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Saab hits the wall
20th December 2011. Posted by Lucas Owen. Trackback
Like me, motoring enthusiasts across the country are this week coming to terms with the news that Saab, one of Europe’s most celebrated car manufacturers, is dead.
For those of us who follow the car industry with interest, though, this was an all-too-predictable demise that has been developing for some time. Saab’s collapse starkly echoes that of MG Rover, based just down the road from Rewired here in Birmingham.
The parallels are startling. Both Saab and Rover were quirky brands with a limited, but not insignificant, target audience (Saab owners are statistically more likely to have a PhD than any other brand of car, fact). Both brands were bought by major players - Rover by BMW, Saab by General Motors - who failed to seriously invest in new products, and cut their losses when it became obvious there were serious problems.
Buyers of each brand dabbled with ill-fated motorsport dalliances in a bid to raise funds and interest; Rover’s stablemate MG went rallying and introduced a halo product, the £65,000 XPower SV: a car so miserably contrary to what they should’ve been developing that only 82 were ever sold. Saab’s new owners, Dutch sportscar manufacturer Spyker, took part in one unspectacular season in Formula 1 which placed such a financial strain on the group that its one profitable arm – the whole sportscar bit - was later sold off in a fruitless bid to prop up Saab.
Here we can learn something: channelling money into grandstand projects is suicide if you don’t do the everyday stuff really well. Sadly, neither Rover nor Saab did this.
When Rover collapsed, its would-be volume sellers included the 25, a supermini that had been on sale in various guises since 1995 and never a class-leading product, even when brand new.
Over at Saab, its entry level car, the 9-3 compact executive model, was introduced nine years ago. Charged with replacing a car which could trace its roots back to 1978, the 2002 9-3 didn’t need to be cutting edge to represent a massive step forward - so it wasn’t. The prospective BMW buyers Saab coveted also realised this when the motoring press gleefully highlighted the 9-3’s humble Vauxhall Vectra underpinnings.
GM refreshed the model in 2007 but this was a largely cosmetic facelift which addressed few of the car’s shortcomings. Sales figures increased marginally as prices were slashed, but the model was still viewed as a leftfield choice by drivers.
Spyker had the chance to turn things around with the 2010 9-5, developed with GM support as the first all-new Saab in a decade, but this was rushed onto forecourts in a desperate attempt to generate sales and cash. Poorly received by a motoring press again critical of its Vauxhall origins, and introduced at a time when savvy buyers already knew the wheels were slowly coming off (pun wholeheartedly intentional), the 9-5 has failed to sell well. Now any remaining stock looks set to be sold at knockdown prices as shoppers warily inspect an after-sales package that may be totally absent in the light of this week’s news.
A really excellent, compelling new product could’ve saved them - Tata have demonstrated this with its impressive rejuvenation of Jaguar/Land Rover, ironically inheriting the dormant Rover brand in the process. In the absence of such a product, failure for Rover and Saab became inevitable. Rover’s owners took it to ruin in five years; Spyker oversaw the death of its $400m investment after just twenty-three months.
Other factors exist that have led to this outcome – not least GM’s blocking of an eleventh-hour rescue package for Saab to protect its own interests in the Chinese car market – but ultimately MG Rover and Saab paid the price for failing to get their bread-and-butter offerings right. As businesses plan for survival in 2012, when ‘that’ll do’ just won’t cut it, this is a lesson from which we must all learn.