PARIS SHOW: Saab reboot for Feb

2010 PARIS MOTOR SHOW NEWS SPECIAL

The Carsales Network has learned that Swedish car company Saab will make its return to the Australian market early next year.

Just prior to Saab's media presentation at the Paris motor show, we met with Executive Director of Sales, Adrian Hallmark, who filled us in on the latest news concerning Saab's return to the Aussie market.

"Monday, we agreed the business plan," he began. "It's taken longer than expected by about three weeks -- the reason being, looking at all our priorities as a company, we need to put cash into Australia to start the business moving, of course.

"When we're spending money on investments, we need to make sure it's going in the right direction.  So we have a clear business plan for Australia. It's, to use the banking phrase, a 'stress-tested business plan'. That means: 'What if we can only do as well as this?'

"And there's an upside that says 'What if we could really make it work in Australia? How good could it be?'

"In the worst case scenario, it's still viable. We have to be there. In the best case scenario, it's almost a case of me throwing away my Blackberry, buying a surfboard and going and being the importer [for] Australia -- because the potential is huge, and I'm being flippant, but that's the kind of joking summary that we've given to the quality of the potential in Australia.

"So we have a committed bunch of dealers -- already. They've even been prepared to step up and place orders in readiness for that decision, before we'd made the decision -- so that when we do get moving, the cars are already on the water, in the pipeline and we can start fast."

According to Hallmark, the company would have preferred to kick off sooner rather than later, but it was not to be. 

"I think first of January would have been great, but there's probably a risk on the first of January, just in terms of legal set-up and one or two other factors. So first of February is the absolute latest date, that we'll be active with an own subsidiary -- Saab Australia or something -- activated, selling cars, selling parts, looking after customers, looking after dealers."

Just in case that slipped by -- as it did indeed the jet-lagged brain of the Carsales correspondent, the new Saab distributor in Australia will be the factory itself, not Inchcape, as had been rumoured.

"It is our subsidiary, this is why we've had to be absolutely clear on the business plan, because we're putting our own money in. That is, for us, a very important distinction. Having said that, we may use third parties to distribute cars and parts -- in terms of trucks.

"We'll use outsourced partners for parts warehousing, parts distribution, car distribution, but we will manage the parts portfolio, pricing, bonuses, target-setting, customer support, marketing, PR..."

So there'll be a Saab head office somewhere in Australia?

"Absolutely. We don't have a head office, we haven't registered the company, we've got potential partners to do the outsourced work, but they're not signed up, so until that's defined I can't be more precise; but the business plan is clear, it's agreed... First of Feb [at] latest, we'll be operational."

What happened with Inchcape (distributors of Subaru in Australia)?

"They looked at it, we looked at them, we looked at three other candidates and for various reasons we decided to do it ourselves.

"We know it can work with [independent] importers, but we also know that Australia is historically good for Saab. But we've been through this difficult period, and to some people, some companies, funding that recovery or putting the commitment into that recovery is risky. So we could pay someone else to take the risk or let someone else take the risk and support them, but it comes to the point where you think 'Why give them the money? Why not do it ourselves?' Because we're going to spend the money anyway, we may as well have the return as well as the risk."

The difficult period to which Hallmark refers is the last 12 months, when former parent and recovering bankrupt, General Motors, put the iconic Swedish firm up for sale -- and no one showed great interest in the middle of the Global Financial Crisis.

That is now behind Saab, following the somewhat protracted sale to Dutch company, Spyker. But with the threat of plant closure hanging over Saab, there were no new cars being built or shipped to Australia, let alone being ordered by GM through its local overseer, Holden. It has placed Saab now in a position where brand management has been arguably damaged and there's a lot of work to be done convincing buyers in Australia that they can trust the new management.

"We want to show we're in, we'd even consider investing in retail [businesses] too," said Hallmark. "We have [done so] in three other major cities around the world."

Hallmark would like Saab and its parent company to have a direct financial involvement in perhaps as many as 20 retail outlets around the world. If Saab can be properly re-established as a brand in Australia, a factory-owned retailer here would make some sense.

"In Paris, London, Frankfurt, we have our own [retail] subsidiaries... and I could even imagine we could invest in retail in Australia.

"There's also a possibility, as Porsche did in Melbourne, to try and link the investment in the premises to have both in the same domain so that you can get some synergy effect from that.

"That's not yet determined, but all of these options are to be considered -- and we'll be considering them fast."

Under the new business plan, Saab would be largely supported by multi-franchise dealers.

"There's very few places in the world where we can generate enough business to be stand-alone," said Hallmark." Even in Sweden it's difficult, because the cost of operating a car business is so high, there's very little [margin left]...

"Multi-franchising is inevitable, wherever we are. I don't want to comment today on exactly what our franchise strategy is in Australia, because I don't know. We have existing partners, some of whom have said 'please, we want to continue', we've got other partners that haven't said anything -- and until we've been out there and worked with the ones who want to work with us and then had meetings with the rest and looked at how we can develop that business, I can't comment in detail.

"But I would say, the first principle is we've gotta have the right footprint to support the sales potential in the short-to-medium term, but also the service support necessities in the immediate term.

"There are thousands of Saabs in Australia that are currently being cared for, but we've got to make sure that we support those customers, because they're a rich source of our future business.

"What we must balance all of that with is the need to maintain profitable operations; we don't want to put four dealership points in a city where we can do with two. It's a balance of convenience and sustainable profits for the investor -- because if we can make them profitable, they'll invest. They'll create better experiences for the customer, they'll do better marketing and they'll give us better representation."

Using Renault as a case of a company that left it too long to re-establish the brand after leaving the country, Saab seems to be better placed, effectively counting 2010 as a write-off for sales.

"The Aussie dealers already say we're on the limit, but let's hope that we're right," Hallmark responded on that point.

"It's official in so far as we've made the decision and communicated with the Australian dealers... although we've not yet formally said exactly what we're doing and when we're doing it in a press statement."

How will the new Saab fare in Australia, we asked? Would sales success be contingent on the new Saab 9-5?

"We can separate image from earnings, if you like," Hallmark answered a little circuitously. "The earnings of any car is a function of its margin multiplied by its volume. 9-5 will not be our biggest earner.

"If you look at the Saab brand in Australia, we did to some extent become the yellow Saab convertible brand, which is not a bad position to have, compared with a boring company car brand -- but it's not broad enough for what Saab should and could be.

"I'll be specific, 9-4X we'll be launching in LA in a few months' time; that will be a huge potential earner in Australia. Somewhere between Q5 and Q7, a Touareg/Cayenne-sized platform car with a 300hp twin-turbo engine. For the Australian market, sounds like a good fit."

So the new, as yet untried SUV will be the point of difference between Saab as it will be and Saab as it was. With the Australian market's current love affair with SUVs, the faith in the 9-4X makes some sense, but where does that leave the new 9-5 and other models in the Saab product portfolio?

"9-5 will be an image-[builder] but niche model in that range," replied Hallmark. "9-3X, the wagon 4WD, we think could be interesting -- especially with the twin-turbo diesel. I know diesel is moving in a more fashionable direction in Australia now...

"And of course the Cabriolet is a key product for us. They don't all have to be yellow either...

"I think from a [sales] volume point of view, 9-3X, Cabriolet combined will probably do the biggest volume; we'll do some sedans too, but I think we're more a lifestyle brand than a volume saloon-car brand in Australia.

"9-4X will be important to us, I think that will be the biggest margin-times-volume effect in our portfolio. 9-4 will be the biggest gross generator of contribution... And 9-5 -- important for the image of the company."

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