Saab have recently undergone a fairly drawn out process, courting potential buyers for the brand as they work to carve themselves out from GM ownership.
One of those potential buyers was reported to be Merbanco, a private group based in Wyoming, in the United States. Christopher Johnston (in true, western US style, you quickly get to know him as CJ) is the CEO of Merbanco and whilst he’s coy about their involvement in this process – by necessity – he was happy to take some questions via email and provide some insight as to how an (alleged) potential buyer sees Saab at this current point in their history, and what they’d need to do under an (alleged) new owner in the future.
I’d like to thank CJ for his time in taking our questions and permitting them to be shared here on site at SU.
——
Christopher Johnston (CJ): Steven, Thanks for contacting us regarding the recent news reports. Without confirming anything, we may be under a non-disclosure agreement and therefore wouldn’t be permitted to discuss detail, or even confirm, any involvement in Saab. Even if involved and permitted, we would not divulge proprietary details as that would not be the right thing to do.
That said, I have visited Saabs United often, enjoy reading the comments, and assume that any parties interested do the same. I don’t know if or why anyone is interested in our views, but will do my best to answer questions in general.
Saabs United (SU): What Saabs have you owned in the past. What do you own now?
CJ: Past: 900 Turbo, 9000 Aero, 9-5 sedan.
Now: 9-3 Cab for summer.
Here in snow country, I’m waiting for the AWD ng9-5 and the 9-4x. Living in a place where it is applicable, I love the moose test!
SU: When did the Saab sale come across your radar and why were you interested in the transaction?
While our name was leaked last week, we can’t discuss Saab publicly and can’t even confirm if we were involved. Let’s say I have been a fan of the brand since 1982 and love to acquire good “passion” brands that are under stress internally or externally. The first new car I ever bought was a Saab. We have had a nice history here of finding and restoring ailing brands.
SU: Can you give us an insight into that history of turning companies around? We’ve heard of the AGCO connection, though information was limited on the web. Can you expand on that and are there any others you’d like to talk about?
CJ: My Father and Partner was a founder of AGCO, now the second largest Ag equipment company in the world. Following the initial acquisition of “stressed” Allis Chalmers in 1990, AGCO (NYSE) proceeded to do more than a dozen add-on strategic acquisitions, the largest of which was Massey Ferguson. Dick retired from the AGCO Board in the late 1990′s. The Johnstons, with partners, joined to execute another turnaround in the acquisition of Republic Realty Mortgage Company, then the largest privately held commercial mortgage banking company in the US. RRMC was purchased from First Interstate Bank of Los Angeles and, following two add on acquisitions from NationsBank (now Bank of America), RRMC was divested to and became the backbone of General Motors GMAC Commercial Mortgage Corp.
continued after the jump……
SU: Can you give us an outline of your visit to Trollhattan – who you met, what you saw? What/Who was the one thing/person you experienced/saw/met that really captured your imagination?
CJ: Well, that’s a level of detail that I can’t go into for the reasons stated above. However, having looked at various posts on Saabs United, it is obvious the management team is well regarded, and GM has always invested well in technology and infrastructure. Saab is known for engineering, sporty driving, safety and Scandinavian branding, marketing, and design. GM Power train has always been a world class benchmark.
SU: What do you think are the key priorities for Saab in the next 2-4 years?
CJ: Saab must deliver the 3f’s: focus, fund, and fix Saab. As an owner, Saab needs to focus on distribution, learn to stand on its own again, and among many other things, improve fit and finish in the cockpit experience. Simplistically, products matter but serving customers is the key. With great offerings everywhere, Saabs won’t sell themselves. In the North America, Saab must step up is game on rekindling the BRAND image, improving DISTRIBUTION, and most importantly walk the walk on CUSTOMER and experience, everyday!
It’s no coincidence that the most successful automobile companies are absolutely superlative with their customers and supply base. In the large mass market, Toyota does the job and truly excels in retaining customers. In the luxury/sports sedan market, BMW and Daimler are the benchmarks. If quality and technology are equal among competitors, the company that really treats its customer best is rewarded and will grow and retain. Customers are more sophisticated than ever before, it’s more than marketing or cliche, it’s a commitment.
SU: Did you propose any expansion of Saab’s model line, beyond what’s already in their business plan?
CJ: Again, as a customer let’s just say I would love to see the 9-1 come to life and a value/entry model for families. The Turbo X line was cool and I would enjoy expansion on the luxury performance end as well.
SU: What do you think are the biggest hurdles that Saab has to overcome in the next 2-4 years?
CJ: In general sales, products, image, customer focus, execution – everyday. Based on public information and comments on your website, Saab needs to rekindle (lose the GM homogenization) and expand the brand – the true believers love Saab – it needs more true and retained believers.
Obviously, transition is an issue, as is perception related to continuing attachment to GM versus independence. The current crowded market and low sales are substantial issues as they affect (every automakers) factory efficiency and profitability, as is atrophy and shrinkage of the distribution base – it won’t work if a customer is forced to drive long distances to get competent work (warranty and no warranty) work on a car.
These are but a few big hurdles and it is easy to overlook the sheer number. Could the need for cash flow to pay back the Swedish Government loans inhibit new model development, for example?
SU: How do you envision Saab would look if owned by Merbanco in terms of structure, product portfolio, marketing approach, etc?
CJ: On this, let me say a bit about Merbanco. First, it is a deal platform – all transactions are done under entities formed specifically for the transaction. We are “acquisitive”, look for stressed investments and are very experienced and competent in purchasing and executing turnarounds. Deal investors and participants are tapped on a needs-specific basis, and vary for size and type of investment.
Generally, we structure acquisitions as management buyouts, where key operating management owns part of the company alongside us. We are not flashy but are very involved in our investments. We love manufacturing, distribution, and strong brands. Unlike most buyout firms, we play with our own money and, subsequently, can be long term oriented and can forego near term needs to achieve long term goals.
We are also very singular oriented – we don’t have, nor want, a bunch of different investments. We prefer to focus all of our energies on one or two investments with experienced people as investors.
Finally, we come from Wyoming and, residing adjacent to two National Parks and millions of acres of other government owned land as our backyard, we are very oriented to nature and the environment.
SU: There seem to be two prevailing themes about the future of the car industry – Sergio Marchionne’s massive consolidation theory and (for want of a better name) the Saab theory that small producers can survive with new supplier relationships, leaner operations and good product. Your thoughts?
CJ: Great question. In the marketplace, there is room for alternatives. Toyota is a massive company operating under only three brands. Fiat is a massive company operating many brands. Some singular brands make both cars and trucks. Success can come in many forms.
A question is how small a mass market producer can be and succeed? Unless passed technologically, if a company can offer a great product, provide value, and treat each customer like the absolute best you have, you can succeed. Look at Apple. It is difficult to differentiate technology in a segment, but easy to maximize current technology in tandem with a superlative customer experience. Speaking as a customer, Saab needs to re-engage with its two key customers – its dealers and the purchaser. With its suppliers, Saab also needs to BE a good customer.
SU: Where do you see Saab positioned in the marketplace? Where do you think they should be positioned, if different from where they are now?
CJ: Despite its recent history, Saab is a very good solid brand. They are short today in terms of products and in terms of the customer experience. With only one brand, there seems to be room for a less-bells-and-whistles version for each model and a smaller production vehicle like the 9-1 class on the value end. Each model has to meet the needs of its intended customer.
On the upper end, Saab needs to offer the latest/greatest available technology and performance with the best fit and finish and customer experience in its class or segment – with no exception. Again, it is about me, the customer. Saab needs to make products that customers want.
SU: Saab reputedly has fantastic engineering capabilities. Would you have sought to expand the provision of this service to others, or use it all for Saab’s benefit for new cars and features?
CJ: I recall seeing a post on Saabs United about open sourcing. I really like that idea – it makes a better world. It also drives innovation and allows suppliers a means to be rewarded for innovation. Absent GM, Saab will need a great relationship with its supplier partners.
SU: Some are wondering if you’re the US funding behind Koenigsegg. Is this true, or is there any likelihood of a deal?
CJ: Let me answer it this way, we have never run across or spoken with anyone related to Koenigsegg or affiliates. I have never been a customer for their products and know little about them. If they do purchase Saab, they have our best wishes for success.
SU: You were out of the purchase process once and then re-entered late in the scene, correct? The deal with Koenigsegg isn’t signed yet. Do you think you’ll be an interested party if things fall over with Koenigsegg?
CJ: Suffice it to say, we are long term customers and fans, have owned, and would love to own “a Saab”.
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{ 51 comments }
Great interview, thanks guys. Perhaps even a scoop for SU Swade?
Notwithstanding the restraint that surrounds the comments, its stll interesting to hear some outline of the Merbanco view of the Saab opportunity. I agree with many of your thoughts CJ, particularly the priorities for the medium term and the product-related matters like the need for the 91.
Again, thanks.
Thanks for interesting interview! Unfortunately, I guess they are out of the process now…
WOW! Great interview – Thanks CJ and Swade!
Even if the Koenigsegg deal would fall through, but the Merbanco would be still in the picture, it seems that the carpocalypse might be the best thing that has happened to Saab for a long time!
I have a strong belief in Koenigsegg and Bård Eker, but after reading this, I would also sleep very good if Merbanco bought Saab.
Nice scoop.
It is good to know that CJ has a background as a Saab owner. Merbanco looks like a very nice alternative now that we know a bit more about them.
I hope this means that the Koenigsegg alternative is even better, though I fear it is not.
Having an investor onboard who drives Saab would be a big plus IMO.
cool interview and insight,thanks CJ and Swade!
Great job, Swade! Thanks for the insights, CJ!
Great interview! Wow, CJ seems like a great guy. I hope K-segg is just as good or better for SAAB! He drives them, he is one of us
I agree with Arild and Rune
and I’ll ditto what Dippen said….
As exciting as the Koenigsegg deal sounds in theory, as a dealership employee I would like to hear more of CJ’s sensible/reassuring plans for the future of the Saab brand. He appears to have grasped the three important issues which will ensure the future of Saab, a 9-1 entry level model, an improvement in interior quality and most importantly of all looking after the customer once we’ve converted them to the brand.
Great stuff Swade!
This interview makes me feel even more relaxed about Koenigsegg-Eker. If the guys from GM/Saab chose them as better suited to run Saab then Mr Johnstone and Merbanco, then we are just fine!
Great reading. Thanks Swade and CJ. Time will show, I guess…
Wow !
After reading that I’m even more frustrated with the K-Saab deal… CJ sounds like a man that has both feet firmly planted and yet open to new ideas and knows how to run a business and make it work…
As a local Trollhattanian Merbanco still would get my vote…
Swade.
It is exactly this kind of reporting which makes this the best site for Saab info on the Internet today.
Bravo!
Ed K.
Kalle: Better suited for Saab….or GM ?
Mats, I fear that particular question is going to haunt this community for a long time.
1. His interest in SAAb is pretty obvious and… it’s interesting he mentions GM Powetrain Sweden in there. Would those assets be a part of a SAAB deal?
2. As far as I remember from the 2 years I was in the business, it is often done in PE transactions to set up an investment vehicle for a specific transaction. It is basically a holding company (even if it doesn’t have the legal status of a holding company) where buyers’/investors’ financial resources are pooled together to buy and operate. I’d expect a deal to be structured that way.
Merbanco can still cooperate with Koenigsegg and be a part of SAAB team as investor. If all of them are big fans of SAAB, they can find the way to work together for involving more money for SAAB.
And I hope the result of it is going to be:
New 9-3 – reborn of 900 turbo
New 9-5 – A perfect version of 9000 and 9-5
New 9-4x – I don’t like such cars, but It can be just best in class
Aero X – no comments
And the car I personally wait for “9-9x” The Alpina B7 Killer”
He drives a SAAB, reads SU and has really interesting oppinions about SAAB the cars and the customers.
I hope Merbanco really was second best for SAAB.
Swade, this is not simple blogging this is insight journalism. Great !!!!
BTW, how many hits did SU/TS have since febraury from Wyoming?
Great stuff Swade, kudos for a well done “interview” Good and interesting to read CJ’s answers and to get a better feel for Merbanco. When I read his answers I get a feeling we have someone who really understands Saab and what the brand ultimately needs. It is one thing to to see a company in distress and acquire it for a quick buck and another to have a long term brand relationship with the company and then decide it is worth to stick your money in to save it. Is there a similar story with Eker and Co?
Rusty I agree with you mostly, but like CJ said, a 9-1 would be very important for Saab at this time. A 9-9 can wait for a while.
GM Powertrain Sweden is owned by Saab Automobile AB and will be included in the sale.
Thanks Swade, and many thanks to CJ for answering questions, and being a Saab enthusiast (that 900 hooked so many of us). A big thanks for showing the positive side of U.S. private equity.
Definitely useful insights into the challenges FreeSaab faces in the U.S., especially in plugging the geographic holes with dealers who meet customer needs.
Based on what I have been reading about Detroit 3 and their supplier relations, I’d say CJ knows how adversial it is in the U.S. (The story of Bo Andersson has been getting analysis from the sourcing community – Bo seen as a good guy in a bleak, and soon to be much bleaker, story).
No matter what happens in Trollhattan, fixing the U.S. market has to be a priority. Where GM did the most damage last ten years.
Look at the BMW1er – it is the ugliest bimmer ever. Mercedes A – B klasse, same. It would be nice to make 9-1 as I most fuel economical and nature friendly car. I see both 9-1 and 9-4x aimed to be “most sold cars of the year”. Practical, economical and so on. But such car can never be “The True SAAB”. It is important for making money, but for upping status of SAAB it is much more important to make really luxury, big and fast executive saloon.
When such car will be known as the best in “limo F” class: most comfortable, fastest, safest – it will be much easy to sell “low-end” cars, since people will know – that top SAABs are best in class.
As I mentioned before “Iimo” class truly shows the image of make. SAAB should never be for all, it should be high class car, as BMW \ Mercedes and Bentley \ Maserati etc. Not a competitor against Open, Ford, Fiat, Toyota and even Audi….
Koenigsegg makes amazing cars, and I am sure they will aim SAAB to make greatest cars with a lot of top engineering solutions, not “practical and cheap”.
I really like Mercedes S, especially W140, 7er BMW from any year, I like Maserati Quattroporte (unfortunaly never had a change to drive it). These cars better than my 9-5 in a lot of aspects, just because they are from higher class. But I never change SAAB to them, because of THAT SAAB feeling…. Btw there is crown on SAAB logo, but where is the car for king?
OFF TOPIC.
Volvo to be partly owner of Saab !
According to the news Volvo is shareholder of K-egg.
Volvo owns 3750 K-egg shares, as payment for using their airtunnel facilities.
If K-egg buys Saab they will be “partners” !!
Hmmm…
Excellent stuff, Swade. I sure hope Merbanco are behind the K bid, I think they would work wel together.
It amazes me how passionate Saab ‘people’ are! We have a guy who is nuts about Saabs buying the company and CJ who is a Saab fanatic.
Come on guys, work together…a dream made in heaven.
K-egg creates a new company ..
“Koenigsegg Group will devote itself to “itself and by group companies to produce and trade with passenger and related products and services, and associated activities in and outside Sweden.”
According to the request which has been submitted to the Swedish Companies Koeningsegg Group will take over a complete corporate identity from a ‘stock company.
Around 22 percent of the shares in the new company should be owned by American Mark Alan Bishop.
The largest shareholder is Alpraaz with 42.5 percent. It is Christian von Koenigseggs first company he started as a 20-year-old in 1992. According to the statutes dealing with consultancy in technology, marketing and finance, and trading in securities. Halldora von Koenigsegg is President.
The second largest shareholder with a stake of nearly 23.5 percent, the Koenigsegg Automotive, the company which in turn is owned 49 percent of Norwegian Eker Group.
Eker Group will also be direct owners of Koenigsegg Group with a share of nearly 12 percent.
The Chairman of the Board shall be the American Augi K Fabela. The Board proposed three members: Christian von Koenigsegg (CEO), Mark Alan Bishop, and the owner of Eker Group Bård Eker. Melissa Joan Schwartz is deputy of the board.”
Great interview, Swade and CJ! Wish Merbanco would have been involved with Saab somehow.
Very insightful and thoughtful, but also reassuring to know that such cool-headed and intelligent people are interested in buying Saab. As wel all know, K-segg deal is not signed yet.
I still can’t see the 9-4x selling all that well outside the US, especially by the time it’s released and it might even end up making more money for GM than it does for Saab? As to the 9-1 in the US, it could be quite be quite the opposite. It might match or better the 9-3 in many markets but be a comparatively poor seller in the US? However that still makes it a very important model. In fact, I think Saab probably needs a 9-1 almost as much as it needs a new 9-3, and it needs a new 9-3 desperately.
Thanks for the Reply, SR. I was unsure if it was a SAAB Automobile AB subsidiary or not.
My experience with americans from the wild-west is that they are indeed trustworthy and stand by their words.
Someone who picked SAAB as his first car and still drives them, says quite a lot. Unfortunately Merbanco has gaind little exposure here on SU or elsewhere.
I now tend to lean towards Mr. Johnston and away from K-egg.
Jonston says he is playing with his own money, that is a crucial difference. Merbanco seams decent and honest. Why not the US is Saabs largest market. Even if F-150 are the mainstay of the people of ” Boring Whyoming” should be changed to ” Automotive Whyoming”
May the best contender win the race….
Thanks to both Steven and Christopher for that interview. Always nice to see a personal toutch and passion behind the $$$ and corp names.
I also like the idea of being on both ends of the the spectrum,value to raw performance and create a synergy between them where true innovations and technology can trickle down to “value-cars”.
Swade, e24.se ripped your interview. They mention your site by name, but of course there is not link to it. And they also calls SU a site for American Saab enthusiasts…
It was a great interview, thanks Swade!
It certainly makes me feel more comfortable if Merbanco won (although given the news reports that seems unlikely).
Hi All:
I didn’t know what to expect here and am flattered and moved by the comments you have made! SAAB is a terrific company and it is easy to be passionate about it after 25 years. The group here shows everyday how special SAAB really is.
Thanks again to all, and thanks to Steven.
CJ
CJ,
I’m no expert but when I read your answers you came across as a person with the kind of attitude and insight that I hope Saab’s new owner(s) have.
Thanks for being so open CJ. Steve, you could get an MBE for services to the industry. In fact CJ possibly deserves one as well. Normally people are so guarded in these interviews that we have to add the word “understandably” to guarded and then regret the content that ensues. This interview was pitched nicely so that there wasn’t much need for being guarded.
Great Job Swade !!! Very interesting and exclusiv !!!
I like this man, he sounds very clued up indeed. That’s the kind of leadership the auto industry needs.
Kudos to you Swade for that great interview. It was very nice to get some sort of insight on one of the potential owners/investors in Saab’s future. It’s also interesting to read that CJ sounds like an avid reader of the “SU” blog. The way he answers a lot of the questions makes me second guess that Merbanco is actually out of the running here. There could be some sort of tie-in that they are trying to iron out the details on… Just a little phishy on the way he answered that last question that’s all.
CJ: Thanks for open mind and for what it is wirth, I would buy very happy to buy a Saab if you where the new owner. ( BTW: This also goes for K-Segg )
You really cant expect anything else than very positive view of Saab from one of last finalist.
Talk about interior look and customer service are very core values of American auto business thinking.
Small entry model needs massive volume synergy with some other carmaker to make sense. And still it might not make sense to sell it in the USA market, only in Europe.
In the past Saab quite often offered unique tech solutions that competitors didnt have. This is again one of death and life questions for Saab and will be very very hard game because other brands have upped their game level big time.
I hope CJ will have great new Saabs to drive in the future too.
CJ -
Thanks so much for the courtesy of this interview. I appreciate your insight and candor! SAAB brings out the best in people.
CJ
You show the right attitude posting comments here on SU.
It seams like You have what we swedes call ” Saab-Andan” ( the saab-spirit).
It is someting special with the cars whatever age or model. It is hard to see oneself in anything else than a SAAB.
I just hope it is not to late for Merbanco making a final offer (even better) on SAAB.
You could let the highly skilled finns at Your plant in Uusikapunkki AGAIN make the convertibles alongside with the Fisker cars (extreme hybrids).
I have now definately switched from K-egg to Merbanco!
Jörgen, Valmet Automotive is not part of the Agco (or Merbanco). It is owned by the finnish Metso corporation, so there are historic (rather than ownership) ties only.
However, I would guess Saabs would be very welcome to be built again in Uusikaupunki, any day.
CJ’s last response also kept simmering in my head today, because of the paradigm shift with Penske and Saturn, which continues to simmer in my imagination.
Add in my total agreement that the U.S. market needs fewer bell and whistle options on the current model line as well as a 9-1 value model combined with the kind of outstanding customer experience I have had with the dedicated standalone dealers.
I would NOT have bought my 1987 900 if I had not discovered Reinertsen when my 1976 99GL broke down the first night of my 50-mile commute back to Manhattan from my new job in New Jersey.
I remember sitting on the train home thinking I either had to buy a new car or get my old job back.
One call to Reinertsen, found in my dealer book, and the results assured me of the service I had never had in NYC for the previous eight years.
Anyway, it was a real pleasure to re-read Swade’s interview with CJ. Hope everyone else involved in the fate of Saab has also read this at least twice.
Thanks again to CJ, and Swade.
Karen +1
“Hope everyone else involved in the fate of Saab has also read this at least twice.”
I have, and a big thanks to CJ for sharing his time and hypoteticals regarding alleged bidding on SAAB. Thanks also Swade for again raising the bar in the fan-blog world, although that genre seems hardly applicable to SU anymore, this is something else.
turbin
“…. although that genre seems hardly applicable to SU anymore, this is something else.”
You wrote that, what do You want to say?
So Swade, when is the interview with mr Eker ready?
That was great reading Swade! And thanks to CJ for that open conversation. According to what CJ say I wonder on what grounds they were picked away, sounds like a dream owner with just the ideas we have discussed here for a long time.
Anyway interesting reading indeed.
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