Goodbye, Saab: An Analysis

18 Dec 2009 | 1,542 views | No Comment
In the end, it was all about time—and the lack thereof. Saab, purveyor of some of the most iconic entry level luxury/sports sedans in the world, is likely to bite the dust over the next coming weeks, unless someone or some company chooses to rescue it from oblivion. “Despite the best effort of all involved, it has become very clear that the due diligence required to complete this complex transaction could not be executed in a reasonable time,” GM Europe President Nick Reilly said.  “In order to maintain operations, Saab needed a quick resolution.” General Motors Co. yesterday announced it would shut down the money-losing Saab unit after talks collapsed on a sale to Spyker Cars NV, maker of a line of exclusive luxury/sports cars. This all happened on the heels of another collapse that took place with Saab about a month ago, that time the company in question was Koenigsegg Group AB. GM had purchased Saab GM bought half of Saab in 1990 and took full ownership in 2000.  The purchase was an effort on GM’s part to expand its luxury car portfolio, much as Ford had done the same with Jaguar and Volvo. The general feeling in the industry at the time  was that luxury car buyers were turned off by domestic brands, and in order for GM and Ford not to continue to lose luxury car companies, they needed to “internationalize” their portfolio offerings. That was also a time when car companies were straining to become concerned that they were not “global” enough to survive the coming decades, though it’s difficult to argue that GM and Ford would fit that description of needing more international properties because they both had and still have extensive international involvements. At the time, GM was struggling with some of its own issues—a lack of distinctiveness to its products, poor quality control, and resources being spread too thinly across its product lineup. All of that was not lost on Saab enthusiasts, who as a whole, greatly feared what a GM takeover would mean to their beloved brand. As it turned out, they had reason to be worried. GM went years before giving Saab even the most minor of upgrades and refreshings, and it showed. Saab products looked little different from GM sedans, and to add insult to injury, GM’s only new model contributions were products that themselves were not highly regarded, and which on top of that, had only minor cosmetic changes to distinguish them. Meanwhile, Ford took a troubled Jaguar brand and turned it into elegant, classic sedans and sports cars with quality so improved that the brand ranked among the best in the industry for several years. With Volvo, Ford found a fitting partner for platform sharing, technology sharing and other needs, and the brand itself continued to flourish. “The old GM” committed two  fatal errors which doomed several of its brands. The first was a reliance on badge engineering—the practice of putting a few small cosmetic changes on a car that was based on something else in the  product portfolio, slapping the car on its rear  fenders and rushing  it out to showrooms to face a justifiably skeptical audience. The second fatal flaw was starving Saab of new product.. The same thing happened to Saturn, and to a lesser extent, even Pontiac.  In this market—and it’s been this way for a number of years now----you simply cannot go more than three or four years without a major upgrade, and you had better be ready to deliver an all-new product on that  fourth year. “Today’s news regarding the Saab brand being discontinued illustrates how much this is a product-led business,” said James Bell, executive market analyst for Kelley Blue Book. “GM allowed Saab to strangle itself with little or no new or exciting vehicle updates for many years, further proof that you cannot shrink or cut your way to profitability.” The real tragedy in all of this is that GM finally caught on, and was prepared to help Saab launch four  new models over the next 16 months. One of them was a beautifully done all-new 9-5 luxury sedan. It’s unknown now what will become of that car, or of the other planned models. “We were so incredibly close,” Spyker CEO Victor Muller said in a text message to Bloomberg News. “I have no words.” The pending death of the Saab brand is particularly poignant because uniqueness, distinctiveness and  brand heritage are all keys to sales success these days. One wonders what would have happened if GM and Saab had gotten that message years ago, not just within the couple of years or so. For more on Saab, visit our history section on the website.

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