The deadline has passed and General Motors have now received what we believe to be at least 5 bids from prospective purchasers of Saab Automobile.
Our message to you, GM, is a simple one – SELL SAAB.
Representatives from GM have commented on a number of concerns regarding the Saab sale in recent days and I’d like to address those concerns first.
Ed Whitacre doesn’t know much about cars (his own admission) but he does know about business and by his estimation, no-one had come forth with enough money to buy Saab.
Well, there’s as many as five bidders for the company that we’ve heard of today and with one of them being Genii/Ecclestone, I find it very hard to believe that the bidders’ ceiling is lower than GM’s expected price.
Spyker’s Victor Muller has gone to great lengths to express his intention to provide an offer that GM will find very hard to refuse. The financial element must be a major factor in Spyker’s bid as well.
In short, and acknowledging that we don’t really know the amounts proposed to change hands in terms of the leading bidders, money should not be a problem here.
There were comments in a news article today that GM were concerned Spyker might not have sufficient experience in running a full-scale carmaker.
Many have noted the irony of that comment given GM’s recent bankruptcy and acknowledged failure to grow Saab as a marque in the last 20 years. But that’s another thing all together.
The expertise argument is really quite thin.
Firstly, Saab will be sold with existing staff in place. They know how to run their division and they know how to build cars. Saab has an excellent management team, one that has navigated the company through the biggest corporate reconstruction in Sweden’s history. Their technical, design and engineering staff are second to none and have been doing great work building up GM’s other brands for the last 10 years or so.
A new owner, therefore, will not need to know all the ins and outs of running a big manufacturer. Saab already have people on the ground to take care of that.
What a new owner will need is business expertise. Access to capital, sound business decision making skills, management skills. There is no shortage of business expertise in this buying group. Like money, it should no longer be an issue.
GM’s own spokesmen have admitted that they managed Saab poorly over the years. I have an email in my inbox from one of them dated just yesterday, admitting that’s the case.
GM – don’t let your final act of mis-management be a failure to sell the Saab company.
What Saab have got going for them
- Willing, capable buyers – Saab have attracted high calibre buyers who are capable of taking the company into the future. At least five of them submitted bids earlier today and at least three of those, possibly four, should be read very seriously. These people have high-end business experience and most of them have high-end automotive experience.
- A business plan – GM’s concerns that Saab may fail in 12 months time (again, I’ve got an email from a GM spokeman indicating this could be a concern) should be allayed by the fact that Saab will have a sound buyer as well as investment via an EIB loan that will allow them to develop new technology and vehicles for the future. Saab’s business plan has been examined and tested by the EIB, the Swedish National Debt Office and accounting firm KPMG. All have said it was sound, if not without risk (what business is without risk?).
- New models coming – Saab have three more new cars coming in the next 12-15 months, with the new 9-5, the new 9-5 wagon and the Saab 9-4x. Work is already underway for a new Saab 9-3, though that will take a little longer. These vehicles are the foundation of Saab’s business plan and the new 9-5 has already been seen and won firm praise for its design and execution.
- Excellent facilities – Saab’s factory in Trollhattan is one GM’s most efficient – one thing we can thank GM for – and recently won a LEAN award in Sweden for efficiency (and Sweden is a very efficient place). That factory’s efficiency will be bolstered with more production, with the Saab 9-5 being build there as well as the 9-3, along with the Saab 9-3 convertible, which has been brought to Sweden after previously being manufactured in Austria.
- Willing customers – GM cite Saab’s low sales in 2009 as evidence of a lack of interest in the brand. Nothing could be further from the truth. 2009 saw GM put Saab on the chopping block and that lack of certainty, coupled with a lack of marketing, meant sales went through the floor. Saab’s lack of funding meant that production slowed to a mere 100 cars per day. Lack of certainty meant that finance companies took away leasing as a sales option. Lack of promotion mean that Saab’s visibility in the market plummeted (and the visibility that remained was mostly negative). Saab have a big place in the hearts of customers around the world – they are GM’s only global brand – and I am quite confident that a new owner can reach these customers with new vehicles in very quick time.
What GM should be mindful of
- Their obligation to shareholders – GM recently filed for bankruptcy protection and part of their obigation to creditors in that situation is to maximise the price achieved for assets owned by the company. Saab was transferred from “OldGM” to “NewGM” but at what price? Did that price maximise what they could have got for Saab in an open sale? This is their oppoortunity to do that.
- The costs of closure – It costs money to close down a car company. Heaps of it. Why close it down and incur heaps of costs when you could sell it? Again, is this a wise use of the money that was loaned to GM by the US government?
- The costs to communities – Saab have 218 dealers in the US, where GM are based and around 1,100 dealers world wide. Saab has around 3400 employees, most of them being based in western Sweden. Saab’s plant also supports a large number of supplier jobs in Sweden and elsewhere. Why cost communities all these jobs and taxes, when there are viable bidders lined up?
- The harm done to dealers – GM made US Saab dealers sign a new dealer agreement late in 2009 and dealers say that they either had to sign up or lose all chance of compensation immediately. In addition, by signing the new agreement they gave away valuable state franchise rights. US dealers did all this based on GM’s promise to make a good faith effort to sell the company. Drawing out the process and knocking back what seem to be a bunch of viable bidders will take a fair bit of explanation before it could be accepted as acting in good faith.
- The reputational cost of closure – Maybe they really don’t care, but the cost to GM’s reputation will be a double blow. Their chances of further success in Europe will be severly reduced. Their chances amongst Saab owners and other sympathic people will be blown to smitheens (see iwontbuyfromgm.com) but that’s a small crowd. Mostly, it’s their reputation amongst the business community, the people who really are watching this unfold. Ford has managed to sell everything its put up for sale, including brands smaller than Saab. So far, GM hasn’t managed to sell a thing (noting that the Hummer sale may – or may not – still go through). Isn’t NewGM supposed to be free from the indecision and inability to get things done that plagued OldGM?
- The possibilities for the future – Selling Saab means that an ongoing relationship will be established whereby GM will be able to sell parts and manufacturing to Saab, as well as acquire new technology from Saab as it is developed. This is potentially worth billions of dollars over the medium term. Again, is it a wise use of taxpayer dollars to turn this down when it’s so easy to make it happen?
It should all be so simple.
Saab have new cars, an efficient plant, a customer base and most of all – they have willing buyers.
GM need to do the right thing with US taxpayer money – pay it back rather than use it to close down a viable brand.