What is Premium?

I’m moving this back to the top while I go to sleep in order to encourage some more comment and discussion. I’m enjoying the input you’re all having here.

Gunnar has elaborated on his thoughts in comments with a posting on the issue over at Automobiles DeLuxe.

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Saab has been mentioned, not only by me but by GM personnel themselves, as “GM’s global premium brand”. But what does ‘premium’ mean?

This question is meant as an extension of the Cadillac post I published the other day, which has drawn numerous comments.

One opinion that I’ve received via email rather than in comments pushes the idea that the 9-5 hasn’t been delayed, but making a competitor to the BMW 5-series and Audi A6 takes time and must be done right. This is absolutely correct. But if this is the territory that the 9-5 is headed for, then where’s the line between premium and luxury? Shouldn’t the ’5′ and the A6 be Cadillac’s territory according to the GME mantra?

It’s my understanding that the Cadillac range in Europe is intended to be an American alternative to the usual European sedan choices, but where does Saab fit in to that market? Is Saab meant to compete against the lower end of the 3-series and Caddy the higher end?

The common argument that I hear is that Cadillac and Saab buyers will rarely ever cross-shop the brands. If you’re talking about 1950s Caddys and 1950s Saabs then I’ll beleive you. In modern times I’m not so sure.

In America, Caddy’s are definitely placed in a separate market segment. They’re bigger and have huge engines and are aimed at the those with a penchant for some largesse. In Europe however, the BLS is a Saab-sized and Saab-based vehicle using the same engines as the Saab it’s based on. What’s the differentiator? Is it the interior, given Caddy’s position as a luxury contender?

If so, why hold the 9-3 back instead of making it better able to compete by giving it better equipment?

Bob Lutz has also recently been quoted as saying he’d like to see a Cadillac entrant in the premium hatch market eventually (Audi A3, BMW 1 series, etc). This is right where the future Saab 9-1 would be headed by my reckoning. Would the development and final quality of the 9-1 be compromised by having to allow some ceiling space for a Caddy entrant to fill?

These are the questions I’m dealing with in trying to understand why GM would push a brand like Cadillac, at considerable expense, into a market that according to sales figures and industry forecasts – doesn’t want it there.

I’ll be honest, I’m stuck here in Tasmania where Holdens, Fords and Toyotas make up 80% of what you see on the road. Cadillacs are merely a curiosity at nostalgic car shows. Any thoughts from the Americans that see Caddy on a regular basis, or the Europeans who are having Caddy thrust upon them would be welcome.

What is premium? How does it differ from ‘luxury’ and where do the lines blur between Cadillac, Saab and the people with the dollars to choose between them?

20 thoughts on “What is Premium?

  1. Cadillac will never, ever be an alternative to luxury German brands. Think of a Cadillac as an upmarket Opel and I think you’d be right – almost. Why almost? Well dynamically they arent even equal to an Opel and this is where Saab has Cadillac beat. If GM think they can compete against BMW, Audi and MB with Cadillac they are wasting their money and hopefully they will realise this before its too late for Saab.

  2. Swade;
    Here in the U.S., as far as I can tell, Cadillac is aiming for the middle-aged man who is a middle to upper-level professional, has “made it” in his career, and wants a big, flashy car to proclaim his success. The re-imaging of Caddy recently has moved the company products from being perceived as big and stodgy land-yachts to large, flashy performers with cutting edge design.
    Saab buyers are much more introspective and modest to buy a Caddy, although I do find myself paying attention to their print and TV ads. My only thought about the world/European markets is that GM is trying to do what they do here–provide an American AND a European luxury/performance brand so that either type of buyer will end up in a GM showroom.
    That said, is the BLS any real competition for the 9-3? I would think not. I don’t see showroom traffic at a Saab/Caddy dealership bouncing back and forth between the brands–I think most buyers will have a pretty clear idea of the type of car they want before they arrive.

  3. Lutz is nutz to make Cadillac into a hatchback. That would be as stupid a move as that old POS the Cimarron.

    Caddy is about largesse and luxury and should remain such.

    Saab is about tight, modern, Swedish design.

    No mixin’ and matchin’ to be done there.

  4. I wonder how much of this is competing internal power centers inside of GM. I suspect that Saab has very little political pull to fend off moves from other divisions. Obviously it is in the best interest of the Cadillac to sell as many cars as possible — it may not be in the overall best interest of GM, given Saab’s position in Europe, but the Cadillac division has enough political pull to get what they want.

    The worrisome thing about this is that GM’s historical weakness is a failure to execute a singular, comprehensive business plan — by default collapsing into multiple, contradictory, and short-term plans that don’t address what GM needs to do in the bigger picture.

  5. I’m going to agree with Greg here, GM must obviously not have their premium/luxury brand execution strategy down pat, and there must be some tension inside GM as how to fit Cadillac and Saab together in the same marketplace.

    Of course, if they keep Cadillac strictly american and Saab strictly swedish, they probably wouldn’t have a problem, but it seems as if they are doing the opposite with the BLS and 9-7x.. Cadillac has a Saab and Saab has a Chevy.

  6. I agree with Kraig…. Growing up, and still in college, Caddy appears to be the brand for the middle-aged (35 – 45) to young “old” (50 – 65)… It seems as a large, luxury vehicle in which looks, size and comfort out weigh speed, performance and functionality.

    IMHO, I think if Caddy went after Mercedes- which, as I see it, has always been about luxury over performance- then there is plenty of room for Caddy and Saab to co-exist in Europe. To me, Saab should compete with BMW and Audi, as both German brands are known to be more about refined performance with some luxury.

  7. I live in the USA. I see cadillac on an every day basis and don’t think much of them. I use to valet cars over the summer and drove every one of the models they over (minus the v-series). Yes they are nice cars, but in my opinion Saab does a much better job at the luxury marque. Cadillac does offer strong points (exterior styling, powerful engines) and so on, but in my opinion, displacement makes up for small cocks. Most Europeans don’t want v8′s under the hood, rather a turbo 4, diesel, maybe a 6-cylinder.

    Saab should be promoted as the luxury brand (after some improvements have been made). GM should be smart and pull out the whole Cadillac idea out of Europe with the intent of promoting the brand as a Euro-lux alternative. Audi, MB, BMW, etc make much much nicer cars than Caddy all day long.

  8. Currently, in the US,

    Saab = successful intellectuals and almost successful professionals ;)
    Cadillac = successful professionals

    So, positioning wise, Cadillac wants to compete with Bimmer, Mercedes, Lexus. Saab sees itself as Infiniti, and Audi competitor.

  9. In reading these comments it seems few people here have actually driven a modern Cadillac. The CTS and STS are modern, good handling cars. I have driven both and the CTS in particular is dynamically excellent. The interior lets the car down. The new car addresses this. The styling is unique and brash but that is not necessarily a bad thing. Today’s Cadillac’s do not look like anything else on the road. Selling Cadillac in Europe IS a smart business decision. They do not have to sell in large numbers to make money. The strong Euro helps with that. The problem I see is twofold. One, the cars do not have diesel engines, a must for a large luxury car. Second, Cadillac needs a rear drive BLS sized family of cars, sedan, coupe, wagon and crossover all with diesel options. There is no question SAAB and Cadillac buyers are not one in the same, except for me I guess, I like both brands. I think SAAB and Cadillac can co-exist by chasing different buyers. The problem is GM does not have the money to adequately support both. They have rightly, to my mind chosen to put Cadillac first. Caddy sells more cars and makes more money than SAAB. The question is can SAAB survive in the market place at the current pace of development? I hope so.

  10. As an American, I too see Cadillac on a frequent basis, and I think Frank A is right to point to Cadillac’s brashness as a brand-defining characteristic. To me, that confines Cadillac to being only a niche brand in Europe, where (to my [admittedly limited] understanding) that American brashness meets with mostly negative or at least strongly ambivalent responses. Given that, why bother trying to build “mainstream” European cars like the BLS? Leave SAAB to do that; they seem to understand Europe (gee, maybe because they’re from there.) Sure, sell some Cadillacs in Europe; if there are a few Europeans who find the glitzy Las Vegas Americanism of American-designed Cadillacs appealing, sell them some cars. But don’t develop dedicated Europe-only models; it’s a waste of money, and it cannibalizes your own brands (something I was convinced GM had learned to STOP doing in America.)
    It seems to me that Cadillac COULD succeed in Europe WITHOUT hurting SAAB, by offering a limited portfolio of American cars that could conceivably appeal to SOME Europeans (CTS, STS, SRX, XLR.) You could even pair Cadillac and SAAB dealerships (as is nowadays often done here.)
    To sum up: Only GM could take a car (the 9-3), tart it up in different clothing (the BLS), give it the same engines and a similar interior, and claim that no one will ever cross-shop the two.

  11. MJL, your last line about the BLS is right on point. VW does the same thing with Skoda and Seat. Interestingly two companies with too many brands selling too similiar products.

  12. There is no doubt that Cadillac makes money for GM, and Saab does not. Development resources ought to apportioned accordingly.

    However, it makes no sense to give Cadillac development resources to compete **against** Saab in its core European markets.

    Protecting multiple brands requires self-discipline. Brands need to define their own market segments, and stay out of market segments defined by others.

    What we’re seeing here is that Saab is being starved of development resources that could be used to increase sales, in order to support development by Cadillac in the same markets — less efficiently and more expensively than Saab could do in the same markets.

    In other words, no one at the highest levels of GM is willing or able to tell Cadillac that the BLS should just go away.

    Actually it’s more complicated than that. Part of the BLS problem is the underutilization of capacity at Trollhattan. Cadillac comes along, and whispers sweet nothings into Rick Wagoner’s ear (“we can suck up some excess capacity and make a smaller Caddy for Europe at the same time. Kills two birds with one stone. You do want Cadillac to be a truly ‘global’ brand, don’t you?”)

    So, in theory, GM Europe cuts its costs, Cadillac makes an inroad to the European market, and it’s a win-win, right?

    Wrong. Because Cadillac’s brand image grates on European customers (except at the fringes). And strictly from a return on investment standpoint, the money is better off being put into Saab. For the money put into the BLS, we could have had a real nice, Opel-based, Saab 9-1 right now — and it would certainly sell better than a 100 units a month.

    But — and this is the real problem — no one at the highest levels of GM seems to understand that.

    When Cadillac comes along and tries to maximize its divisional profits, no one in the executive suite has thought the European market through enough to call Caddy on its BLS BS. The decision is made strictly on politics “yeah, Caddy’s made some money for us, here’s a $50 million to go make a play in the European small-executive class segment.”

    Far from no executing a coherent premium/luxury brand plan, I’m not convinced that GM even **has** an overall plan.

    GM is still making it up as it goes along. The only real difference between the old GM and the new GM is a realization that they have to make good cars in order to survive. GM hasn’t gotten to the point yet where it can strategize about who gets to sell which good cars where.

    So Saab continues to exist because it does some small positive things for GM, and the cars get good reviews (e.g., the glowing LA Times review of the 9-3SC from one of GM’s harshest critics).

    But actually giving Saab a bunch of development money in order to increase sales would require some real understanding at the highest level of what Saab is, and its place in the market.

    And so the status quo continues, until GM either decides to take Saab seriously, or Saab dies from lack of attention.

    I have been a lot more positive about GM’s ownership than other Saabisti. But the BLS decision (and the apparent decision to do a new BLS after 2010 which they might bring to the US) really, really disappointed me.

    Ironically Cadillac’s effort to compete in every possible premium segment will kill its brand image. Regardless of its impact on Saab, a Cadillac variant of the 9-1 is completely insane.

    But, again, Cadillac’s short-term need to maximize divisional profits (to “hit the numbers” demanded by the big wigs), undercuts its long-term viability by watering down the brand image.

    Successful brand management requires strategic self-discipline and an overall focus on the longer-term health of the company.

    GM is not currently capable of this. GM is trying to avoid bankruptcy, make some desperately needed short-term profits, and survive the impending dual crises of Delphi and the next UAW contract negotiations.

    The future is murky. Maybe GM survives and in 2008-09 actually has enough breathing room to start thinking strategically. Maybe not.

    All will be revealed in the fullness of time. Until then I’ll be enjoying my classic 900 turbo’s.

  13. Frank, you are just wrong comparing the 9-3/BLS job with the platform sharing done by VAG. The VAG sharing is more comparable to the the Vectra/9-3 relation.

    Regarding Cadillac in Europe – there are so many mental barriers to pass that I simply don’t see it happening. First the cars would have to be superb, and honestly none of the Cadillacs are that if measured with European eyes.

    I see the Cadillac thing as money wasted, and a possibility wasted for Saab.

  14. Hi and greetings from germany…

    Well, I’m a Saab Fan… so my view is a bit more in Saab direction. But I see the things as following:
    Many postings so far are good and I think they are correct. It might be an option for GM to sell Cadillac in Europe for the “older” professionals to get some shares from Mercedes. But the point is the following: As far as I can analyse the market in germany the “old professionals” that have the money would buy a Merc, a Merc, a Merc, an Audi, an VW,………and maybe then after there is really no other choice a Cadillac. I want to say with this that the Cadillacs over here (or in general the american cars) are seen as fuel hungry and environment unfriendly cars. There are a few fans of american cars but the main part of the people don’t have the feeling for a cadillac like there is in the US.
    I recon the brands are “identified” like this:

    -> Saab – understatement, intelligent, premium class for professionals and art people that think out of the box and earn good money and who want to have the best of both sides (like I do, on one hand the power and sportiness of a turbo powered engine and on the other hand the understatment for just cruising. It’s like beeing a fox in a sheep shell… nobody really knows the power of the Saabs but when you unleash the beast the jaws are dropping.

    -> Cadillacs (and US cars in generall) – they have the image of beeing big, hugh, soft, fuel drinking boats. No one belives them that they are sporty etc. (except the super sportscars like a viper).People don’t like them. People over here want a car that is able to get going fast, to be able to travel 200 km/h and more in a sporty way.

    So jung and middle aged professionals are going to buy a Audi oder BMW to get a sport-sedan oder a Saab if they know the brand and the technology. They won’t buy the “crusing” style car for the family – in this case they get a van from VW etc.. These people would get a 9-3 2.0T or Aero – good for the starting family but still sporty enough for the singles to have fun.

    The old professional either wants a sporty car and he has the money to get the highend cars from Merc, BMW, Audi or they know again Saab and take them to save a few Euros and still habe the power, like they would habe with an 9-5 Aero. Those people are the typical 9-5 Aero buyer if not Merc, BMW, etc..

    The only “possible” buyer of a Cadillac would be the “old” professional with money that don’t want to have a sporty car but a solid, easy going, crusing car that takes every bump and hole in the street etc.. Problem: Those people would buy a Merc because of the tradition, the reputation of merc in germany etc.. Those people would never buy a Cadillac. There is no “ahh” and “ohhh, look he can afford a big merc even with his pension” in a Cadillac. ;)

    The only people I recon that would buy, let’s say the Cadillac BLS, are those that can’t afford an Saab with the same power and addons but want to have a car that’s near it.
    The BLS 2.0T/175 bhp is araound 28.000 EUR – the 9-3 2.0T/210bhp Vector is at 34.000 EUR/the 1.8t/150bhp is at 30.000 EUR.

    So, my resume (after all this stuff):
    - it can be a good or decent idea to sell Cadillac in europe, BUT it has to be clear which brand IS the premium brand: Saab or Cadillac. Othewise you allways have the fight between those two. VW and Skoda for example: It’s clear – VW is the premium and skoda not – even if they are nearly identical. People in germany pay lots and lots of euro just for the image! Either you want the image or you say no to it and save a few bucks – then you buy an opel an not a Cadi.

    - Problem Nr. 1 is: Neither Saab or Cadillac are pushed and promoted in any way so that people would know about it! There is nearly no advertising here!! No TV Ads, no Print Ads nothing – I guess it’s also becaus Opel tries to push them down to the floor so they won’t loose more customers. But there is the problem again regarding a clear setup of premium brand and not.

    - Problem Nr. 2: Cadi. and other US cars don’t have a high value and respect over here (no offence, but it’s like that).

    - Problem Nr. 3: It’s the same like Problem Nr.1 but this time with Opel. Opel also has a premium class (signum etc.) and they want to sell it. Saab germany is part of Opel… like a unloved stepchild. But many people that want a premium car won’t take an Opel (because they lack on the premium image and prestige) and buy a BMW, Audi, VW, Merc. And the same old problem – Saab is not so known as premium class with a good cost/value ratio. *dang*

    - So GM is building 3 competitors in Germany: Opel, Saab, Cadillac – hello… someone at home??? This won’t work out in a country that has big players headquarters like BMW, VW, Merc in it!

    The best thing would be to stop Cadillac in Germany/Europe for the premium segemnt. It could be so easy and peacfull:
    - Opel builds and covers the non-premium low-cost market with cars like the corsa and astra.
    - Opel builds the “middle”-premium class cars like Omega, signum etc. for those who want to show what they got and archived but can’t afford a “high-end” premium car like a BMW, Merc, Audi.
    - Saab builds the “high-end” premium segment with the 9-3 for the young ones and the 9-5 for the middle/old ones as competiton to Merc, Audi, BMW with better technology, design and value/cost ratio.

    This would cover all three markt segemnts and nearly all price areas from little to big – then they would have to push Saab as “high-end” premium car to show the price/value advantage agains BMW, etc.. Opel could use the Saab know-how for special production like they already do with the OPC Line.

    Everthing would be ok and I guess Saab could finally use the potential it has in the market and get some more shares.
    To push the image of Cadillac as a premium, luxury car will cost GM more than the other solution due to the fact that only a few people know cadillac, and the power of the german car makers is much bigger so that they can roar much louder than cadillac.

    I guess they are throwing money out of the window to push a deadborn child on the market (sorry for this). At the end they will recognise that this won’t work out. And than the question is what they’re going to do: Drop Cadillac in Europe and push Saab/Opel or they Sell/Drop Saab to push Cadillac/Opel cause of some US managers that have friends at Cadillac that they don’t want to “hurt”. (You know what I mean).

    So, that’s my opinion. I allways ask myself who is planing this stuff and what kind of informations do they use to evaluate the european market?! Some decision are so strange to me as german/european that I can’t understand what’s going on at GM.

    Let’s hope the best for Saab.

    P.S.: Sorry for the millions of spelling mistakes. ;)

  15. All these posts have been very awakening for me, thanks people…

    “nobody really knows the power of the Saabs but when you unleash the beast the jaws are dropping. ” LOL!

  16. One thing that strikes me when I read things like Bjoern’s commentary above is how many people seem to love their home country’s auto offerings. Germans love their Mercedes, VW, BMW, AUDI, etc. Swedes love their Volvos and SAABs. Why is it that for the most part Americans hate American cars? Sure, you have your “rednecks” who would buy nothing but American for nationalistic reasons and you’ve got your “hot rodders” who love their muscle cars, but for most people in the States we look overseas first when looking for a new car. Whether it be the perceived reliability and dependability of a Japanese auto or the prestige and design of a European one.

    I think I’m the only one in my neighborhood (I live in California) with an American car in his driveway (I’m not counting pickup trucks as American still rules here for now…) and I only have it (a 2006 Dodge Stratus) because the company I work for contracts with a fleet services company which only carries American cars (likely because they’re cheaper).

    I wish I could have the same pride about my country’s cars as others. There are a few good new American cars (Pontiac G6, Solstice/Sky), but other than that I wouldn’t dream of buying an American car, and that includes Cadillac.

    When I think Cadillac I think “baby boomer”. That’s the target market: wealthier baby boomers. The Cadillac commercials on TV feature music like Led Zeppelin (nothing wrong with that, just not “my generation” (no “The Who” pun intended)).

    I know this blog entry was about Cadillac in Europe, but I thought I’d point out my jealousy about not being proud of my country’s offerings. It’s funny that my country is the home of GM, Ford, and arguably Daimler-Chrysler (the “big-three”)…

  17. We are talking about company cars.
    So, how many choices do we need as a white collar worker, lets say in the medium echelon? Exactly, three: Lexus, Merc and Bimmer (depending where you are living). Some would look to Audi as well. But since it is a Volkswagen with an other brand name, we do not need to consider this one anyawy.

    What´s about the blue collar worker? They get their cars too. Unfortunaltely for them, the have to pay for it directly. What are their favorites? Holden/Vauxhall, Ford and VW or some of these Japanese equivalents. Poor guys.

    And the rest like dentists etc. Yes, for them, we prepair some “individual” cars like Volvos or Saabs with mass produced parts.

    So, what is it all about?
    Right, not being a Chinese in the 50s in an uniform suit with only different epaulettes.

    But unfortunately, that is exactly that we are doing with the help of the big car companies. Look at old pictures from the 80s. Could you distinguish on car from the other? NO! Except one! SAAB 900.
    And look at the streets now! It´s the same! Without an exception.

    It seems to be that the people are enjoying this situation. Or is it due to the companies which use only the tools and processes and employ the same hand full of designers and the people have no choice? Or is it the law?

  18. For what it’s worth – Saab Vs Cadillac

    So GM feels that Cadillac has reached the level of quality to satisfy the Europeans?

    There was me wondering why we are seeing these chiselled blocks of metal in car magazines. Note in magazines and not actually too many of them on our roads. You see it’s not unless you’re some drug pushing pimp who’s connected to the Russian mafia will you find this car attractive. They’re Big, they’re brash and they scream the message, “I’m so full of crap I have to carry it around with me in this monstrosity”. Why on earth anyone would buy a Cadillac is beyond me. Who in their right mind wants to drive something so uneconomical a Flight in a 747 is not only quicker, cheaper but also more fuel efficient. You see that’s the point; that’s the bit that differentiates the Caddy buyer. Cadillac is GM’s Luxury brand.

    Luxury by definition:

    1. great comfort: expensive high-quality surroundings, and the great comfort that they provide
    2. nonessential item: an item that is desirable but not essential, and often expensive or hard to get

    Taking this into consideration, Cadillac fits luxury quite well, almost.

    Cutting holes in a wheelie bin and using it for the Escalade dashboard isn’t even the sort of luxury that the likes of KIA stoop too. You don’t see Louis Vuitton subsidising their products with bits of plastic. So why is GM with their most beloved product? An accountant that’s what, GM builds excellent cars; their production facilities are second to none and that’s a fact. Accounts and time statisticians make GM factories part of the leaders in this field. But accountants also get involved with design too. What we see at a car show, is the true Opel Antara for example. Sleek lines, Chrome air-intakes, beautifully styled headlights. The production version is what GM gets to sell once finance has sucked every last cent out it. Cheap leather and creaky plastics and this is why Cadillac can’t cut it when it comes to luxury. It’s why virtually all motoring journalists say Americans don’t understand what luxury is about. Luxury is about not expenses spared. Cadillac today is the perfect example of ‘scale of economies’ gone wrong. But it looks like somebody in GM has noticed this and things are starting to change. The 2008 CTS is a huge improvement on the outgoing model. Direct injection engines and 6-speed automatic boxes over a 4-speed auto shows someone is realising you can’t offer diamonds but only give coal. GM have a long way to go before Europe starts looking at Cadillac over Mercedes or Aston Martin.

    GM America is responsible for Cadillac. This is Cadillac that isn’t even imported by GM Direct. No, Gm gave the rights to Kroymans to do the job and maybe this is another reason why sales are lagging in Europe. Kryomans also sell Aston Martin, Ferrari, Ford, Jaguar, Landrover, Maserati, SsangYong, Volvo, Alfa Romeo and Nissan, along with GM brands such as Chevrolet and HUMMER.

    One thing I have noticed about multi-franchise is that the Sales staff will sell the easier product. The hard truth is that if you only have one brand to sell then you are going to make sure it sells to put food on the table. With so much to offer is Kroymans really giving Cadillac the right attention? My guess is probably not.

    So where does Saab fit into all this. Without a doubt Saab is stepped below Cadillac. If GM can’t get their pride and joy right what hope does Saab have?

    The answer is more chance than you might think. Where as Cadillac is the responsibility of GMA. Saab on the other hand is under the wing of GME. It might explain why the Saab dashboard couldn’t be equated to something you might find in your Tupperware cupboard. It means that the new 9-3 isn’t directly constrained to what is happening in Detroit. This naturally doesn’t mean that future Saabs will be designed with ‘no expense spared’. Saab is a premium class brand after all or ‘entry level premium’ what ever that means? To be sold to ‘Upper liberals’ who ever they are? So we will see a certain amount of plastic, just like there is a certain amount of plastic used in a BMW or Mercedes for that matter which is often regarded today as not having the same level of luxury they once had 20 years ago.

    Will the Saab be better than the caddy? Well that’s a reality Detroit will have to wake up to. Or maybe not; that big US Burger company has been falsely feeding us dough information in Europe for 30years. Don’t tell me you’ve never wondered why the cheeseburger you have in your hand never looks like the big succulent treasure shown behind the counter?

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