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Saturn really does have potential buyers

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U.S. investor group approaches GM on Saturn

By Soyoung Kim

DETROIT (Reuters) - An investor group including private equity firm Black Oak Partners has approached General Motors (GM.N) about buying its Saturn brand assets and dealership network, both sides said on Wednesday.

The investment group, which includes some Saturn dealers, said its goal was to set up an independent distribution network that would first sell GM vehicles and then branch off into products -- including electric vehicles from its rivals.

GM confirmed it had been in discussions with Black Oak and said there were other investment groups interested in taking over Saturn, a struggling brand GM launched 25 years ago in a failed bid to head off market gains by Japanese imports.

"They're one of several parties that we've had discussions with at this point," Saturn spokesman Mike Morrissey said of Black Oak. He declined to name the other potential investors.

Financial terms of the deal, which Black Oak proposed to GM earlier this month, were not disclosed.

The Black Oak Partners-led group said in a statement that its offer would preserve about 10,000 retail jobs and would spare GM the cost of shutting down Saturn.

GM, which has been operating since the start of the year under a federal bailout and faces the risk of a government-financed bankruptcy, had pledged to present its dealers with an update on Saturn by this week.

In mid-February, when GM said it was working to spin off Saturn as a distribution company, the brand had about 420 U.S. showrooms. That number has dropped to about 380 stores now as more Saturn dealers opt to shut down and sell back their unsold inventory to GM.

"We understand the pressure in the marketplace," GM's Morrissey said.

John Pappanastos, a spokesman for the Black Oak-led investor group said GM needed to act quickly to complete a deal before more Saturn dealers choose to shut down.

Saturn dealers are having trouble getting banks to finance consumer purchases because of concerns about the resale values of cars given the brand's uncertain future, he said.

In addition, Pappanastos said, many Saturn dealers are concerned they could lose their ability to sell unsold inventory back to GM if the automaker is pushed into bankruptcy, as many analysts now expect.

"There is a very clear sense of urgency," he said.


People briefed on the discussions have said GM has sounded out a number of overseas automakers about their interest in selling cars through Saturn dealerships, including China's Chery Automobile and Geely Automobile Holdings. (0175.HK)

Representatives of those automakers could not be immediately reached for comment, and it was not clear if either was actively considering using the Saturn sales channel to break into the U.S. market.

Under the restructuring plan it submitted to U.S. officials in February, GM committed to provide Saturn dealers with vehicles through 2012.

Black Oak Partners said in a statement that it wanted to open Saturn to sell small and fuel-efficient vehicles from a range of manufacturers.

That would make the sales operation closer to a traditional retailer and set it apart from other U.S. auto dealerships, which are typically restricted to selling vehicles from a single manufacturer.

GM, which has taken $13.4 billion (8.9 billion pounds) of U.S. government loans since the start of the year, is reviewing underperforming brands, including Saturn and Hummer as part of a sweeping restructuring mandated by the U.S. government.

GM is also under pressure to win deep concessions from its bondholders and the United Auto Workers union, with the government warning the alternative would be bankruptcy.

GM created Saturn in 1984 in a bid to compete head-on with Japanese vehicles for quality and customer service.

The first Saturn dealerships opened in 1990 and pioneered a "no hassle," flat-price sales model that took much of the negotiating out of buying a car.

But the brand languished over the past decade as GM throttled back on new investments.

Saturn brand sales dropped 22 percent in 2008, worse than the 18 percent decline in the overall market. Sales were down by 58 percent through March this year.

Former GM executive and consultant Steve Girsky was hired earlier this year to conduct a review of Saturn's prospects for the automaker and dealers.

(Additional reporting by Poornima Gupta and Kevin Krolicki; Editing by Andre Grenon and Steve Olofsky)

Edited by PurdueGuy

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I'm glad to see this. It shows that there is something of value to extract here.

Honestly, if GM did the unthinkable and killed Pontiac, GMC and/or Buick, I would hope GM would give somebody the chance to buy those assets as well, perhaps with the option of cherry picking dealers (so the new BPG wasn't strattled with 3000-member saturated dealer network. 380 is a good network size, IMHO).

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