Automotive News - June 7, 2010 - 8

8 • JUNE 7, 2010

GM dealers that were restored must wait to restock
Chrissie Thompson
cethompson@crain.com

Reinstated Cadillac dealer John Holt says his sales staff has never had to sell cars that aren’t already on his lot. But that may have to change. That’s because the Oklahoma dealer, whose Cadillac franchise was part of the first round of General Motors Co. reinstatements this spring, is selling out of Escalade SUVs and SRX crossovers faster than he is receiving

them from the factory. “Our thought process is going to have to change from selling something that’s here to selling something that’s on its way,” he says. Holt started getting new Cadillacs late last month after he, along with other wind-down GM dealers, was prohibited from ordering new vehicles for almost a year. Although they’re glad to see a few vehicles on their lots again, Holt and other dealers say it will

take at least a few months for inventories to return to normal. So far, Holt has received 12 vehicles from GM, and he has sold five or six already after having run two TV commercials. On order are 30 more vehicles, which Holt says is a suitable allocation. But he won’t receive them for about a month, and he’s already out of Escalades and has sold his last SRX. Holt’s store in Chickasha, about 45 minutes outside Oklahoma City, was

one of the 2,000 dealerships hit when GM decided to trim its dealer body ahead of its bankruptcy last summer. The company says it has offered to reinstate franchises at 666 dealerships, and most dealers have accepted. Many more dealers say the automaker, in recent weeks, has agreed to let them back in. GM declined to release an updated reinstatement tally. Holt’s store was selling 100 Cadillacs a year before GM said it would

wind down his Cadillac franchise and leave his Chevrolet operations in place. He says his goal is to have 25 Cadillacs on his lot. Whether his allocation lasts the summer is “going to be real close,” he says. Brian Hamilton faces the same scenario. He is adding Buicks and Cadillacs to his Chevrolet store in Kearney, Neb., after GM reinstated those fransee RESTOCK, Page 24

Free of GM, Saab declares its independence
New owner Spyker cuts costs, shops expertise to others
Rick Kranz
rkranz@crain.com

TROLLHATTAN, Sweden — Saab Automobile AB is reinventing itself as an independent automaker. Since its sale by General Motors Co. to Spyker Cars NV in February, Saab has been re-evaluating every aspect of its business. Big changes are under way or expected. “We are now in charge of our own destiny, which means we can do anything we want,” said Spyker CEO Victor Muller. Saab is slashing manufacturing and engineering costs. It is looking for tieups with other European automakers to share engineering costs, with an announcement expected in the next two or three months. It also is shopping its engineering expertise to automakers worldwide.

BJORN LARSSON ROSVALL/REUTERS

Spyker CEO Victor Muller, shown during a March visit to Saab’s factory in Trollhattan, Sweden, says of his recently acquired automaker, “We are now in charge of our own destiny, which means we can do anything we want.” It is all part of an effort to reduce Saab’s breakeven point to about 80,000 vehicles by the end of 2012 so the automaker can become profitable even as it ramps up its new model line. Saab is replacing its 13-year-old 9-5 sedan with a redesigned model in July. The 9-4X, Saab’s first crossover, arrives in April. The redesigned 9-3 will debut in 2012, and the automaker would like to offer a car smaller than the 9-3 in 2013 or 2014. Saab has targeted global sales of 50,000 to 55,000 vehicles this year and about 100,000 next year. In two to three months, the automaker also is expected to unveil its electrification plan.

As part of its cost-slashing efforts, Saab chopped its engineering budget 40 percent, to $151 million for 2011, said Mats Fagerhag, Saab’s executive director of vehicle engineering. The cuts reflect reductions in development, material and supplier costs and fewer contract workers. “We are gradually moving from a GM strategy of shared components and investments,” Fagerhag said in an interview at Saab headquarters here. In some cases, Saab wants to improve quality over the GM-prescribed components. “You are going to have a Saab car that consists of components and systems that we have developed jointly” with other carmakers, Fagerhag said. He said the first vehicle to benefit from the engineering cost savings will be the redesigned 9-3. Saab is re-evaluating its underused engineering capability. It has worked with a handful of Swedish companies over the years, but that is expected to change. This year, Saab sold the tooling for

the 9-3 and the past generation 9-5 to Beijing Automotive Industry Holding Corp. Production in China begins in 18 months. Saab also submitted proposals for engineering work related to those vehicles. Muller said Saab “will work much more for third parties.” Saab also is targeting manufacturing costs at its lone assembly plant here in Trollhattan. It has state-of-the-art assembly equipment, installed by GM. But Saab’s maximum production is expected to be far less than the plant’s capacity. “We have a huge infrastructure and engineering capabilities for 190,000 cars and overhead costs that are related,” Muller said. Also under review is the amount of assembly automation that will be needed for the redesigned 9-3. “Automation is a very heavy upfront investment. A high-volume plant in most cases gets the payback because of efficiency, quality,” said Saab CEO Jan Ake Jonsson. “But we are only going to be a 110,000-car plant.” c

Ford tries to retain Mercury owners, satisfy dealers
Jamie LaReau
jlareau@crain.com

Downer of a decade
Mercury sales peaked at 579,498 in 1978 but have fallen steadily, especially in the past 10 years.
SALES CHANGE

DETROIT — Ford Motor Co. will take a three-part approach to retaining Mercury customers disenfranchised by the brand’s demise. Ken Czubay, Ford’s U.S. sales chief, told Automotive News that the company is displaying a phone number on its Web sites for concerned Mercury customers to call. By the end of this week, new Mercury owners will be sent a letter addressing the shutdown. Ford also plans consumer offers for service and new-car incentives to retain the brand’s buyers.

Czubay said he did not know how many Mercury owners exist. Edmunds.com data show that nearly 4.3 million new Mercury vehicles were sold in the past 15 years. Edmunds does not have scrappage data. After announcing plans last week to close Mercury by year end, Ford offered the 1,700 dealerships with Mercury franchises cash for the loss of the brand. Total compensation would range from the very low thousands up to about $700,000, sources said. Compensation is based on a threeyear sales average of Mercury as a percentage of a dealership’s total sales. It

also factors in repayment for signs and parts and a blue-sky value, Czubay said. Blue sky measures a store’s intangible assets, such as good will. In an interview, Mark Fields, Ford’s president of the Americas, said the compensation “is beyond what the franchise agreement states. It is beyond what state law states. It’s well beyond what other competitors have done in the marketplace.” For example, most Mercury parts are commingled with Ford parts, Czubay said. Ford will let dealers keep Mercury parts and pay them 100 percent of the value. But one dealer who asked not to be

identified said Ford offered nearly $200,000 in total compensation. He said that’s not enough, given that he invested millions in a new LincolnMercury showroom three years ago. Sources said the formula gives dealers whose Mercury sales were 0 to 25 percent of total sales $1,500 per unit retailed annually. Dealers with 26 to 50 percent of sales get $1,650, those with 51 to 75 percent get $2,000, and those with 76 to 100 percent get $2,500. Last orders will be taken in early August. Ford is offering $1,500 in dealer cash on all Mercury vehicles through August. c

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

359,143 311,787 263,200 202,257 193,534 195,949 180,848 168,422 120,248 92,299

–18% –13% –16% –23% –4% +1% –8% –7% –29% –23%

Source: Automotive News Data Center

http://edmunds.com http://edmunds.com http://www.mightyautoparts.com/harris http://www.mightyautoparts.com http://www.mightyautoparts.com

Automotive News - June 7, 2010

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