It’s a hard knock life for a truth-telling autoblogger. On one hand we have auto-related websites sitting in the happy-clappy pews—whose main contribution to veracity is reprinting PR releases for dissection and pointing us towards source material. On the other hand, we have Automotive News—who can’t ask a proper follow-up question even when the news source simply repeats the only word spoken in Mel Brooks’ “Silent Movie.” And then we have the big boys: The Wall Street Journal, New York Times and Bloomberg. Distressingly, these behemoths have shown a remarkable willingness to cite unnamed sources as the basis for their reports on the Motown Meltdown. Not that anyone (but us) is keeping track but the resulting stories are usually misleading PR put-up jobs, that turn out to be dead wrong. The whole “sale of GM brands” story is a perfect example . . .
This is the second time this week we’re reporting that the MSM is re-generating an obvious smoke screen for abject failure, dead brands walking and future dissolution. First, it was Saturn’s possible sale to an investment group calling itself Telesto—which turned out to be a GM franchise owner (hardly the kind of deep pocketed backer needed to run an entire car brand). Oh, wait, before that, we were told there were “informal inquiries” with Saturn’s competitors for the brand’s sale (but not with Chevy, presumably).
You know where I’m going with this thing. Here’s Bloomberg‘s Saab “no money really” shot:
Saab Automobile, seeking a new owner to emerge from bankruptcy protection by June, has about half a dozen serious parties interested in buying the Swedish carmaker, a person familiar with the negotiations said.
The bidders include an individual investor, a consortium of Swedish companies and at least two private equity firms, said the person, who didn’t want to be named because the talks are private. None of the most likely bidders are automakers, the person said.
Anyone remember the last time a private equity firm bought an automaker? If not, there will be a stark reminder come May first. At least Bloomberg does the math on Saab’s date with death, before giving the idea that there will be life after death even more play.
Saab predicted it will make fewer cars in 2009 and 2010 than the 93,000 produced last year, and that it needs to make 130,000 cars to break even . . .
There are as many as 27 potential buyers, including car manufacturers as well as investment companies from all continents, Eric Geers, a spokesman for Saab, said by telephone today. The parties will visit Saab’s headquarters in the coming weeks to look at Saab’s business plan and new models, he said.
Is Bloomberg sure these aren’t just Saab owners (as in owners of Saab cars) on a factory tour? Never mind “serious bidders.” With so much worldwide auto production over-capacity, with the market in the toilet, with Saab’s brand heritage terminally defiled by GM, anyone putting money into this company is one of the money-parting fools.
Let me get this straight. All of the GM badbrands will find buyers, Chrysler will be rescued by Fiat, the GM goodbrands will rise from the ashes to be sales powerhouses, and all of the healthier companies will hold their breaths till we’re out of this recession and the market returns to normal. What about the overcapacity I’ve been reading about for years?
Folks, SOMEBODY has to go out of business. The alternative is for the weakest companies to be propped up by their governments, which pushes the disease to the next-weakest, and so on until Toyota is the only privately owned automaker left in the world.
The one paper who’s been doing a good job, in their (as I see them) somewhat libertarianist editorial pages at least, is Investor’s Business Daily.
jpcavanaugh :
Folks, SOMEBODY has to go out of business.
Yes, just as the weakest, slowest gazelle has to be caught and devoured by the lioness looking out for her hungry cubs.
Uh, okay not an exact comparison!
What’s interesting to note in the story is that of the half dozen serious bidders for Saab, none of them are Chinese.
To my knowledge, no Chinese company has bid on Saturn. And they have also did not bid on Hummer.
The Chinese may have bid on Chrysler (by SAIC. Offer rejected by UAW), and Volvo (by Geely, the leading contender).
This tells me that the Chinese are looking at automakers with sufficient self-engineering, R&D, and manufacturing to take advantage of. They are not interested in just a brand or a distribution channel.
Re: windswords –
I got to agree. You can`t take any bidder – for any of these damaged brands and orphaned divisions seriously – unless it`s a Chinese manufacturer of some sort.
`Mystery Investors` are in reality liquidation investors As alluded to earlier the only money they are bringing to the table is leverage and they certainly don`t have the financial deep pockets to turn these divisions around.
If someone’s got to go, I’d be willing sacrifice all of GM to get the old Saab back…
” … until Toyota is the only privately owned automaker left in the world.”
Don’t forget VW. VW outsold Toyota during this most recent quarter:
http://finance.yahoo.com/news/Volkswagen-may-oust-Toyota-as-rb-14956611.html?.v=6
VW’s inexplicable inability to shoot straight in the US (except for the miraculous revival of Audi) hides the relative strength of the company from most US based observers.
jpcavanaugh is absolutely right–somebody needs to go out of business. And sooner rather than later, because your observation that the disease only gets pushed down the food chain is utterly correct. On the one hand watching all of this unfold has been fascinating, but on the other it’s sad and frustrating. Think, though, of the great case-studies in business schools GM is going to provide in the years to come. This is a company that went from selling about half the cars purchased in this country to virtual disintegration in about half a century.
The slowest gazelle will be caught!
Can it be I somehow haven’t noticed we’ve been bombed back to the stone-age?
This is a veritable economic crisis. It’s the beginning of the 21st century. We’re witnessing how one and a half really BIG players in the auto world are facing disintegration.
But we still believe in THE TALK:
Only the really BIG GUYS will survive.
MUSCLE is all that counts.
You need to be a DINOSAUR to make it in this world.
I don’t KNOW whether SAAB will survive this crisis. Nobody does.
But I think it is quite likely.
I think SAAB stands a chance because SAAB is small, not big, it’s lean and people at SAAB have learnt their lessons about how an owner can ruin a brand.
They won’t repeat the story.
Yes, I agree.
Some guys will go out of business. Or shrink a lot.
Some BIG guys, I’d say.
So it’ll make a difference.
We all agree on the overcapacity issue. But that doesn’t really apply to a company like SAAB. We talking 100K units here. This is a niche company. The question is whether a niche company can survive on its own in this new market.
MINI and Alfa right now are proof that niche car comapnies can work well. But a new investor on SAAB has to deal with:
1. extremely tarnished brand in the primary exports markets (US and UK) due to crappy products (the new 9-3SS and aged 9-5) and talk of bankruptcy.
2. A pipeline that is NOT niche (new 9-5, looks like an excellent car but I don’t see large exec. class sedans doing well for the next few years) and a new 9-4 crossover that is a new face in a very very crowded CUV marketplace. There is NOTHING in place for a new 9-3 and a new buyer would need a minimum of 500 million to build it.
3. Financing; lets be honest, SAAB sold cars in the US for the past 5 years based on loose financing and great lease deals. My SAAB (900NG) was $175 a month leased after a very generous trade in. That is 1/2 of a comparable semi-luxury car. You can move a 9-7 if you offer 10K off the sticker. A new buyer won’t have the ability to make those deals.
That being said, IF SAAB is sold it will be for $1 with a deal for GM to use their engines for 10 years. Gives GM a steady customer. The numbers could work. Do a deal with FIAT to build a new 9-3 on the Alfa 159 platform and have a new car in 3 years. Drop a GM 4 cylinder turbo in there, and you have yourself a very nice Italian/Swedish blend at a very attractive price.
Funny the Alfa 159 *is* a Saab platform (the one developped by Saab as a replacement for the 9-5) and the GM turbo is actually a Saab engine…
perceptions perceptions……
Anything can be sold for the right price. It’s just a matter of GM accepting it.
@saabista63
You have a valid point that size alone is not the issue. It is possible to be too big as well. That said, it’s hard to see how a small, independent company can make a go of it given its costs vs. the competition. The auto industry, as currently configured, makes it very difficult to be a small volume, mid priced brand. The complexity of having many markets and not having high volume in any one make the challenge that much greater. My guess is that Saab really could only survive as a very different automaker (possibilities–higher priced vehicles, EVs, hatchbacks, etc.)
@ snabster
MINI and Alfa are connected to larger companies (BMW and Fiat, respectively), and therefore not a good example of niche company viability. MINI could not have developed its cars on its own (without BMW’s resources). They even needed joint ventures for their engines. For Alfa, it seems the jury is still out on whether Alfa truly makes a profit on its own. Those of us in the US may found out if the Chrysler deal goes through. My guess is that Fiat’s real goal is to sell Alfas in volume in North America rather than 500s or other (low/no profit) Fiats.
Your analysis of Saab seems very accurate, though.
I’ll have to concur that Saab’s small volume and current market insignificance play out to its advantage in terms of finding a new home. A 150K units a year niche brand is much more manageable for a private investor than a million-car monster. Saab has also achieved a lot of cost optimization during the past few years and as a result they have a much leaner operation that some other automakers.
GM’s bad heritage could be dealt with fairly quick, IMO – with proper management and product investment VW has managed to turn Audi around in under 10 years. Saab’s current management should just be given proper resources to invest in new models, return the brand to its engineering mojo and re-focus the marketing back to what I always thought was some of the best marketing in the auto industry (pre-Born From Jets – you knew that one was GM-installed).
As for synergies, you do not need to be owned by a large company, I think the current state of the auto indutry has proven that huge conglomerates do not necessarily work well. Saab could still cooperate with other “friendly” auto manufacturers (such as Alfa/Fiat) as it has always done in the past, not to mention BMW’s own MINI does a lot of out-sourced work. Remember, MINIs are FWD cars, so they cannot share platforms with BMW.
The joke in Sweden is that those 27 bidders thought they stood in line for cheap cars, and not the whole company.
Seriously, folks? 27 bidders? For real? I have a hard time seeing anybody be a serious contender…
Comprehensive reading 101: 27 “interested parties” or “potential buyers” who signed NDAs does not make 27 bidders. It was already clarified (yesterday) that about 6 of them are serious, the rest are most likely just out window-shopping.
@conjeo; my point, incorrectly explained, was that niche car companies can exist, but the only two examples I can think of were MINI and Alfa, and can only exist in the confines of a mother ship. Ssyangoung would be another example but did not have a happy ending.
@nutella, yes the FIAT premium platform had some work by SAAB, but for some reason GM/SAAB moved away from it. I suspect that they wanted something larger for the 9-5, and I don’t know how that platform would do for convertibles –always the best selling SAAB in the US. I just use it as an example that it might be relatively cheaper than you think to bring a new 9-3 up to speed.
What i find amazing is GM is moving the entire 9-5 production line to Sweden; that must cost a pretty penny. Given that nobody would buy a 9-5 anyway this year the delay isn’t hurting them too much.
in some parts of the world SAAB are still seen as desirable and prestigous cars, like in Scotland for example – there are lots of them about – even a few 2009 models here and there. Even the GM era models have a few fans about here. If a new owner was to can the North American marketing budget ala Alfa Romeo they may do fairly well, especially if they use the SAAB distribution channels they may inherit for another product for America.
I like RetardedSparks idea sacrifice all of GM to keep Saab alive and well. Sounds like a good trade off for what they have done to Saab.
Seriously though if I had my way Subaru would buy up Saab, or more specificly Fuji Heavy Industries. I guess you guys forgot them as a niche automaker that is semi on there own, no big brother auto company pulling the strings, well Toyota has invested but they aren’t running things.
Subaru and Saab both have niche products. They sell to or in Saab’s case used to sell to similar demographics but with different price points. They are both great with turbo’s and have good engineering departments. And they have both found out first hand how bad GM management phylosophies can be, should be a big lesson learned there. They both have aviation histories, Subaru’s being current. And Subaru has ties to Toyota which could make make finding some adaptable FWD platforms for Saab possible. Oh well one can dream, unfortunately Saab is looking more and more like a history foot note.
Yes…somebody, probably a lot of people HAVE to go out of business…in NORTH AMERICA. The lame, uncompetitive products made in America, for America are whats killing the NORTH AMERICAN industry, along with the over-capacity, the legacy costs etc, etc. The creative zit on an elephants butt that Saab is has NO bearing on GMNA other than “its a shame GM didnt promote Saab big-time” cuz they are THE only things worth a FF that GM makes, and the only thing to take on the rest of upscale German market-share.
Redbarchetta :
April 17th, 2009 at 4:43 pm
Seriously though if I had my way Subaru would buy up Saab, or more specificly Fuji Heavy Industries.
This is actually a very interesting idea. Subaru is most likely not interested, as they don’t want the burden, however, if they provided some capital so that SAAB could engineer some of their own new vehicles, they could make a comeback and become the viable company they once were.
On another note, there is some history to SAAB sharing and co-engineering platforms. The Saab 9000 from 1985-1998 was a joint engineering venture among SAAB, Alfa Romeo, and Lancia. Also, the Saab 4 cylinder engine was another company’s design, however whose it was is escaping me at the moment.
However, I must confess that I am biased towards wanting to see SAAB survive, they are all I have ever had, and all I ever really want. I only had one that was designed under GM, and it wasn’t half the car all of my family’s other 6 SAAB-SCANIA designed vehicles are.
Black turbo, the Saab 4-cylinder engines were based on the 1.7L Triumph four shipped in for the early Saab 99s. It has evolved far beyond recognition into the B235 engine currently powering the 9-5.