April 16, 2009 at 5:12 pm

Equity group, dealers make Saturn bid

A group of investors and dealers emerged Wednesday as bidders for General Motors Corp.'s struggling Saturn brand, which is slated to be eliminated as part of the automaker's restructuring unless a buyer is found.

The group, Telesto Ventures, which includes Oklahoma City-based private equity firm Black Oak Partners LLC and several Saturn dealers, submitted a proposal last week to acquire the assets of Saturn Distribution Corp. GM said there are multiple suitors for the brand.

Telesto, named after a moon circling the planet Saturn, would initially distribute GM-built vehicles through Saturn's 439 dealerships in North America and eventually offer small, fuel-efficient vehicles produced by several manufacturers, most of which would be sold under the Saturn brand.

The financial terms of Telesto's offer were not released. If a deal is completed, it could salvage a customer-friendly brand whose sales have plummeted more than most of GM's brands, preserve jobs and give the Detroit automaker a much-needed cash infusion as it restructures and pursues additional federal aid.

But the key will be finding a manufacturer to provide vehicles once GM stops building Saturns after the 2011 model year, analysts and dealers said.

"It's in GM's best interest to find somebody who can make this last, but it's in their better interest to offload it and get some capital," said Jim Hall of 2953 Analytics in Birmingham.

The move could lead to a European or perhaps Chinese manufacturer entering the U.S. market, Hall said.

Deal pursued in 2008

A key player behind the venture is Mark Moore, second-generation head of Bob Moore Auto Group in Oklahoma City, which was one of Saturn's pioneering dealers. The group has two Saturn retail outlets among its 10 dealerships and 17 franchises, many of which sell GM brands.

Moore, managing partner of Black Oak and former member of Saturn's Franchise Operations Team, first suggested to GM in the fourth quarter of 2008 that Saturn be spun off, investment group spokesman John Pappanastos said. GM said the proposal did not influence its decision to pursue selling Saturn.

Moore did not return a call seeking comment Wednesday.

"Our goal is to build upon an iconic brand supported by a strong national network of retailers that fundamentally share a vision for delivering a best-in-class customer experience," Pappanastos said in a statement.

Saturn spokesman Mike Morrissey confirmed the offer.

"Black Oak Partners is one of the parties we've had discussions with regarding the purchase of Saturn," Morrissey said. "They are just one of several. Discussions are ongoing, and it would be premature to speculate on any possible outcome."

Black Oak also has investments in the banking, oil, technology and real estate industries.

The move would free GM from having to invest heavily in closing Saturn dealers or shedding franchise agreements in bankruptcy court.

Dealers nationwide have complained that Saturn showroom traffic evaporated after GM announced late last year it was studying the brand's future.

Part of GM's restructuring involves closing, shrinking or selling the Pontiac, Saab, Hummer and Saturn brands. The uncertainty has Saturn sales tumbling -- demand is down 58 percent so far this year, compared with a year ago.

GM's U.S. sales are down by nearly half through March, compared with the market's overall 39 percent decline, and the automaker's market share has dropped to 18.2 percent from 22.7 percent a year ago.

On Wednesday, dealers were cautious but eager to learn more about Telesto's offer.

"Great. This is super for today, but what's tomorrow look like?" said Joe Serra, a Saturn retailer and president of Serra Automotive Inc. in Grand Blanc. "The part that isn't answered is who is going to be the manufacturer for the future product? That's the unknown. That's the big question mark out there."

Investors tout benefits

GM, which is operating thanks to $13.4 billion in federal loans, has until June 1 to complete a tougher restructuring plan and shrink its $70 billion in debt.

The automaker must reach a deal on concessions with the United Auto Workers, bondholders and other constituents before either goal can be achieved.

The Saturn offer would help more than GM, said Pappanastos, the investors' spokesman.

"GM will be relieved of liabilities related to retailer franchise agreements and avoid the downstream financial fallout on their other brands that would result from closing Saturn retail facilities," Pappanastos said. "And taxpayers will be able to salvage more than 10,000 retail jobs that might otherwise be lost in a GM reorganization."

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