GM to close Saturn as sale to Penske collapses

By David Bailey and Bernie Woodall

DETROIT (Reuters) - 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 on Wednesday.

The breakdown of a deal that had been widely expected to close this week will force some 350 Saturn dealerships to close and could cut 13,000 U.S. jobs that would have been preserved under a plan by auto magnate Roger Penske.

Penske had been negotiating with Renault SA to acquire vehicles for the Saturn brand once a production agreement with GM had expired. Those talks collapsed, scuttling the Saturn acquisition by Penske.

"Mr. Penske is clearly a very clever man," said Paul Melville, a partner at Grant Thornton corporate advisory and restructuring services. "If he has pursued a deal with Renault and if it's too difficult to make that happen, it's dead."

Penske Automotive shares were down about 8 percent in aftermarket trading. The breakdown of the deal was announced after the New York Stock Exchange closed.

Renault acknowledged that it had been in talks with Penske to supply cars, parts and technology for Saturn, which had not been profitable for GM.

"The conditions for an agreement have not been found," Renault said in a statement.

GM said it would immediately begin shutting down production at a plant in Michigan that builds the Outlook SUV and a plant in Mexico that builds the Vue small SUV.

The automaker also has halted plans to resume production of the Aura sedan at a Kansas plant. Production was scheduled to resume in mid-October.

'VERY DISAPPOINTING NEWS'

GM said it would wind down Saturn by October 2010 under an agreement already approved by its dealers. Saturn dealers were to have signed a new agreement with Penske and many were expected to close in the weeks ahead.

"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 Chief Executive Fritz Henderson said in a statement.

The Saturn transaction was to have been part of an orchestrated plan by GM to shed niche brands and focus on its Chevrolet, GMC, Buick and Cadillac lineups.

GM is selling a controlling stake in its European Opel brand, as well as its Saab and Hummer brands. It is scrapping Pontiac along with Saturn.

Penske, 72, had been negotiating to buy Saturn under a deal that would have seen GM supply vehicles under contract until the end of 2011, leaving him free to tie up with other manufacturers afterward.