle to create a US dealership network - they're going to be lining up to provide products for Saturn.

GM to sell Saturn brand to Penske dealership chain - Forbes.com:
"General Motors Corp. has a tentative deal to sell its Saturn brand to auto racing magnate Roger Penske's dealership group, both companies said Friday.

Penske has signed a memorandum of understanding that would give his dealership chain, Penske Automotive Group ( PAG - news - people ), Saturn's 350 dealerships, the companies said. Penske said that he expects to offer all the dealers new franchise agreements and will retain all 13,000 Saturn employees for now.
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Initially, GM will continue to produce on a contract basis the Saturn Aura sedan as well as the Vue and Outlook SUVs. But Penske said he is in talks with global car manufacturers about building Saturn cars in the future.
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Despite a cult-like following that drew thousands to annual reunions in Spring Hill, the brand never made money for GM.
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"Saturn was kind of an unpolished gem at GM," said Brad Coulter, director at the Bloomfield Hills, Mich., turnaround firm O'Keefe and Associates. "They had never really fully exploited what they developed. Saturn is known for having some of the best-run dealerships. The brand is highly rated. It's a top-notch sales organization."

Today, Saturn production is scattered at plants across the U.S. The Aura is built at GM's factory at Kansas City, Kansas. The Outlook is built in Lansing, Mich., while the Vue is built in Ramos Arizpe, Mexico.

The Saturn Sky roadster is built in Wilmington, Del., but that plant is scheduled to close in July and the model will be discontinued. The Saturn Astra compact hatchback was imported from GM's plant in Antwerp, Belgium, and was discontinued last year.

Penske Automotive will take over the separate Saturn parts warehouse and distribution center in Spring Hill.

Penske in an interview said foreign automakers would be key to his making Saturn succeed, but they will have to match GM's quality standards before Saturn's dealer network will distribute their products.

"As people around the world look at that, they have the opportunity to tap us on the shoulder and say we have product that we'd like to bring into the U.S." he said.
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Detroit-based GM, which filed for bankruptcy court protection Monday, has said it plans to shed its Saturn, Hummer, Pontiac and Saab brands. Earlier this week, GM said it found a buyer for Hummer in China's Sichuan Tengzhong Heavy Industrial Machinery Co."

UAW will sell Chrysler stock

While probably a reasonable strategy, this isn't the headline the union needs now - it makes some folks think that the union leadership doesn't expect Chrysler to survive.

UAW Says Won't Control Chrysler - WSJ.com:
"The United Auto Workers president is seeking to distance his union from direct responsibility for the future of Chrysler LLC, noting 55% of the auto maker will be owned by a retiree health care trust fund and not the union itself.
. . .
The trust--known as a Voluntary Employee Beneficiary Association, or VEBA--is supposed to take ownership of 55% of Chrysler as part of a government-brokered cost-cutting plan that union workers ratified earlier this week. Chrysler filed for federal bankruptcy protection Thursday.
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As part of a restructuring worked out before the bankruptcy filing Thursday, the UAW agreed to take half of its debt obligation to its retiree health care trust in equity.
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"This creates additional risk for the retirees' health care; however, with the company being successful, we'll need to turn that stock around, and we have provisions worked in the agreement that even though it won't be a public company until later on, we'll be able to sell those shares under certain circumstances," Mr. Gettelfinger said in his television interview.

Here is another take on the same story.

Health Care Marketplace UAW Planning To Sell Chrysler Stock Obtained From Bankruptcy Deal To Fund VEBA - Kaisernetwork.org:
"United Auto Workers will sell its 55% stake in the reorganized Chrysler as soon as possible to fund a trust that will cover retirees' health care costs, UAW President Ron Gettelfinger said Monday, the AP/Houston Chronicle reports. Chrysler owes about $10.9 billion to the UAW-operated voluntary employees' beneficiary association, which will cover health benefits for about 82,000 retirees and their spouses, as well as future retirees. The trust will start paying out in 2010.

Gettelfinger expressed confidence in the fund but said that it 'will be on life support initially.' Dental and vision benefits for retirees already have been cut from the VEBA, and further cuts are possible, he said (Johnson, AP/Houston Chronicle, 5/4). The fund will start with $1.5 billion from an existing health care trust, and will receive about $300 million from Chrysler next year. Gettelfinger added that all money from the sale of the Chrysler stock will go to the VEBA (Bennett, Wall Street Journal, 5/5)."

Our Problems Can't be Fixed by the Congress That Caused Them

This article by Harvey Golub is on Senator John Kyl's recommended reading list - I'm glad I found it.
Click the link to read the entire article.

I Vote No Confidence in Congress - WSJ.com:
"In recent months, Congress has displayed a fundamental lack of understanding of how our economy and our financial markets actually work. Members believe they can say a bank is likely to become insolvent and that will not lead to a run on the bank, or say a major insurance company is in trouble and not have insurance stocks tank. They believe they can extend a $700 billion Troubled Asset Relief Program (TARP) beyond its charter and not have every institution under the sun try to get what they believe is cheap capital.

Most significantly, although Congress is a large cause of the collapse of the home-mortgage market (witness the folly of Fannie Mae and Freddie Mac), members believe the markets are too stupid to recognize Congress's culpability and will maintain confidence in Congress's ability to resolve the financial crisis."