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GM Mulls Saab Strategies as US Sales Flag
Author: Johanna Iivonen
Publication: WMRC Daily Analysis
Date: September 20, 2004

Abstract: GM's Saab sales in the US have this year fallen seriously behind the brand's annual target of 50,000 units.

Full Text:
WMRC Perspective

Significance

GM's Saab sales in the US have this year fallen seriously behind the brand's annual target of 50,000 units.

Implications

GM is considering increased incentives to boost the brand's sales, but may be in a limited position to do so due to currency exchange risk, as European imports have become more expensive.

Outlook

GM is keen to roll out the 9-7, Saab's SUV model built on a Subaru platform. Such strategies are likely to continue as the company is diversifying the Saab brand so that it can become a strong, profitable global marque.

Incentives Planned To Boost Flagging Saab Sales

General Motors' (GM) Saab division is struggling to meet its annual sales targets in the US this year, Automotive News has reported. The company sold just 25,813 Saab units in the US during the eight-month period to 31 August, according to the report, meaning that sales have fallen seriously short of the 50,000-unit target this year.

The company may introduce higher incentives to give sales a boost as the year is approaching its end, but Saab USA President Debra Kelly-Ennis admitted that currency differentials might make this more difficult. 'We are doing anything we can to get Saab on track,' Kelly-Ennis was quoted as saying. According to Automotive News sources, Saab's incentive spending in the US has been significantly reduced this year. The strengthening of the European currencies against the US dollar has this year curtailed the profits of those manufacturers who import their vehicles from Europe.

Meanwhile, data from TNS Media Intellignce/CMR shows that GM also slightly reduced its advertising spending on the Saab brand in H1 of the current year. The company spent a total of US$37.8m on Saab advertising in the US, while the full-year 2003 figure was US$77.3m.

Subaru-Fortified Models Hoped to Revive the Brand

Saab sales in the US have suffered as the brand still lacks a sports-utility vehicle (SUV) in its stable. Kelly-Ennis was quoted in the report as admitting that the Saab product line is 'much more narrow than others' and that customer demand is significant in segments where the brand does not compete. SUVs have become the backbone of the world's biggest new vehicle market and it is very difficult for a brand to perform optimally without one. GM has recognised this fact, and high hopes are being placed on the launch of the 9-7 SUV model, due next spring.

Dave Towell, an Ohio Saab dealer, was quoted by Automotive News as stating that the company desperately needs an SUV, and that sales are being lost prior to the launch of the 9-7 next year. GM is implementing its new Global Architecture platform strategy by bringing its many brands closer to together, at least on the production line - the 9-7 is built on a Subaru platform and such strategies can be expected to be used increasingly in the future. In addition to the 'Saabaru' model developments, plans also exist to do the same with the Saab 9-3 and Opel Vectra in Europe (see Sweden: 3 September 2004: GM Europe May Close Saab's Trollhättan Plant).

GM has taken steps to ensure that Saab's brand identity is transferred to the new platforms. It has hired Swedish designer Ola Granlund, born and raised in Trollhättan, to head the 'Saabaru' models' development, according to Automotive News. Granlund has spent time in Japan, working with the Subaru division, in an attempt to add a Scandinavian approach to the new model development process.

Outlook and Implications

GM is paving the way for the diversification of the Saab brand. The brand's model range requires a presence in significant market segments, such as the SUV segment, where rival Swedish make Volvo has performed strongly. Increased platform sharing with Subaru is an example of the company broadening its thinking in its attempts to revive its core operating profitability. GM's US truck range has been criticised as having lost some of its market appeal and the company is now also diversifying its US truck line-up by taking cues from its foreign divisions' and subsidiaries' models.

Flagging Saab sales follow GM's reduced advertising and incentive spending on the range. The currency exchange risk has made Saab more vulnerable in the US, as GM has less leeway with the level of incentives it can offer to end customers. This is likely to facilitate GM's plans to diversify the Saab marque by increasing platform sharing between the brand and other GM makes, such as Subaru and Opel. GM's rival, Ford Motors, announced on Friday that it was restructuring its exclusive European brand Jaguar's production in Europe (see United Kingdom: 17 September 2004: Car Production to End at Ford's Jaguar Browns Lane, UK Plant Despite Union Protests). Given GM's struggles to revive its core profitability, it remains to be seen how long it will take the company to follow suit and announce further restructuring at the traditional Saab Trollhättan plant as the Saab brand is reconfigured to best perform on the global market.
 
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