Subcontractor Negotiations Foil Penske Bid to Save Saturn

By now most of you have heard that the Penske Automotive deal to save Saturn fell apart.  (See page 1 of the Wall Street Journal, for example)  The reason given is that Penske failed to secure a commitment from a third party to manufacture cars for sale under the Saturn name.  GM has guaranteed to do so for 2 years, but the issue was what happens after that.

Penske was negotiating with Renault to be that supplier two years from now.  But Renault balked at the plan.  In our opinion, this was a good business decision by Penske.  Too often the requirement of a subcontract relationship to make a deal happen is left for later, especially if it seems that there is time to secure the subcontract.  But the risk does not go down just because there is more time.  In fact, as in this case, the risk can increase as potential car buyers hesitate because of the uncertainty.

What do you think?  (mk)