By on May 10, 2011

Saab has started paying suppliers again (although production hasn’t restarted yet), and CEO Victor Muller is once again all popped-collar confidence as he dismisses the “speed bump” that he blames on negative publicity. But behind Mueller’s yacht-club breeziness and talk of “true Saabs,” major changes are afoot in Saab’s business model. Saab’s deal with Hawtai, the product of a desperate search for support in the midst of a liquidity crisis, has changed how Muller sees the global car business, and as a result he’s shopping what may be Saab’s last meaningful asset: Western dealerships. Muller explains his thinking to Automotive News [sub]

We laughed when the Japanese came. We laughed when the Koreans came. But we will not be laughing when the Chinese come. The Chinese are like a steamroller. It took 67 years to build up our dealer network. It is the biggest asset not on our asset sheet, and these guys buy into it for free. If they make the proper cars, can you image how much simpler it will be to push product through the distribution network that is already there? It is like a railway network that is already there.

Bertel and I have a running bet about whether the first actual Chinese import to the US (not a converted glider) will be a Chinese brand or one of the western brands… but it’s not much of a bet because neither of us can ever commit to picking one brand that seems most likely to bust America’s Chinese car cherry, and our “bets” change on a weekly basis. In any case, though, think it’s safe to say that neither of us saw Saab as playing much of a role in any of the scenarios we’ve discussed.

Regardless, Muller’s attitude towards the Chinese industry is something akin to a sailor on shore leave, with a “come one, come all” approach to dangling its dealer networks in front of the entire Middle Kingdom. That’s right, Saab and Muller are in the general-purpose Chinese car evangelism business, rather than being tied up in some kind of exclusive deal with Hawtai.

Asked if this would be a vehicle produced by Hawtai, Muller said “there are 120 companies” in China. Saab would be interested in “the one with a strategy,” he said.

And what about branding? Will Saab be careful to pick only the safest, most upscale Chinese cars and brands to sell at its struggling dealer network?

Muller said the first Chinese cars sold here likely would not receive a 5-star safety rating. But he expects a low price would attract buyers.

In China “you can get a $10,000 SUV with air conditioning and electric windows, everything that was ever invented for a car. Do you really worry about a five-star (crash rating)? They look good,” he said.

Sweet. So, rather than using Hawtai’s ridiculous diesel engine production overcapacity to re-cast Saab as a diesel-first, Euro-niche maker, Saab’s struggling dealer base is being dangled as the automotive industry’s answer to Wal-Mart. Sure, there will be a day of reckoning when the Chinese start selling cars in the US, but many of the more legitimate Chinese OEMs have acknowledged that their products aren’t ready for the US yet. Chinese automakers who are tempted by Saab’s siren call of US-market exports should beware: with so much popular suspicion and antipathy towards China here in the US, a premature launch of not-ready-for-primetime products could set the entire Chinese industry’s US market ambitions back by years. Plus, you’d have to go into business with Saab. We’d suggest sitting this one out.

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14 Comments on “Saab Recasts Itself As Auto Industry’s Answer To Wal-Mart...”

  • avatar
    SVX pearlie

    When you’re drowning (in debt), you’ll grasp at any piece of straw…

  • avatar

    “If they make the proper cars, can you image how much simpler it will be to push product through the distribution network that is already there? It is like a railway network that is already there.”

    Are you sure he’s not talking about selling Saabs through Hawtai’s already existing dealer network in China and not Chinese cars through US Saab dealers?

    Everything else in that article sounds either theoretical or taken out of context.

  • avatar

    I think it is telling that none of the major state-owned manufacturers (SAIC, FAW, etc) have expressed any interests to export to the US in the near future. In fact, even if we were to consider the developing world export markets, it is only the second (and sometimes third) tier Chinese manufacturers who are active. Brands like Zhongxing, Geely, Changfeng, Chery and Brilliance are the ones who are most active in the Middle East, eastern Europe, and south American markets.

    At the end of the day, the larger manufacturers seem to appreciate that they need a longer incubation period in the home market, before they are ready for prime-time. In fact, the Chinese central government has expressed on numerous occasions that their “preference” would be for the manufacturers to hold off on exporting to the US, until some time down the road, when conceivable, the products are closer to meeting world-standard.

    While there is little doubt that like Chinese cars will be in our markets in the coming decade, I suspect that a better coordinated export drive would involve the launch of well-conceived Roewes, FAWs down the road, rather than half-baked Geelys and Chery’s.

    Certainly, those first-tier products would be more on par with western offerings in terms of quality.

  • avatar

    What other dealer body is better prepared to market low quality cars that are ill-suited to the US market than Saab’s?

    • 0 avatar
      SVX pearlie

      Dodge / Chrysler comes to mind pretty readily when you say “low quality”…

      • 0 avatar

        I’ll give you low quality, but their products are pretty well suited to the market. Their truck interiors are usually one generation of ergonomics more sophisticated than their competition, and their minivans are flexible if frangible.

      • 0 avatar

        Even the much maligned Sebring was a top safety pick.

        Safety was part of Saab’s value proposition, not really sure how a Saab with sub par crash safety scores would go over.

        The Saab snobs who hated what GM did with the marque aren’t likely to stand in line for a Walmart edition 9-x…

      • 0 avatar
        SVX pearlie

        If Saab were to bring back the “classic” pre-GM 900 & 9000, they’d be derided by the Saab ingrates as unfinished, underpowered deathtraps.

  • avatar

    While Mr Muller may be a bit optimistic about when and how the Chinese will formally enter the North American market, his general idea is accurate.

    If you recall the Japanese experience, going back to the Toyota Toyopet or Honda 600, you see cars not quite ready for prime time based on the expectations of the era but finding a cult following nonetheless. Of course it turned out that these cars had better quality than the bigger, heavier, and fuel inefficient domestic ones on offer, but buyers didn’t care so much about fuel costs then. Once the oil shock happened they did care, and also found higher quality. And they never looked back.

    Hyundai was in the market in the 1980’s, and its quality reputation was so poor that by 1989 they pulled their cars from the US. Coming back a few years later they addressed this issue directly with the longest warranty in the business until their actual quality caught up. Now they’re on a roll and getting much needed brand respect from the market.

    The Chinese will come, and make many, many mistakes, and their first individual brands will be tarnished. But the follow-on brands, the ones in the second wave, will finally establish Chinese vehicles as a good value vs. used cars at the entry level. It will take at least 10 years and it will be interesting to see which brands are the first movers, since they have the highest hurdle. I predict some Chinese brands will cloak themselves in existing brand names with heritage, like Saab, in order to establish themselves. Then they’ll take the wraps off their real brands. Not unlike Nanjing tried to do with Rover in the UK.

  • avatar

    Hey Ed,

    This response is more about your retelling of Mr. Muller’s interview. I know that Victor has come across as a smooth talker in the past to me, so when I read your comments about popped-collar confidence and yacht club breeziness, I started to wonder whether my impressions were mistaken. Upon seeing the interview, I have to stand by my initial impressions that he is more than just a salesman.

    I smelled very little BS in the interview. Right off the bat at around 30s he says Saab has no one to blame but themselves for the “speed bump”. While there’s some debate about it, I think there’s a bit of credibility in his comment that it was the bad press that led to the suppliers putting a cash crunch on Saab. Victor generally answers all questions quite directly and candidly. It’s quite commendable and something a few other CEOs should consider.

    It seems like an axe is being ground. It’s one thing to provide an opinion as you did with your Walmart analogy in what is basically an editorial. It’s another thing to dog Victor Muller and Saab at any given chance. I guess that’s part of the mob mentality. I’ve come to expect more NPR objectivity than FOX pandering from you guys.

    • 0 avatar

      Interesting points. For me the combination of his global goose chase in the pursuit of saving a brand that should have died of decades ago (not because I don’t like it, but because of the way this industry works) and his ridiculous attire (apparently I am that shallow) outweighs his ability to handle a few press-launch softballs. Look at how that first “speedbumps” question was asked. The 9-4X is a “fine legacy of GM” but also a “true Saab”? Saab is the “independent thinker’s” alternative to BMW, Mercedes and Audi? Sorry, not convinced.

      Look, I don’t have an axe to grind with Saab… history does. The logics of markets, capital and scale simply say it shouldn’t exist. Part of me really wants to just root for the underdog, but all I see here is another example of the automotive industry luring a bright, publicity-happy guy into a brutal, grinding trap. It’s happened many times before, and it never ends well. If I’m overly harsh on Muller personally, it’s because I think he’s naive, not because I think he’s a con man.

      • 0 avatar

        Thanks for the sincere response. I don’t think there’s any foul play in an outright declaration of the man’s naivete. Leave the snarkiness to Baruth. It does seem like there is an axe to grind, though, in the comment that for all intents and purposes, Saab should not exist. The fact that it is scrapping to stay afloat seems to rub you the wrong way. Who’s next, Mazda? You have all the right in the world to state your opinion on your site. Just consider your purpose. Tell the whole story? Convince the reader? Throw fuel on the fire?

        Full disclosure. I own a Saab and a Mazda (and a Ford-but I’ll leave that axe for another day). I tend to get burned by fighting for the little guy who I think is fighting the good fight. The story just rubbed me the wrong way when it stated Victor Muller dismissed and placed blame when I clearly didn’t hear that. It just seemed like kicking a guy while he’s down.

  • avatar
    bill h.

    Certainly there is a right to question certain statements or aspects of Muller’s overall business plan. The whole enterprise may yet fall down permanently at some point in the future, because of the aformentioned conditions of the industry and markets as a whole.

    But each additional day that Saab stays around, and by its very existence continues to irritate certain automotive blogs and their Amen choruses, that’s a good day.

  • avatar

    Given the size and geographic distribution of the Saab U.S. dealer network, I question why anyone would want use it to introduce a first model, unless they really love challenges. At best it would be a niche market player, useful only as a training ground for U.S. marketing experience.

    I don’t know how your bet is structured, but given the Chinese government’s preferences and strong-arm ability to control the who-what-when of its exports, put me down on the side predicting the first all-Chinese-built car to be imported by GM, maybe with a 50-50 chance of it having a Chevrolet nameplate.

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