Saabs Divided

Although entertaining, the drama surrounding Saab has finally concluded.

Sure you will read silly articles discussing a new ‘deal’ for Saab, but in reality Saab passed sometime in 2008.  It was then GM provided notice they had no further interest in supporting Saab operations. Born from Jets was scuttled, advertising ended, leasing was over and sales went in a violent tail spin.

Over the next few years exclusive Saab dealerships were declining quickly, and continued during Victor Muller’s fiasco.  A Saab dealership became a ‘tuck in’ franchise, meaning if you had room within other brands you placed Saab in one of your buildings with few dedicated resources.  It had been (and continues to be)  impossible for stand-alone Saab franchises to stay in business.

No really, GM helped.

In reality Saab products were fair in reliability and as good, if not better, than Volvo.  From 2004 the new 9-3 held up well and represented a fine value under $30,000.  GM also provided a disproportionate amount of healthy  dollars  in support of a poor performing brand.  Under GM’s ownership, sales support (incentives) and advertising costs exceeded any consolidated gross profits realized from each Saab produced.  Anyone with clarity about the auto business knows the cost of new vehicle manufacturing in Sweden is the most expensive of any home base, including Germany.

GM sought to close Saab for good reasons.  It made clear business sense to conclude that boutique manufacturing in Scandinavia could not compete globally.

The late (and talented) GM Board of Director Jerry York knew this in 2005, Sergio Marchione knew this  in 2008 and Muller’s bank accounts discovered this quickly as sales continued a downward spiral with the loss of GM’s incentives and advertising support.

The new 9-5 (and to a certain degree) new 9-4X, were comical executions for the brand, and only compounded losses.

Some say without Victor Muller, Saab would have died in 2010 – so credit is due.  Well if that’s true, I guess the same can be said about GM in 1989.

Either way the show ends.

Saab loyalists are left with re-runs.

If you believe someone really wants to start up Saab again in Tollhatten ….. please shut off your PC, remove SaabsUnited from your browser and get some fresh air.

Let’s be pragmatic.

Youngman wants whatever is left just to get some return on the $45 or so Million they were silly enough (now embarrassed) to give Muller during his twilight hours. If Youngman wins anything there’s no way they are going to build cars in Sweden (ref: ‘You Had Me at Hello’).

Sure Youngman will bluff the prospect of running the assembly line, but it’s only to win the opportunity of buying assets to ship to China.

And what would Youngman build?

BIAC is already building comical versions of the 9-3 and 9-5,  so think a Proton based Saab AERO, designed to raise the bar on their already low priced carlines sold in China (hey they already build Lotus’???).

BMW, Volvo, _____ (fill in any name you wish) – have interest in Saab’s production tools and equipment, likely to export because this stuff is real expensive new. Bid 10 cents on a dollar to walk away with some advanced engineered modular assembly components and it’s a win-win.

The mission of Saab’s receiver is to sell off assets and raise cash, not build another car company.  The sooner folks realize this the quicker everyone can “carry on.”

So anticipate Saab’s ‘auctioneers’ awarding many items to many interested parties (think a garage sale and you have the idea). Larger $$ blocks going to  biggest players, and then anyone else with cash in their checking accounts.

Unfortunately Saab’s physical buildings, like most dated industries, will likely remain idle for sometime till some developer configures a viable business opportunity.

It’s a mess, and if you think Victor Muller cares what happens, remember he’s the second largest creditor behind the Swedish Government and likely to see some cash returned to help fund his trip to LeMans this June.

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Still believe Saab’s assembly plant will build Saab’s again?

Ok …  I had a call from an unnamed source who’s grandfather knows someone at the security desk where the mother of one of the receivers works.  I hope Bloomberg News doesn’t pick up the story because as you know SaabsDivided can’t reveal sources!

Thanks Top Gear!

Enjoyed your chapter on Saab last week, learned a lot as well. I believe you did a great job summarizing the ridiculous of what was (and continues to be) Saab.

However at the very end, I couldn’t help feel Jeremy had just one more final comment concerning his feelings on Saab’s demise – possibly edited from the B roll because a humorous punch line would have been … well… inappropriate?

I guess like the Soprano’s final episode .. we will never know.

“Just the sheet metal, and the badges”, I just love those guys.

Mr. Ahmed’s 15 minutes of fame ends, the hopes of despair compounded by   sen·sa·tion·al reporting.. 

>>>>>>>>>>>>>>>>>>>><<<<<<<<<<<<<<<<<<<<<<<<

From Turkishpress.com today.

“The Turkish private equity firm Brightwell Holdings has withdrawn a bid to buy bankrupt Swedish carmaker Saab owing to GM’s refusal to transfer licences tied to the brand, a Swedish daily reported Tuesday.

“We have withdrawn the bid… We cannot continue due to GM’s attitude,” Brightwell Holdings board member and spokesman Zamier Ahmed told financial daily Dagens Industri.”

>>>>>>> >>> See original Saabs Divided post dated Feb. 9 <<<<<<<<<<<<<<<

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Post-Mortem Learnings – The New 9-5

Clearly the auto industry has learned post recession, and after the collapse of GM’s orphaned brands, badge engineering (for the most part) doesn’t work.

Or as they say, “You can fool some of the people some of the time, but not all of the people all of the time.”

Enter the Second Generation 9-5. Conceived in the rush to satisfy dealers’ cry for new products.

Enter the Global Epsilon platform (Buick LaCrosse USA / Opel Insignia Europe).  Planned 2008, the 9-5 would be built in Sweden with a (new) 2.0 Liter 4 Turbo and 2.8 Liter V6 Turbo.

Enter Muller, the 9-5 looked great on paper. Consolidated gross profits were substantial at inflated MSRP’s.  Dealers finally had product to look forward to and  Saab loyalist promised to rush the showrooms.

Terminal Launch

The 2010 9-5 Aero arrived as nothing more than a “try-out” car missing features as; no sunroof, no remote start/entry, plastic trim without grain, no spare tire, etc.  Priced at $53,000+ MSRP.

Initial dealer concerns were brushed aside by Muller’s management team (mostly GM folks stating .. it was just 900 vehicles).  At the hastily prepared dealer launch meeting, the trainers stressed the importance of a “wrap around” aircraft windscreen, aircraft heads-up display and brushed alloy aircraft styled door handles.

Note: Ironically with all these aircraft references, someone aborted the 8^th most popular North American automotive slogan “Born from Jets” and launch the new 9-5 with “Move Your Mind.”

But what really impressed me was the complete lack of carline development; it was like no one cared about Saab’s brand values or (more importantly) the customer.

The horribly printed new 9-5 brochure (globally produced to save money) positioned Saab as a brand focused on the environment “green leaves and trees” type of  visuals.  However upon opening the booklet the consumer found no hybrid offerings or 35MPG champions – just a gas propelled, turbocharged, 18 inch alloys, large sized sedan.  It quickly became obvious Saab’s first independent product launch was going to be dishonest from job one.

Poor Showroom Dynamics  

The product offerings (standard equipment, options and packing) was pure GM menu nonsense, too many choices, options, packages, and ladder pricing going into the stratosphere. Overall the new 9-5 was $10,000 more than the car it replaced.  No matter how you contented the new 9-5 the Buick LaCrosse was hands down the better value at $28 – 32,000 (more luxury for less).

Can’t blame Muller ?

CEO’s are charged with the responsibility of making decisions.  Muller, although being new to the job, should have completed a top to bottom review of all products and communications.  Did he miss this one? or Did he simply say good enough?

Example of carline leadership.

Wolfgang Reitzle was the CEO of the Premier Auto Group (Ford’s Volvo, Jaguar, Land Rover and Aston Martin bundle of upscale cars). When Mr. Reitzle came on board his first stop was the design studios. His mission, assure that each and every carline is true to the brand’s DNA.  Mr. Reitzle was a master. With one walk around he could point out the most obvious of product flaws relating to content, fit/finish, high touch / high feel materials. He challenged everything from segments, customers, price ladders, offering mix, launch phases. But what he really offered was the leadership to invite conversations that core values must transcend and live in every product  execution.

Looking at the lack of heavy incentives and healthy sales noted today on each carline he touched, I give Mr. Ritzier an A+ on a job well done (even though the Premier Auto Group failed as a sub-brand of Ford).

Muller’s Saab was distant and arrogant, allowing no atmosphere to suggest what he was about to launch was indeed wrong.

Selected 9-5 executions:

Widely promoted as the first “aircraft inspired – wrap around windscreen”, is nothing more than a Buick windshield with blacked out A pillars.

Try-out materials are obvious.  Glossy & cheap feeling plastic trim components are throughout, missing production grain & finish.

First view from a driver’s entrance point – large gaps and loose materials.

Second view from a driver’s perspective – large gaps and flimsily hard plastic glove box.

Flat no grain “mouse grey” dash panel.  Sharp eye piercing green display is 1980′s.  Center button on far left is for “night panel,” most mistake this for the start button.

Front seat passenger and driver belt has exposed steel; first thing you feel when you put your seat-belt on. Missing trim covers.

GM’s Chevy Cruz steering wheel, stalks, controls, hard plastic- manual steering wheel adjustment, all reinforces “Move Your Mind” requires some creativity.

Bland and exposed door sills – presents a less than upscale feel. Again hard / no grain plastic is used throughout the car. No branding on door to “welcome” passengers is disappointing.

Hard plastic headrest covers are obtrusive, cheap and invite occupant concern of hitting one’s head in a rear crash (although designers know a belted customer can’t).

I think these rear door strikers cost around $.70 cents each.

Missing center passenger head rest. Core values?

Missing door safety lights, no reflectors. Core values?

First impression – fender holes that mount to no where.

Try and explaining this to a customer. No spare, no run-flats (and now.. no road service).

Cheap and very thin “card-board” type material floor mats.

Misaligned gaps and over-all poor fit and finish greet the passenger.

The potent 2.0 Liter Turbo looks lost in the cavernous engine bay that formally housed a 5.3 Liter V8.  Saab’s engine appears in-adequate for the sheer size of the car. Additional engine trim components would have helped express more engineering and branding appeal (seek BMW, Audi, even Hyundai examples).

And these are just the few, we can discuss plastic front end sway bar links in other postings.

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Lesson learned

Be true to your brand and your customers.  Build honest products.

In the case of the new 9-5, GM and Muller fooled no-one because the car never sold.

Maybe now, we know why.

Many e-mails received from readers suggest issues from older posts.

Favorites include:

“Managing the Ridiculous,” insider view of being a Saab dealer

“Muller’s Wind Tunnel, ” an interesting Saab profile

“McDonalds,” dealer hypnosis

Enjoy

 In the final analysis..

“Victor Muller worked hard, doing all the wrong things, very well.”

With no dealers, there is no brand.

One core reason for Saab’s demise was Victor’s belief that thousands of Saab loyalists would buy his over-priced / GM based carlines.  He stood still, waited, and no one came.

“Move Your Mind” proved .. a waste of time.

Yes Victor, the Wind Tunnel was the better investment after-all.

Quote from ttela.se news, by Anna-Karin Nils Gustafsson - Mr. Ahmed, Brightwell Investments states “Alla Kommer att vilja ha en Saab”

Further into the article Mr. Ahmed quotes “We will produce cars, how many, not sure?’

Let’s try and help Mr. Ahmed as he appears to be a likable fellow.

If your thinking global -

The critical mass for Saabs produced in Sweden is likely over 150,000 (just to start).

Saab’s problems begin as each car is built.  Once you pay for materials, depreciation, assembly, and labor (just to name a few), the consolidated gross (margin) attached to each car is inadequate to sustain the true market support needed to sell cars and reach critical mass.

Example – current GM / 9-5 – US market.

Optimistically speaking, for each car built, the 9-5 consolidated gross is $8,000 per car (at current importer MSRP’s and current foreign exchange rates).

Conservatively speaking, for each car sold it will cost you $13,000 ($ 10,000 for incentives & $3,000 advertising).

A $5,000 loss – leaving no money to operate your importer, hire managers / staff and pay warranty expenses.

You can’t make this up in volume.
You can’t make this up in parts sales.
You can’t make this up selling cars to Russia and China.

Even the 10 year old 9-3, with its’ fully depreciated stamps and tools, likely represents similar losses. The 9-4X best potential, but that car will never be built again.

Most new CEO’s “play books” suggest – do more with less.  The car industry defines this as reducing incentives and adjusting volumes. Post recession domestic and import car companies have done a nice job in moving to a pull market (demand first, then production).

In the US (back in April 2011) Saab’s natural sales pace was around 400 cars per month*, thus the 401st car produced represents a push strategy (production first, then demand).
Because of Saab’s horrible brand position (and limited product appeal) any investment in Saab will require a disproportional amount of marketing dollars. Big pockets as we call it in New York City.

Eventually Mr. Ahmed will complete his proper due diligence and create a business plan for his investors.  His answer to the question on volume (segments and markets) will be most controversial as this  impacts overall dynamics relating to honest funding of future carlines.

Mr. Ahmed states “I am convinced that in the future, everyone will want to have a Saab. Everyone.”

Great, you had me at hello!

Now please put the plan on paper over the next 5 years.  If you see red numbers – stop. The kind folks in Sweden, dealers and customers, have been through enough already.

* Note: months where Saab sales were higher were attributed to artificial loaner car sales, see previous posts.

Many folks have asked about buying a new Saab.

Let’s explore.

Brand despair + loss of confidence = price collapse.

In the dark days of 2009 we experienced similar type of pricing pressures. Saab dealers, having been provided with legal ‘wind down’ notices from GM, started discounting their new cars accordingly. However the key difference then Vs. now is GM provided considerable incentive support that helped dealers merchandise the cars.

Used car prices tanked.

Late in 2009, a ‘08 9-3 Sedan with automatic / sunroof / 5,000 miles sold for  $18,000, convertibles for $22,000.  All other model year prices cascaded as well. Today there’s a shortage of used Saabs – mainly due to the fact Saab sold few NEW cars since  2008.  Normally this would increase prices, however this is Saab and demand is relatively low.  Either way, anticipate used car prices to improve once new cars are flushed (likely by spring).

Dealers Choice.

Today, without incentives, any discount below dealer net represents a true loss for the dealer (not to mention a year’s worth of floor plan expense).

Other price factors:

• What Saab USA decides to do with hundreds of new port cars (most if not all are 2011 9-5 Premium Edition XWD’s and AERO’s with MSRP’s over $48,000).

• What becomes of any legal discussions between all parties (GM,  SaabUSA, Saab Dealers and SWAN).  Don’t expect much here except legal and accounting fees.

• Forceful tactics used by dealer floor lines (these are banks who finance dealer inventory).  A 12 month old new Saab has exhausted any  collateral value – thus banks are demanding dealers pay down principal amounts – or sell it quickly.  Ally Bank is indeed the worst of the bunch, so seek dealers who floor with them (you can see the name of the dealer’s bank on the new vehicle invoice).

• Warranty – the $2,000 cost of an outside service contract provider is an excellent offer and recommended. Who pays & contributes becomes part of the final price discussion. For needed repairs visit any GM dealer.

• Do some homework about the car you’re buying? With all the games Saab USA played with their dealers close to 40% of most new inventory are likely “CTS – service loaners.” Ask the dealer to share with you the ‘in-service date” and type of sale noted on IRIS Warranty report. If the car was reported to the factory as a service loaner (with no miles), it’s just like a new car. However since the dealer received service loaner incentives, the final price should be slightly more attractive than other new cars in stock.

Saab, a recommended buy? Yes

First preference, any 2010 – 11 9-3, then (if you must) the 2.0 Liter 9-5 and lastly the over priced 9-5 AERO.  Watch for flat spotted tires from sitting, damages to the paint caused by the white shrink wrap, leaves and dirt in the sunroof, trunk and door plumbing drains, and distilled oil in the crankcase.  However with little effort these cars can be made to look (and ride) like new.  Oh, a new battery is a must, extra key too while parts depots have them.

Concerning the 9-4X – limited production (less than 800 units) and likely the least discounted model.  Overall an attractive car, so yes, if you’re in the market for an SUV/CrossOver put this car on your shopping list.  Seek the 3.0 liter model (better price point and engine).

Getting your best price?

Be a qualified buyer; no games, show ready cash/certified funds, a great credit score then make your best offer.  Also.. don’t go shouting 50% off MSRP over the phone, its a complete turn-off.  Buyers are wise to approach dealers with some understanding of their situation, dealers will do whatever it takes to sell you a new Saab.

Oh and throw away all those silly consumer pricing guides, none of them are accurate,  the dealer is the true market maker.

Good luck.