Friday, December 23, 2011

On the apparent demise of Saab

Those few of you who kindly read this blog know that I don’t make many posts. It is simply a matter of priorities and time—I wear lots of hats here and writing this blog falls fairly low on the priority scale and high on the time scale. I do find that essays need to kick around in my head for a time before I get them out, and then, because of my pedantic nature it takes an inordinate amount of time to get things written and re-rewritten. As I sit here today, on the verge of a Christmas week which I will take as a thoroughly needed vacation, especially in light of the week’s events, writing this piece is probably the last thing I should be doing. However, I feel I have both a stake and a perspective in the seeming demise of Saab, and I can’t let the moment pass without adding my point of view.

I have just finished reading “Who Killed Saab Automobile” by Holweg and Oliver at the University of Cambridge. It is well researched, well written. Certainly, there will be many opinions about the subject, so here are mine.

Saabs troubles have been deep rooted for many years. Keith Hart, who worked for Saab for decades, once recounted a story to me that was ominously prescient. Back in the 1980’s, at Saab’s US headquarters in Orange, Connecticut, the end of each month would see a new sales record set for our favorite brand, and a celebration would ensue. Those were giddy times for Saab in the US. Concurrently, plans were being drawn for an omnibus Saab campus elsewhere in the state which would house not only a new headquarters, but also parts distribution, training, and even had a “hotel” on site for visitors including those there for training, or Saab employees in from Sweden. The story goes that Bob Sinclair, arguably one of the greatest visionaries ever with Saab, cancelled the plans for that campus seemingly at the height of Saab’s success. Why? He had gone to see the new offerings from Lexus and Infiniti, and knew that those companies were going to directly impact the segment in which Saab was playing. Indeed, not for that reason alone, sales did start to tumble in the late 1980’s.

Then there was the involvement of GM. One can’t forget that Saab Automobile was in a fairly dire condition coming into the 1990’s: sales were off, their portfolio was too small, and their cost of production too high. While much anticipated, to me the NG 900, the first collaboration with GM, was a failure. While we all have fond memories of the Classic 900, recall that it could barely compete in its segment by the 1990’s, and was extremely expensive to produce, so a replacement was imperative. I don’t agree that the use of the Vectra platform was such a bad idea as espoused by Holweg and Oliver for the NG900. I will say that the execution of that car was deplorable. The clutch was perhaps the most hideous I have ever felt, the seats were the only Saab seats which were awful (where virtually all other Saab seats are exceptional), and the early chassis problems which caused vibration issues such that we had to replace control arms and wheels were inexcusable. It remains the only Saab that I am quite certain I will never own or want to drive, but not because of its bones. In fact, the 9-3, which is so much alike, is a terrific car and I would gladly have one as my daily driver. As was noted at its introduction, however, was that the first 9-3 was what the NG900 should have been all along.

As GM’s involvement increased, and the 9-5 came to the fore, it seemed that perhaps there were synergies which were finally exploited for the good. Yes, there were tensions still between the Saab way and the GM way. We would hear that from Saab Cars USA staff, and I am certain that such friction was even worse at the manufacturing level. Many have pointed to GM’s failure to endow Saab with enough product to remain competitive. I agree. I believe that had Saab been given the opportunity to develop an SUV early on when they were hot products in the US, that this would have greatly enhanced the profitability of Saab and its dealers. Likewise, all-wheel drive should have been recognized and implemented years ago, and not after everyone else in the market already had it. Thus, we were relegated to the 9-7x and 9-2x, which beyond being questionable products, arrived far too late.

From the dealer’s point of view, it also struck me as odd that despite the long relationship with Saab, that it took GM forever to integrate Saab into their logistics portfolio. Often we had hybrid or completely separate systems for training, warranty, information dissemination, workshop material and so on. Why? In fact, we had never fully integrated, and the integration which did take place was not completed until around 2007. Why?

If we fast forward to 2010 and the sale of Saab the Spyker, one of the most exciting times to be a Saab dealer, it is clear now, with the benefit of retrospection, that too many fundamental mistakes were made. Yes, there was a tremendous upside to the state of Saab which to many of us almost assured success—the product portfolio was teeming with great new product, a small but superb group was assembled to run SCNA, Voctor Muller seemed a dynamic leader and with the entire industry and economy in a shambles, with vehicle scrapage rates far exceeding sales, it seemed an opportune moment to launch the new Saab. All things were true, with the exception of the jump in sales which had been anticipated in 2010-2011. However, I don’t think that this is where Saab failed.

I believe that the first failure in the re-launch was too much optimism. I believe that a more prudent business plan would have included lower initial projections, serious reductions in staff (which would have made Victor unpopular in Trollhattan for a time) commensurate with those lower projections and vastly more available capital to give the company time to grow, and allow for real and sustainable marketing campaigns. There were other mistakes. The 2010 9-5 should never have existed; all of the 9-5s should have been built as 2011 models to enhance their residual value. Pricing on the 9-5 did not meet market expectations. That was a colossal failure. Few would argue that the 9-5 wasn’t a fine car. However, too few found it to be a good value. Marketing was virtually non-existent. Sure, I saw a few ads on cable TV, and a billboard which I complained bitterly about because the Saab name was in such a light hue that it was illegible. It just wasn’t enough. Nobody knew the 9-5 existed, or even realized that Saab was still around. There were ways, ways that would have required imagination and creativity, to spread the word….but that didn’t happen, either. Instead, there was doubt from the outset, espoused from many, that Saab could survive at all, despite the plans for the Phoenix and the new partnerships which were developing, and that doubt also drove away many prospective buyers, even those who had been loyal to the brand.

To my thinking, we were done for at that point. Much has been said about GM’s villainous behavior in killing the Youngman-Pangda deal, or Guy Lofalk’s mishandling of receivership, but in reality, though I don’t disagree with either of those opinions, it should never have come to that. Saab was a hostage, and the question we should be asking isn’t why those who are holding Saab hostage are so cruel, but why Saab put itself in a position to be taken captive in the first place. I won’t cast aspersions at Victor Muller, but he was at the helm when the ship hit not one but many icebergs. Perhaps with a pilot at his side, and he was absent one with the departure of Jan-Ake Johnsson, he could have taken measures to avoid catastrophe, but he didn’t, and he has sadly borne the consequence of that, hard as he might have tried to keep the ship afloat.

So here we are. We have gotten used to being at the precipice, and peering over. Now it seems we have taken the next step, and the only question remaining seems to be how far we’ll fall before we touch bottom.


Graham Swan said...

Thanks Pierre for another thoughtful piece. I also read the article by Holweg and Oliver and found it overall to be a convincing, if ultimately pessimistic analysis. I'd like to think that there was still a chance to save SAAB as recently as a few years ago when GM could have provided SAAB with XWD and, more importantly, an genuine SAAB SUV. However, it chose not to do so in a timely way and the rest, as they say, is history.

Whatever happens, I hope you will continue to blog on this wonderful company and its cars.

Swade said...

I've downloaded the Cambridge guys' report, but haven't read it yet. I took a quick flick through and saw a huge bibliography, though, and that worried me. If all they've got is news reports as sources for their paper, then I'm not sure I'll be convinced by their conclusions.

Well thought out piece - again - Pierre. Condolences on the Celtics today.

Kanundrum said...

Pierre. Great Article as usual. I would also like to add a few things such as dealerships enthusiasm about the brand, your obvious Marketing (Or lack there of) and lastly consumers and Saab Fans.

I only say Saab Fans because it seems like a lot of people love their Saabs so much they didn't buy the new ones and only stuck with the old ones ha. I was almost in line to get a family member a new 9-5 before all of the bankruptcy issues came into fruition.

Hope to see you all soon!