Roughly one month ago, General Motors agreed to sell Saab to Spyker cars for approximately $400 million in cash and preferred stock. Whether or not this deal was a good value for GM was discussed in a previous post, but as a follow-up, the viability of this deal to Spyker will be discussed here. Spyker, though a car manufacturer, is a completely different type of automotive maker in terms of sales, employees, financials, and business model. Saab is also facing declining sales and a suffering brand image – two trends Spyker hopes and plans to reverse. The profitability of this deal is very difficult to predict and is dependent on many variables, but in all likelihood, this project is going to fail.
Spyker Cars is a very small, Dutch luxury maker of high-end sports cars, and despite being an automotive maker, Saab is a completely different kind of business. Spyker typically makes around 50 cars per year for a selling price in the ballpark of a quarter of a million dollars apiece, whereas Saab sold 40,000 cars in 2009 and 100,000 cars in 2008, each in the ballpark of $40,000 apiece. Compared to Saab’s 3,400 employees, Spyker has about 130. Spyker’s models are largely made-to-order and sold at just 36 dealerships worldwide, while Saab’s models are mass-produced and sold at about 150 dealerships worldwide. While these figures alone cannot predict whether this will be a successful deal for Spyker, they certainly are not figures showing support for the deal and compatibility between the two companies. The success of the deal is going to come down largely to how well Spyker and its management team can make the move from a small, niche market carmaker to a mass-producer with worldwide recognition.
Saab is being purchased at one of the lowest points in the company’s history. As mentioned previously, Saab sales have experienced a massive decline. In 2007, Saab sales were over 130,000 cars, and since then sales have fallen to 40,000 in 2009 – less than a third of 2007 sales. While the current economic downturn can be blamed in part, most of this was the doing of GM. In a response to Courtney Stuart’s article regarding the future of Saab, a current Saab owner writes:
“What GM did to Saab was short of criminal, they de-contented these cars to a HUGE degree and turned Saab into a marketing name with no substance.”
Many consumers share this same sentiment, as evidenced by the falling sales and declining brand image in the automotive community. Now that Saab has been sold and the opportunity to begin anew has presented itself, Saab stands a chance to be rescued. However, as the above figures, dissimilarities between the two companies, and consumer sentiments suggest, Spyker faces an uphill battle with this deal.
Great post. I'm particularly interested in your comments that Spyker seeks to revitalize Saab's image. If we separate ourselves by a degree its interesting to notice as much as Saab's name might gain if Spyker proves competent in operating it, its own brand name might take a hit. Saab's reputation hasn't been one of quality, rather one of inexpensive, affordable, decent-quality automobiles. Virtually the inverse of Spyker. From that standpoint Spyker should control it with an arms length, but perhaps its own luxury brand taking a hit might be a worthwhile cost from a utility perspective if you consider the good it might do for the Saab brand would be enough to revitalize it and create higher revenue than Spyker itself was previously capable of.
ReplyDeleteOn a different note, your research is very impressive. It's amazing just how staggeringly different the scale of the two companies is based on the numbers you provide. Most surprising to me, however, is that Spyker operates 36 dealerships. Do you know if they're partners or individually Spyker? Otherwise it seems they'd be selling very few cars per dealership.
At any rate, as you conclude your post - because the bar with Saab's brand name is so low at this point virtually any improvement Spyker can fulfill with Saab would be an accomplishment. For their sake, they should hope they can translate that likely increase, no matter how small, into enough profit that it doesn't shut both out of the picture.