Case Analysis – Saturn Corporation in 1998
In 1990, Saturn was born in Springhill, Tennessee. General Motors (GM) had dreamed of creating a new brand that would be an example of corporate innovation and a learning laboratory for GM’s other divisions.
The most advanced techniques and ideas in the industry were implemented at Saturn. To facilitate the implementation of the newpractices, the Saturn division was given extensive freedom from GM in comparison to the other divisions.
Essentially, Saturn was to make American cars for the American people. Saturn cars were designed and manufactured in Springhill. Employees were able to have ownership in the company and participate in the decision-making process. Saturn dealers were also considered part of the organization.They were trained to improve their customer service and avoid the high-pressure sales techniques customers hated. Overall, Saturn differentiated itself from competitors by the values it communicated, the quality of its cars and the innovation that went into manufacturing the cars.
In 1996-1997, sales of Saturn cars declined. The growth in the small car market had slowed down, but it was notnegative. Saturn’s poor performance was mostly because it had not come out with a new car model since its institution.
In the summer of 1998, UAW protested and called for a strike. It was estimated that a 7-weeks strike would cost GM more than $2 billion due to loss in profitability and lay-offs. Saturn workers were able to continue operations as normal since it had its one distributors andmanufactured most of the parts in the cars it produced. However, now, Saturn workers were threatening to go on strike as well. Recently, GM had made decisions about the future of Saturn without involving the workers in the process. With the general strike, Saturn workers now had the bargaining power. Their concerns focussed on:
1. Employee performance being tied to the total annual production of cars(Springhill was producing at full capacity)
2. The new-Saturn midsize car being developed with a design based on an Opel model and manufactured in Delaware
3. The new Delta platform to be shared across Saturn divisions and manufactured also in another plant
How should GM respond to the concerns expressed by Saturn workers?
Stakeholder Analysis (Interests as Criteria)
GM: It sought to increaseprofitability. Revenues could be increased by focussing on the growing segment of mid-size cars. On the cost side, GM had a lot of work to do. *Working capital was negative in 1997.
Saturn workers: They wanted to maintain control over the work done at Saturn because control over the entire production process allowed the division to act on its learning. Without it, Saturn would not be able toclose the Organizational Learning Cycle.
Saturn Customers: If they had not bought a Saturn, it was more likely that they would have bought a Japanese car because they looked for quality and car efficiency. Target customers varied by age; similarities manifested as psychographics and behaviour. They felt a strong emotional attachment to Saturn; they were satisfied with the customer service of thecompany. Keeping the customer based as it is and assuming 60% renewal rate and customer purchases every 10 years (4-5 cars in a lifetime), total customer lifetime value was 1.3 million+ 60%^4 *1.3 million/7*10= 1.54 billion cars at the end of 1997.
Other GM divisions: There was internal competition at GM for the limited available resources. Chevrolet competed in the same car segment as Saturn(small car). However, it appealed to different kinds of customers. It sold good-value family cars for a slightly older clientele.
American car buyers: Increase in wealth and lower gas prices meant that their preferences for cars were changing.
1. Expand Springhill facility to 500,000 car capacity, in-house the future production of the L-series (mid-size car) and cancel the...
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