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Forget this one.
As pointed out by Saabrep, the article was originally printed in 1993, but for some reason Automotive News decided to republish it today.
Nothing to see here except my own acute embarassment but I’ll leave it up anyway as a lesson learned.
Automotive News – in addition to telling us about the lack of buyer interest in Saab as a company – also have a story today on vehicle profitability.
The gist of the article is that manufacturers are going to use what will be a down year in sales in 2009 to try and increase the profits they make on each vehicle sold. If they’re going to struggle, they may as well make it worth the struggle, right?
Saab feature as a part of the story:
Saab Cars USA Inc. will halt discount leases Feb. 1. Instead, dealers will receive cash payments based on reaching 75 percent, 90 percent or 100 percent of their sales quotas. Saab will not disclose the cash amounts.
“It’s a reallocation,” said Saab spokesman Steven Rossi. “You have a certain chunk of money, and you have to ask what is the best way to spend it. We’ve been spending a lot of money and we want to bring it under control.”
In addition, Saab Cars USA expects its own profit per vehicle to improve as a result of recent restructuring and downsizing efforts.
“We may sell the same number of cars but we have enhanced our profit potential,” said Bill Kelly, president of the U.S. subsidiary.
First question – who the heck is Bill Kelly?
OK, aside from Mysterious Bill (everyone gets a nickname here at TS), what seems to be going on here is the mothership moving the carrot from the customer’s nose to the dealer’s nose.
They want the dealers to work harder to close a sale at what they perceive is the real value of the car rather than throwing cash after customers again and again and again. GM got themselves into the incentive trap after 9/11 and it seems everyone’s realising that it’s a road to nowhere in terms of ongoing viability.
Saab have consistently been at or around the top of the list when analysts like Edmunds release their true cost of incentives data. In December 2008 they were second on the list, spending $5,508 per vehicle on incentives. Only Lincoln spent more in December and the average incentive for European carmakers was $2,963 per vehicle.
If this is going to work, SaabUSA and GM are going to have to ensure three things:
1) Realistic vehicle pricing – they’re going to have to price the vehicles at a point that really reflects value for money within the sectors they occupy.
2) Much more effective marketing – It’s hard to say it in this climate, but you’ve got to spend money to make money and Saab’s advertising and marketing budgets were frozen well before the current credit crunch and ensuing economic hardship. From information I’ve received over the years, Saab’s US ad budget has barely increased since around 2006, if at all.
3) Killer product offerings – well, duh.
——
I think this is a good move. Some in the US will whine and moan about the cost of cars being too high.
Save it. You’re paying less than anyone else and other manufacturers are going to follow suit.
UPDATE: despite this article being 16 years old, the premise still applies. Amazing, isn’t it? END UPDATE
Saab’s residuals have been miserable for ages now and the way to address that is better vehicles, better quality, better pricing. They’re bring the first to market as we speak, scores indicate they’re achieving the second, and this measure is intended to work on the third.
It might even have a chance of working if they give it the support it needs.
7 responses so far ↓
1 Markac
// Jan 9, 2009 at 11:25 am
At the moment the dealers need need new product. You can give the dealers all the incentives in the world but they are still trying to sell basically a geriatric 9-5 and a middle aged 9-3. And the 9-3 isn’t aging as well as the 9-5 did (must be to much Opel blood!). At this moment even the 9-3 crossover could give the dealers something else to sell. I would just hate to be in their shoes.
2 Tedjs
// Jan 9, 2009 at 11:29 am
Here is another interesting piece of information: I just got a flyer in the mail from the GM card and they will ‘top off’ my earnings and give me $3000.00 towards the purchase of a new GM vehicle. And the 2008 and 2009 Saab 9-3 are FINALLY included in the list. It is about time.
So, with the $4000.00 cash back + the $1000.00 loyalty cash + the $3000.00 on my GM card earnings that is $8000.00 off the 2008 vehicle. Dang! And my dealer still has that gorgeous 2008 titan grey metallic Aero SportCombi in the showroom with every conceivable option on the car.
Too bad I am not in the market for a car right now… I really may have considered something like that.
3 rian
// Jan 9, 2009 at 11:30 am
You have said it so well. You have nailed it. I have left a dozen comments on previous posts talking about true value. If you are going to charge to much for a product, at the least you better have one hell of a marketing campaign to make people at least emotionally buy into it long enough to get the papers signed. Saab is trying to compete in the BMW, Audi, etc. league. They are a niche brand and should be embracing that developing products in the niche pricepoint. Like between the VW and the Audi! That is the true value anyway, and people would actually be talking in the reviews about how much more value they got from their saab over what they actually paid. Currently every(nearly) review says the exact opposite. It is frustrating because it is right in front of them. They just need to get real with who they are and who their customer is. It’s that simple. Oh and divorce GM. I’ll say it again: Free Trollhattan.
4 Alex
// Jan 9, 2009 at 11:34 am
Realistic pricing is key, as the era of internet research makes MRSP’s a crucial part of the car-buying experience. It’s not that Saabs are bad per se, it’s just that there are better cars for the money at their MSRP pricepoints.
Of course they don’t sell at MSRP, but the luxury car consumer who’s new to the brand doesn’t know that. They’re used to paying sticker for BMWs, Mercs, Infinitis, etc and they’ll assume the same about Saab. At sticker the 9-3 isn’t anything near competitive, but if you subtract the $4-5k in incentives that GM will lose on most of the ones sold in the US from the sticker they become a hell of a lot more competitive. Take the 9-3 Aero XWD for example, as a ~$40-45k car it’s hopelessly outclassed by the faster 335i and the better-equipped A4, but at $35k it would rival the G37 on the bang for your buck scale.
I don’t think it would lead to a tremendous amount of new sales, but combined with a smart ad campaign (like the one they’re running on billboards all around Boston) it could make 2009’s sales a bit closer to 2006 or 2007’s. They’re not great cars, but they’re good enough to be selling at least a bit more than they are right now.
5 JohnK
// Jan 9, 2009 at 1:19 pm
I agree with Alex. Saabs are priced too high here in the US market for what they offer compared to other luxury cars. A 9-3 Aero is not worth 40-45k no matter how you cut it. The car should be priced around 30-35k tops to compete. The 9-3 is a nice car but it doesnt compare to the 3 series or A4 not to say it couldnt. They also dont hold their value like the other euro brands.
I think more Saabs would sell if they brought the price back down to earth.
6 Saabrep
// Jan 9, 2009 at 2:47 pm
the article was from 1993!
7 Swade
// Jan 9, 2009 at 2:55 pm
Holy schmozzoli!!!
You’re absolutely right. Why republish it now???
I got suckered badly on that one but I’m sure it didn’t have that subheading when I first read it.
D’Oh!!!