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Yuan's trip to Sweden

(originally aired September 22)

Any Saab North American turnaround would involve new leadership and new thinking.

First in a series of 4 articles covering Saab's; Products, Market Share, Revenue and Cost Structure.

1. Products:

9-5 (D.O.A.) Cancel the new 9-5 carline (including the estate/wagon) – consolidated gross profits on this carline is likely not sufficient to sustain $12,000 PNVR market support (exception to limited Russia and China sales). This car is a failed execution for the brand, has very limited appeal to current/former Saab owners and is way over-priced for a Buick LaCrosse. This action would demonstrate a serious commitment towards a new business approach (its ok to admit to mistakes and save money too).

9-4X (reposition – keep it simple – conquest Japanese - seek volumes – do it quickly) Re-position the new 9-4X – offer one variant for US sales:

* 3.0 Liter AWD (kill the 2.8 Liter Turbo)

* Aero Badge (with all Aero trim - exception to seating surfaces)

* Standard equip.: sunroof, Aero styled front end (w/fog lamps), 19" alloys and Bose system.

* Only option is NAV.

* Priced at $39,995

* Plan 1,200 units per month. If the price point of $39,995 can’t be achieved then abandon the 9-4X carline as well.

9-3 Sedan (depreciated cash cow – conquest Japanese – seek volumes - do it quickly) Continue through MY2013 – conquest and bridge carline - offer one variant for US sales:

* 2.0 Liter (auto or manual)

* Aero Badge (with all Aero trim - exception to seating surfaces)

* Standard equip.: sunroof, pwr seats, 17" alloys, rear spoiler, Aero trim, and fog lamps.

* Only option is NAV.

* AWD platform abandoned.

* Priced at $24,995

* Plan 2,000 per month.

Aggressively target owners of Honda Accord, Toyota Camry, and Nissan Altima with trade incentives. At the same time increase the warranty coverage to 6 years / 100,000 miles (similar to the older CPO warranty once offered – bumper to bumper).

Factory note: Forget silly 30 day money back guarantees - these are negative selling propositions (sales people spend more time promoting what happens if you don’t like the car.. rather than selling the product).

Current 9-3 Combi (discontinue) Feel good carline (with no following) needs to go.

Current 9-3 Convertible (discontinue) Historic transaction price (after market support) is $29,995 – rather than build a car you lose money on .. end it and place all engineering and design efforts on the new 3 Convertible - very quickly.

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New 3 Convertible (launch spring 2013) First launch as image car and prelude to the new 3 Sedan. Similar to what Saab did for MY2003 only the convertible is launched first. MSRP should not exceed $10,000 from the highest priced sedan (sub assembly type production volumes – 800 per month to start).

New 3 Sedan (launch January 2014 as MY2015) (Think retro 1985 Saab 99) This car must be a functional hatch back design - priced at $29,995 – with MPG of 35 – 40 MPG. Forget the Phoenix, forget attacking BMW or Audi. Moving people upscale from Honda, Nissan, Toyota, and domestic brands should be the goal. Small chips into their volumes and Saab can easily sell 50,000 units. The new 3 needs to be affordable, function, and durable - European price leader. AWD should not be in the program. Hybrid should be considered. Advanced technologies (features) should be abandoned. Quality fit, finish, and use of high touch, high quality feel is most important. Warranty period 6 years / 100,000 miles. The new 3 should be assembled in China, production savings would allow higher quality / efficient drive line components. After 6 months launch New 3 VIGGEN as a zero to 60 offer in time for spring orders.

New 1 Coupe (retro Saab 96) – I’ll leave this up to the profitable new organization (suicide doors are a must however). So is a diesel engine with 50+ MPG.

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So there you have it. Push volumes for price leading models for 2 years. Trim overall offerings, make it simple to communicate. Go after large volumes of customers and make Saab exciting and affordable till new models arrive. Position new products as price leading European offer - assembled in China.

Of course the above is created without consolidated financial statements, however I believe most (if not all) recommendations can be implemented. Likely typical in most major markets - exception toRussia and China where almost anything goes with volumes less than 1000 units per year.

Saab - Managing the Ridiculous

(Originally aired Sept 1, 2011)

From Saab’s web site today … quoted “Swade”...

“Saab’s problem right now comes down to one thing and one thing only – a cash shortage. We didn’t have enough cash to meet obligations at one stage earlier this year and key suppliers made a decision that it was too big a risk for them to allow us to trade our way out of that situation. To win them back, we need to find the cash. Our fault. Our task to fix. We are working on it flat-out.”

It’s unbelievable, the propaganda Saab expenses on what is truly nothing but their own fault.

“Saab’s problem right now comes down to one thing and one thing only – a cash shortage."

Let’s explore Swade's comment. In the US, I estimate Saab has been burning around $35 Million per month since February 2010. In it's arrogance Muller’s team took the position “if we build - they will come.”

From a base line 250 sales per month, Saab began pushing unrealistic sales objectives to its dealers at the “burning gas” pace of 1500 per month. Targets not achieved, Saab's leadership team encouraged dealers report “service loaner” sales each quarter end.

Note: Service loaners are nothing but phony sales to the manufacturer (and press). Dealer takes a car in stock, reports the car to the factory as a service loaner sale, then parks the car in his back lot. Because the car was reported to the factory as a delivery the car's warranty begins. Its estimated that in CY2010 Saab reported more than 40% service loaner sales and the press reported these sales as +++% over last year.

What makes these actions so ridiculous is that factory executives forget about these phony sales and start telling dealers “we are gaining sales momentum over last year.”

Even more ridiculous ...Sweden doesn’t have a clue…they believe “wow US sales are kicking ass so lets build and ship more cars” when in fact dealers are parking the cars in back lots unsold.

The public, and most of the press, have no clue how sales are manipulated.

In any regard, Saab was reporting sales but NOT finding end users to drive them. This nonsense goes on most of CY2010. Inventories build at dealers and ports (bi-products sit unsold to this day).

Some other significant achievements during CY2010 and early 2011 …

The 2010 9-3 Convertibles built in CY2009 (missing trim items) are delivered to dealers in March 2010 (without proper marketing support most sit unsold for almost a year).

The 9-3 XWD Combi (wagon) is launched unsold with no ad support or promotions.

The first 2010 9-5 Aeros are delivered to dealers with no sunroof and are basically "tryout" models without proper finishing and options (missing remote start, plastic trim has no grain, priced over $53,000). You can find these service loaner cars on Ebay tonight for $39,000 - unsold.

The first 2011 9-5 2.0 Liter FWD cars land, $10,000 higher than the car it replaced. And as of today is a complete failure.

And this nonsense is just related to car sales.

Let’s not discuss:

Lack of brand awareness

Lack of brand positioning

Lack of any logic in product offers

Lack of any showroom dynamics

Lack of Tier 1, 2 and 3 advertising

Lack of anyone knowing what “bi fuel” stands for

Lack of promotions and competitive position

Lack of corporate communications to owners

Lack of profitable dealers

But according to Swade ….Saab’s “only” problem is a lack of cash. In the early months Saab indeed had tons of CASH.

Saab executives failed to ask the most significant question..

What is it we are doing and why?

Saab never had an honest business plan, and no one had the ambition to tell Victor Muller.. “the plan you have.. well sir it’s not a very good one and here is why.”

Note: There was one very bright exception.. however he only lasted a few months and moved on to a German brand.

More CASH Swade? How ridiculous.

McDonalds

(originally aired August 18, 2011)

From a Saab Dealership point of view...

If McDonald's corporate stopped making burgers but kept invoicing (charging) independent McDonald's franchisee's for cardboard burger boxes, paper cups, napkins, advertising fees, and facility upgrades, I suspect McDonald franchisees would rally together, hire an attorney and sue the parent company for breach of their franchise agreement.

If the CEO of McDonald's stated McDonald's indeed had a fully funded business plan (three times) when in fact they didn't, I suspect McDonald franchisees would rally together, hire an attorney and sue the parent company for breach of fiduciary responsibility and reliance.

In essence that's life of a Saab dealer today, however in this story Saab dealers do nothing.

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A major problem with Muller's Saab is the organization itself. Muller's "leadership team" followed bad habits learned from larger car companies. Mile high dealer objectives, monthly dealer invoicing, poor communications and departmental walls reflect the culture / habits of GM, designed with a focus of selling millions of cars.. not 3,000 Saabs. Examples:

GM styled product offerings - Lets look at Saab's new product offerings. The new 9-5 and 9-4X, designed by former GM employees, reflects a mindset of carlines selling in the the tens of thousands - rather than one hundred. Both the new 9-5 and 9-4 offer a ridiculous high matrix of trim and option packages typically found in Chevy and Buick showrooms.

GM type push for special tools and launch parts - Once again following the mind set of GM, the new Saab organization delivered to its sleepy dealers tens of thousands of dollars in 9-5 and 9-4X spare parts and special tools (how about a $12,000 engine support stand for the 9-5!).

GM Type facility standards - Following GM's "you should be thankful your still a dealer feeling," Saab requested its dealers volunteer thousands of dollars in facility updates ("ice block" building designs) at the same time Saab is not producing cars?

This nonsense doesn't happen by accident, it happens because no one asked the hard question:

What are we doing? and Why?

At minimum, Saab Corporate should have treated their dealers at a graduate level - reducing the financial burdens of keeping Saab dealerships open during these turbulent times. Deferring or suspending all dealer invoicing for items as i.e., Saab cups, plates and paper napkins would have been a great start.

Franchise Agreements and state laws are in force to protect dealership rights. Now facing closure, Saab dealers are left holding large inventories of new cars, parts and special tools.

But no one speaks.

Not Saab's dealer council. Not NADA. Not AIADA. Saab dealers are united... their passiveness during difficult times was truly amazing.

Muller's Wind Tunnel

(originally aired August 1, 2011)

Saab Vs. A Wind Tunnel

Back in January 2010 - Victor Muller stated he purchased Saab for the price of a wind tunnel. Once the purchase of Saab was completed, Muller proudly stated "Saab didn't need one new customer," meaning, if former Saab owners purchased new Saab's, the new organization could easily sell over 100,000 units.

The first time I heard these comments I was really taken back. Was this Muller's 15 minutes of fame speech? or ... was he indeed serious?

Prior to Saab's death in December 2009, Muller was impressed by the thousands of Saab owners gathering in support of saving Saab. 18 months later Saab owners have made it very clear.. they are not impressed.

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Assembly plants idle since April, Muller’s Saab is rushing to fill 11,000 orders.

Why?

Exception to the already funded China orders... why the rush to build cars people are not buying? It's estimated the US has an 11 month supply of unsold (new) 9-5 Sedans with MSRP's ranging from low $40's to upper $55's. There are thousands of 9-5 brake rotors collecting rust at US ports as well.

The all new 9-5 may have looked great on consolidated balance sheets (at inflated MSRP’s) but the true cost of sale per unit is likely close to $15,000 per copy (and this doesn’t include the cost of advertising per car sold). The consumer (and current Saab owners) have spoken, they don't want a GM based 9-5 sedan.

The same is unfolding with the all new 9-4X, without launch support to attract "conquest buyers" the carline is failing.

Its fair to say Muller worked very hard, doing wrong things, very well.

* Rush to place GM employees in key executive roles during critical start up periods.

* Rush to embrace Koenigsegg's business plan without proper due diligence.

* Rush to the media without a convincing plan for the brand - to the press and general public.

* Rush to jettison Born from Jets (top 6th recalled automotive slogan) and launch a internally defended global marketing campaign "move your mind."

* Rush to pretend to be an environmentally focused brand without products to back it up.

* Rush to build GM based 9-5’s without defining its need and audience.

* Rush to build the multi million dollar Phoenix project (abandoning the award winning Aero X).

* Rush to build GM based 9-4X without defining its real need and audience.

* Rush to build GM based 9-5 Wagon (segment so thin.. US sales are likely less than 50/month).

* Rush to burn cash without managing the rear view mirror (wholesale and revenue plans).

* Rush to build 11,000 cars with no market demand or retail support.

Unfortunately Muller's Saab is just about finished. There is no saving Saab this time around, and I'm not sure if there is anything left of the brand to save any longer.

Hopefully when its all said and done, and the factory is turned into a freight train assembly plant, someone will purchase the Saab logo and start something up again just for fun.

Pity dealers who have inventory, loyal employees, customers needing warranty repairs and Swedish Govt & EIB who were taken by Muller's salesmanship.

Creditably shattered but not defeated, Muller now eyes the wind tunnel.

Blog Continues

While on air last week a caller asked why I haven't kept up on my blog? So that being said.. I'm back, I will try and update weekly radio show topics and thank you dear caller for the reminder.

Robb

UBER rich

And now the Wall Street automotive report, sponsored by Country Saab.

Al Gore started it, Bush approved it and Obama signed it.

Last week, the US government approved a $528 million loan from the U.S. Energy Department to Fisker Automotive Group, a start up automotive company based in California.

The car Americans are investing in costs $89,000, reach top speeds over 150MPH and go 330 miles without a charge.

A Toyota Prius for the UBER rich.

Production is being planned in Finland some 4200 miles away from Washington DC.

But no worries folks, the 528 million are part of the billions in TARP funds we put on the coffee table sometime last November.

They say good things happen to those that show up... Fisker wasted no time, with check in hand even Walt Disney couldn’t top the joy Fisker executives experienced on their way home.

This is Robb LoForese