A few things that worry me about GM’s plans
There are several things in the plans that GM announced yesterday that give me hope as a Saab fan.
First, the mere fact that Saab continue to be mentioned was a good thing. The fact that them being mentioned wasn’t in terms of them being liquidated was another good thing. That the 9-4x was spoken of was a good thing. That the new 9-5 was spoken of was a good thing.
But there are still several things that were (or weren’t) mentioned that raised red flags for me.
1) Dodgy assumptions
GM have based their numbers on certain economic conditions. For example, they assume that new vehicle sales will fall to 14 million vehicles in the United States. This is less than what many people are predicting, so they’re being conservative.
The worrying thing is that they’re also basing their numbers on an oil price of around $150 per barrel. This is for the next few years. Whilst oil has fallen a little this week, it closed at $147 per barrel last week. That $150 figure is looking very optomistic.
And that ties in perfectly with…..
2) 18 of 19
Much was made of the fact that 18 out of 19 of GM’s new releases over the next few years are going to be either cars or crossovers. The big news here is that they won’t be gas-guzzling trucks.
You’d think this would be a good thing, but I don’t think it’s as good as it seems on the surface. What they really need in the next few years is a core of smaller, more fuel efficient cars, in order to woo some of that market share back from the Japanese companies, who must be weary now from beating off customers with big sticks.
Those new cars/crossovers include the Saab 9-4x, the Cadillac CTS coupe, a Cadillac CTS wagon, Cadillac SRX crossover, Chevy Camaro, Buick Invicta, Chevy Equinox crossover, Chevy Traverse, Chevy Cruze (it’s a derivation of cruise, just in case you missed that) and the Chevy Volt. Add in the Saab 9-5, too.
That’s not 19 models, I know. GM are keeping a few up their sleeve. But have a look at them. No, they’re not gigantic hulking SUV’s and they may even be fuel efficient relative to the competitors in their respective segments.
The problem is that nearly all the segments are midsize and above. In these fuel-conscious times, where they’d really need vehicles consistently getting 30mpg or more, they’re introducing barely any that are likely to hit that mark.
Please note that there’s still no confirmation about a Saab 9-1 being produced. Instead, Saab themselves are going to produce a six-cylinder crossover for the United States market. The 1.4 litre motor that was unveiled in the 9-X BioHybrid (well, the petrol version of it, at least) will go into the Chevy Cruze and may never see the inside of a Saab engine bay.
——
Right now, GM are implementing decisions that were made a couple of years ago. That’s how long it takes to design and build a new car.
A few years ago, they didn’t see that oil would cost what it costs now. But they should have seen it trending that way and made plans.
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An interesting side note…..
Saab’s ad account with McCann Erickson is worth $55 million in 2008.
How much do you think GM are spending on Cadillac in Europe. I reckon they’d be burning $55m in Europe quite easily when you look at new dealerships taking it on, developing Euro-centric marketing and promotional material, etc.
Now imagine how much better Saab could do in Europe if they had an amount equivalent to SaabUSA’s ad budget to pump out more advertising in Germany and Spain.
Kill Caddy in Europe - you know it makes sense.
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One thing that also been mentioned in Swedish media is that GM will cut down on motorsport. I wonder how much money they put into that. They don’t do any open-wheel racing (like F1), they don’t race prototype sportscar (like Le Mans). The only thing I know they do is to race in WTCC under the Chevrolet brand (Daewoo cars).
Another thing that is interesting is that there is no mention at all about the Saturn brand. Isn’t that the brand for smaller fuel-efficient cars in the US? They don’t mention any new car from the brand, and they stopped the rebadging of the Opel Insignia. But they still claim that no other brand other than Hummer is under strategic review. Weird…
If Saab could have used half of the money wasted on trying to launch Cadillac in Europe, we’d have long ago seen 9-3 Coupe and 9-3XC crossover versions. Maybe Saab did make some mistakes, but it’s corporate parent has done an even better job of wasting money.
It’s sad that there’s still no news on the 9-1. It’s a car Saab needs far more than any 9-7x SUV replacement. Anyone with half a brain can see that. Unfortunately that half brain is a shared commodity at GM and where Saab is concerned, it gets used so infrequently.
ctm: If any other GM brand is under stragetic reveiw, I’m sure GM would be reluctant to announce that fact until it has some concrete options and ideas.
ctm: Saturn has been more positioned to compete with Honda (and Toyota) in my opinion. Their cars are relatively fuel efficient; however there is no real standout in the line up at this time. The Astra has some potential to fill this roll, however it has not really caught on with U.S. buyers just yet due to it to it relatively high sticker price. It start’s around $16,500 and can easily be optioned out to close to $20K.
It is a good looking car though, much better than a Corolla but it misses the mark against the Civic. Honda owners love their cars, and I think the car would have to offer a bit more to convert buyers.
Given that nobody can predict where oil will be in two years, it would be in the Generals best interest to invest in smaller more fuel efficient vehicles so they are best prepared for supply disruptions etc.
On a positive note, George Bush gave Americans distressed by high energy prices a good wakeup call the other day; He told us to “turn off our air conditioners”…. Brilliant. I am there dude. I am there.
ctm,
They support NASCAR in the US. They also support “stock” car series in other countries, including Saab’s effort in Touring Car here in Canada (well documented on this site).
Bernard,
Good to hear. I thought the Saab’s runing in Canada were without backing from GM. But that support will probably be scrapped if what I have seen in the Swedish press is true…
Tedjs,
Would Opel work as a brand in the US, or is it totally off the radar?
GM’s stocks have definitly gained back some ground in lieu of all these announcements.
I don’t think it’s an easy thing to stop selling Caddilac’s in the western europe. GM will face lawsuits from those Cadillac dealerships and due to GM’s current state, I don’t think that’s something smart to do.
ctm,
Saab Canada is listed as a sponsor on jlracing.net, and they do a lot of marketing together.
Opel may work in the US, but Saturn already sells a lot of Opel products. I don’t think that it would be worth it to rebrand Saturn into Opel, especially given the fact that Opel does not have much awareness on this side of the Atlantic. It’s certainly less well known than other brands we don’t get: Renault, Citroen, Fiat, Peugeot, Alfa Romeo, etc…
“In these fuel-conscious times, where they’d really need vehicles consistently getting 30mpg or more, they’re introducing barely any that are likely to hit that mark.”
That’s exactly what I thought, Swade. They were all mid-size and Crossovers. I still see trouble for GM in the future unless they put out some smaller, fun, fuel-efficient cars.
Might I humbly mention the fact that Saab/GM was going to watch the sales of the C30, among others, to gauge success of the 9-1.
I certainly could be wrong, as I haven’t done too much investigation, but I hear the C30 has not sold too well, and this is despite the rising gas prices.
Therefore…perhaps they are still on the fence in terms of cost-analysis? By that I mean GM may not want to pull the trigger if they can’t sell X number of vehicles- and if the estimated sales numbers are below profitability then it’s not likely to happen.
Sport Mode: if Saab really did their homework would they be coming out with the 9-4X? I’d hazard a guess that they’ll sell fewer of these than Volvo sold C30s.
I think GM is VERY leery about selling smaller cars. They got high off the hog with their SUV/truck cash-cow. There just isn’t the profit margin in smaller cars and with the dollar being so weak against the Euro and Kronor they’d hardly make any money selling the 9-1. I was just reading about how Audi has decided against selling the A1 in North America after all. The A3, their current entry-level car in the U.S. costs close to $30K when optioned-out. I don’t think the A3 has exactly been selling like hotcakes. And even if it does the profit margin is low. Audi would MUCH rather sell a Q7 or Q5 or whatever in the States and make more money off each one sold.
Gripen, that’s my point exactly. Most Americans won’t be put out just because times are a little rough. We will give it a collective thought and then find a happy medium. Most people will not take the plunge for a Civic that has no space or comfort just to save money on gas. They want what they want and that’s a fuel efficient SUV or as close to one as you can get.
If the Mini can sell well in the US, and the Civic can be the best selling car in the country, I see no reason why a Saab 9-1 wouldn’t do well.
The C30 doesn’t offer utility, sportiness or great fuel economy (it gets roughly the same mileage as a 9-3), so it’s not a good yardstick.
From GM’s point of view, the 9-1 is an Astra with an extra $2,000 in materials that sells for $5000 more (give or take). What’s not to like? It would do very well if it came in around the price of a GTI.
Actually ck1x, Honda was the only brand to show growth in the US in the past month if I am not mistaken. It’s not to say that we American’s don’t want our SUV’s (myself not included), but that some people are in fact coming to their senses and buying the smaller, more fuel efficient vehicles.
As for the c30, I think I may have only seen one or two on the road, however, Bernard is right, the mileage is awful for a car of its size, when you can get a much more substantial car with similar mileage at a similar price point. I think comparing it to the “9-1″ would be right if only looking at size, but when taking into account fuel efficiency and actual utility, it looks like it is a lackluster effort on Volvo’s part.
That rear hatch on the C30 is just about useless too.
Honda can make money off of Civics sold in the U.S. because they build them in North America (Alliston, Ontario, Canada). They don’t have the exchange rate problem GM has importing cars from GM Europe (thank you, NAFTA!). So there’s more profit margin in selling a Civic in the U.S. than in say, selling a Saturn-ized Opel or a Saab imported from Europe.
Gripen, you have hit the main issue. Our dollar has fallen so far in value that importing anything not built in Canada or Mexico is a money loser. Every car company has increased prices on their 2009 cars even Toyota. A 9-1 built in Sweden could not be sold for under 28K without GM losing money on every one. The Astra is a prime example, they are very nice driving cars, but it does not have enough premium features to justify the price.
Relatively small US sales should not bar Saab from making the 9-1 because it would most likely be Saab’s top selling model in most other markets.
The US may be Saab’s biggest single market but if 85% of 9-1’s were sold outside of the US and it became Saab’s top selling model, that would still be a very significant number of cars, and that should not be ignored. Saab is after all, a European company.
Perhaps the Mexican plant that is going to make the 9-4x could also build 9-1s for the US and Canada, well at least the base models. The more expensive Aero models etc. could still be imported from Sweden.
ctm: Bernard is right in that Saturn is becoming ‘Opel in America’. And that is not a bad thing. They have some pretty decent product right now, and sedans like the Aura might be catching on a bit – it is not a bad car.
The Astra GTC looks like it might be a fun car to bring over here and might generate some more enthusiasm in the vehicle.
I do think Americans now want fuel efficient cars and they are more willing now to consider that than ever, especially those who have an SUV and maybe a mini-van in the driveway. Gee, I have a neighbor complaining about that right now. And they kind of like the size and flexibility of my 9-3 wagon.
Might the wagon be ‘hip’ again? Stay tuned.
The real question is: what is the tipping point on fuel economy for that crossover vehicle at $4.00 a gallon? Mid 20’s? High 20’s? Not sure on that one.
For those who want a bit more performance, the US market Astra does not offer a turbo. For those who want really impressive small-car mileage with an automatic transmission, the Astra has neither a diesel nor a hybrid to boost the numbers into the mid-to-upper 30 mpg range. For those who like it as is, the VW Golf/Rabbit offers just about the same thing for less, and with better interior trim options. The Astra is quite a fine car, just not clearly better than the competition.
For society as a whole, more is accomplished by getting 15 mpg cars to hit 20 mpg than in getting 28 mpg cars to hit 35 mpg. However, current market conditions make the latter goal appear far more impressive. Both Saturn and Saab should bear this in mind. Pretty good is not good enough. Why not stand out?
I really seems that the board of GM consists of old schmucks who think that everybody wants to have their Cadillac and bigger kind of automobiles than their Japanese competitors are manufacturing.
The sales of Cadillac BLS have been in rock bottom and they haven’t even brought out the wagon version of that car yet (although me and my friends saw it last year in Trollhättan). Nobody’s really wanting any Caddy here in Europe so why bother to manufacture a European Caddy? Just try to sell those US versions here in Europe since the exchange rate between Euro and USD would now support it (so if it’s “must” to try to sell Caddy here in Europe). That’s why Dodge is selling their models quite cheap - well at least here in Finland.
Another thing is that Japanese and Korean automobile manufacturers are constantly winning some new ground with their smaller cars. For example here in Europe people do prefer smaller cars than in US. I think that the bosses in GM fail to understand that point of view. They’re only thinking they’d know what US customers want and thus everybody must want the same. Well, that’s not the case…
If those US bosses of GM could open their eyes and see how their competitors are winning new ground with their smaller products, they’d try to do the same - and even produce that Saab 9-1 what we’ve been waiting for.