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Bidder for Saturn steps forward, promises to keep the brand alive

An Oklahoma equity firm is the first known suitor for GM's unit. It would continue to distribute GM-made vehicles through 2011 and would also sell imported vehicles as Saturns.

April 16, 2009|Ken Bensinger

An unheralded private equity firm in Oklahoma City emerged Wednesday as the only known suitor for General Motor Corp.'s Saturn brand, promising to keep the marque and its dealership network alive.

The firm, Black Oak Partners, said that if it acquires the brand, it would continue to distribute GM-made vehicles through 2011 and would also source vehicles from foreign manufacturers to badge as Saturns.

The move is the first public bid for Saturn or the other two brands GM has put up for sale, Hummer and Saab. GM has said it needs to sell or shut down those lines to help it cut costs as part of its federally supervised restructuring.

The Detroit automaker, which has received $13.4 billion in federal loans, has been given until June 1 to show the Obama administration it is viable as a stand-alone company.

John Pappanastos, a spokesman for Black Oak, said the firm approached GM about Saturn last week and formally notified the Treasury Department of its interest Tuesday night, although the group had been preparing the offer "for several months." The two sides have not yet discussed a price.

Black Oak is owned by the family of auto dealer Bob Moore. Bob Moore Auto Group holds 17 new-car franchises, including two Saturn dealerships.

GM spokesman Steve Janisse confirmed the bid. He said it was one of a "handful" of offers the company was considering, but he declined to name the other bidders. Janisse added that the automaker planned to update dealers late this week or early next week on the status of a Saturn feasibility study the company has been conducting.

Pappanastos, who is also chief executive of EFG Cos., which is owned by Black Oak and sells insurance and other auto products, said a deal would help GM avoid costs associated with closing Saturn, save thousands of jobs and "mitigate the potential for substantial local economic impact from Saturn retailer bankruptcies."

GM announced in early December that it would stop producing vehicles for Saturn after the 2011 model year and would wind down the brand if it didn't find a buyer before that time. It also said it would seek to sell Swedish brand Saab.

Hummer, meanwhile, has been on the block for nearly a year. GM had been expected to reveal its plans for Hummer in early April, but it delayed the decision by several weeks.

In the first three months of the year, three dozen Saturn dealers closed, leaving GM with 384 dealerships nationwide and roughly 40 in Canada. Pappanastos said Black Oak decided to make its interest public in hopes it might dissuade other dealers from quitting the brand.

"There's a huge sense of urgency among these people," he said.

Black Oak wanted to acquire Saturn through a new company called Telesto Ventures, which would operate Saturn as a distribution network selling vehicles such as "clean diesels, electric and high-mileage cars," Pappanastos said.

It also plans to import vehicles from manufacturers that currently do not sell in the U.S., he said, and that could include cars from China or India.

Some industry experts questioned the feasibility of spinning off a brand like Saturn, which no longer has manufacturing facilities dedicated only to making its cars.

"Saturn is so integrated it's hard to imagine selling it off," said Jim Hossack of consultancy AutoPacific. "I don't see how they can make money off this."

Pappanastos said he felt that a private Saturn could be profitable at sales levels "well below" 250,000 units, although he felt it would not be profitable at only 100,000 units. Last year, Saturn sold 188,004 vehicles in the U.S.

Because of its unusual structure, including a franchise operating committee that gives dealers a vote on business decisions, unloading Saturn presents distinct challenges to GM.

Rumors of possible bidders have included French automaker Peugeot and a group of dealers that reportedly hoped to acquire the brand rather than face forceable closure.

GM has said that it would continue to back Saturn through 2011 but would halt production of Saturn vehicles thereafter.

Last month, GM said it had retained Stephen Girsky, a former auto analyst for Morgan Stanley, to advise it on selling Saturn. He could not be reached for comment Wednesday.

Though Pappanastos said some dealers would also take stakes in acquiring Saturn, some were hesitant to get involved in that aspect of the auto business.

John Bergstrom, owner of 25 dealerships in Wisconsin, said he had declined offers to participate in an attempt to purchase Saturn.

"I have my hands full with just trying to sell cars," said Bergstrom, who on Wednesday closed four of his six Saturn showrooms because of declining sales. He said he was busy trying to help the 170 laid off employees find jobs. "I just don't know how good we'd be at the distribution side of the business."


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