So Saab could be on the market again.
One of the potential buyers earlier this year was a company called Merbanco, a private group based in Wyoming, in the United States. Christopher Johnston (who you quickly get to know as CJ) is the CEO of Merbanco and I interviewed him earlier this year.
Whilst CJ was 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 viewed Saab at that point in their history, and what they’d need to do under an (alleged) new owner in the future.
Koenigsegg are now out of the picture. The big question is whether or not Merbanco might seek to get back in. They were a favourite of mine prior to the winning bidder being announced and I seriously hope they look at the Saab acquisition again. If they do, you can possibly expect to hear a little more from this guy in the future.
As i did earlier this year, I’d like to thank CJ for his time in taking our questions and permitting them to be shared here on site at SU.
Note: this email interview was conducted back in June, just after Koenigsegg were selected as the preferred bidder. It should be read in that context.
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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