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 thousands of auto retail jobs that would have been preserved under a plan by auto magnate Roger Penske.
Shares of Penske Automotive were down almost 10 percent Wednesday in aftermarket trade. The breakdown of the deal was announced after the New York Stock Exchange closed.
GM's failure to complete the deal also adds uncertainty to the automaker's production plans as it struggles to regain its footing following a $50-billion taxpayer funded restructuring.
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.
Penske, 72, had been negotiating to buy the brand 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.
In a statement, Penske said it had negotiated an agreement to source vehicles from another manufacturer after its supply agreement had ended. But it said that deal was rejected by the other automaker's board of directors.
Without that agreement, the company has determined that the risks and uncertainties related to the availability of future products prohibit the company from moving forward with this transaction, Penske said in the statement.
Penske did not identify the other automaker.
However, people familiar with the discussions said Penske had been in advanced talks with Renault SA on Saturn. A Renault spokeswoman could not be reached immediately for comment.
GM said it would detail the closure plans for Saturn shortly. Saturn's remaining dealers have already signed wind-down agreements with GM, the automaker said.
GM created the brand in 1983 in a bid to compete with Japanese automakers on quality and service and to provide car buyers with no-haggle pricing.
Saturn sales had peaked in 1994 and GM had attempted a turnaround of the brand earlier this decade under then product chief Bob Lutz.
Struggling to regain its financial footing, GM announced in February that it would either spin Saturn off or close the brand. Penske and GM announced a preliminary agreement on Saturn in June after the U.S. automaker filed for bankruptcy.
GM and Saturn had said they expected to complete the deal by the fourth quarter.
Saturn sales have dropped 59 percent through August from a year earlier amid the uncertainty about the brand's future. Its best-selling models are the Vue small SUV and the Aura sedan.
Penske shares were trading at $17.29 Wednesday afternoon, down from $19.18 at the close.
(Additional reporting by Soyoung Kim and Kevin Krolicki; Editing by Leslie Gevirtz, Bernard Orr)