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Saab leaving the ATL for Motown


Saab leaving the ATL for Motown

Saab Cars USA is moving itsU.S. operations from Atlanta to Detroit at the headquarters of General Motors, which owns Saab. Saab Cars officials expect to be in GM's world headquarters at Detroit's Renaissance Center by Sept. 7.

It is not a surprising move. The move enables GM to trim Saab's headcount from its current 80. And it makes it easier for Saab's operations and product development to integrate with GM.

"We save significantly on facility costs. We save significantly on structural costs, because we cut down on redundancies. It will give us the full ability to tap into more opportunities with GM North America," said a Saab representative.

Saab has posted an annual profit only twice since GM acquired a stake in 1990, and is in the midst of an aggressive product expansion in the United States, where it has only offered two models, the 9-3 sedan and bigger 9-5. Saab is launching the 9-2x, a small and sprite sport sedan built off the Subaru WRX, later this year and the 9-7 SUV, built off the Chevy Trailblazer, next year. GM owns a stake in Subaru parent Fuji Heavy Industries and is trying to share vehicle architectures across alliance partners and GM-owned brands.

Through April, Saab's U.S. sales were off 27.3 percent from the year-ago period. The 9-3 sedan, built off GM's Epsilon architecture, has received good marks in the auto press. But the company still has to offer profit-killing discounted leases to move vehicles. GM views Saab long-term as the third leg of its luxury stool that also includes Cadillac and Hummer. Where possible, GM has been dualing Cadillac and Saab dealers. -Jim Burt

2005 Saab 9-2X by Marty Padgett (5/10/2004)
Saab gambles part of its future on a very strong hand.

Bush: no tapping the strategic reserve

Against a background of calls for oil use from Democratic politicians, the Bush Administration said on Tuesday that the strategic oil reserve would not be tapped.

U.S. Energy Secretary Spencer Abraham told reporters that the White House would not "play games" with the reserve, which is held for use during times of national emergency. Democrats, including presidential candidate John Kerry, have called for the opening of the reserve to soften the shock of rising gas prices. On Monday, the Energy Information Administration reported that the price of a gallon of unleaded gas now averages $2.017, a record numeric high. The Energy Department also forecasts gas prices to keep rising through June. The reserve, according to Reuters, holds about 660 million barrels now and the administration plans to boost that amount to 700 million barrels by next year.

Gasoline Prices Up for Summer Drives by Joseph Szczesny (5/17/2004)
Fueling a return to inflation is a distinct possibility, economists warn.

Magna buying New Venture Gear

Magna International will purchase the assets of New Venture Gear for roughly $435 million, according to Reuters. The DaimlerChrysler parts operation has an order book worth $1.5 billion in sales last year, and factories in upstateNew York and Germany. The operation had been on the market since last fall, when DaimlerChrysler said it would sell non-core businesses. New Venture had been a joint project with DaimlerChrysler and GM until 2002, when GM pulled out. According to Reuters, Magna will first purchase 80 percent of the business, and will acquire the remainder in 2007.

Is Volvo planning U.S. production?

Volvo Cars and its owner, Ford Motor Company, have had internal discussions about building a crossover SUV for Volvo at the Chicago plant that is beginning production of the Ford Five Hundred, Ford Freestyle, Mercury Montego, and a future Mercury crossover based off the Freestyle. The Ford and Mercury products are built off the Volvo P2 platform that underpins the S60/S80.

Volvo needs a manufacturing hedge against currency swings of the Swedish kronor against the U.S. dollar. "I think it's a matter of when, not if," said one senior Ford official. "It's just a matter of getting things squared away with Ford and Mercury in Chicago first, but there is a lot of interest in this because of how important Volvo's profitability is to the PAG (Premium Automotive Group) strategy." Said the official, who spoke on background: "Volvo is the easiest brand out of PAG to transfer some production to the U.S. because of shared platforms and architecture with Ford going forward and because the most important aspect of Volvo's image is safety, not the fact that the cars come from Europe. That's not as much the case with Jaguar and Land Rover." -Jim Burt

Ford says his namesake's on track

Ford Motor Company CEO Bill Ford says his company's going to make $7 billion in pretax profit by the middle of the decade - without being too specific on when the middle of the decade might be. Wooing analysts, Ford estimated that the company would churn out 40 new products and would tackle emerging markets like India more aggressively. This year, Ford is planning on pretax profits of about $4.5 billion; in the first quarter Ford earned nearly $2 billion before taxes.

Toyota Earns $10 Billion by Jim Burt (5/17/2004)
That's right -- with a "b."

Sachs: rates will hurt sales or profits - or both

Goldman Sachs auto analyst Gary Lapidus said Thursday that a hike in interest rates would cool auto sales by 600,000 units on an annualized basis, and that automakers would have to raise discounts and lower prices to give consumers an additional $1100 per vehicle to keep the status quo.

Automakers are carrying nearly a 100-day supply of unsold vehicles heading into the summer sell-down. Lapidus says automakers would be better off cutting production than cutting pricing further when rates climb as they are expected to do. Much of Wall Street expects the Federal Reserve to increase short-term rates by 50 basis points or more before the year is out.

Low rates, the Bush tax cuts, and consumers opting for longer and longer loan terms, noted Lapidus, have driven demand and the average price of a vehicle as consumers opt for more gadgets and features and luxury cars - as long as they can have seven years to pay off the loan. It's worth noting that profits have not been rich at GM, Ford, or Chrysler during this period of low rates and high sales volume.

Lapidus said automakers are unlikely to cut production to offset falling demand because of their "prisoner's dilemma," or the fact that the Big Three have too much manufacturing capacity and must pay UAW workers whether they work the lines or not.

Lapidus advised clients Thursday to stay away from auto stocks in an environment of rising interest rates.

Ford, for example, impressed Wall Street in the first quarter by earning 96 cents a share, double what was expected But its guidance for the whole year is only $1.50-$1.60 per share because of the need, the automaker believes, to hike consumer incentives the rest of the year to keep the metal moving off dealer lots.

Prudential joined the auto bears, downgrading the auto parts sector to "unfavorable" from "neutral" citing a pending ascent in the Federal Funds rate. Prudential said "investors perceive that rising interest rates will choke off the demand for vehicles, which will have a negative impact on earnings for the automakers and suppliers." -Jim Burt

Detroit agencies tightening belts

BBDO Detroit is laying off 100 employees in a belt-tightening move. The agency handles all of Chrysler's national and dealer advertising. The automaker has been exacting cost cutting from all its suppliers and its ad agencies are no exception. BBDO is a unit of Omnicom.

Cuts could also be following at GM ad agency Chemistri, say sources. Chemistri CEO Pat Sherwood recently announced he is leaving. And top creative executive Gary Topolewski left for BBDO to work on Chrysler's business. Chemistri's clients include Cadillac, Pontiac, GM Service and Parts Operations, and several global GM operations. There are rumblings that GM is unhappy with the departure of Topolewski, and Chemistri owner, Leo Burnett Worldwide, is scrambling to find a top-drawer replacement. One possibility, though, is moving the national advertising of Cadillac to Leo Burnett's office in Chicago where there is a wider pool of creative talent. Such a move would drain headcount from the Troy offices of the agency. Detroit has long been dogged by the difficulty in attracting superior advertising talent from markets like New York, Chicago, and San Francisco. -Jim Burt

Smart taps New York ad agency

Mercedes-Benz USA selected Kirshenbaum Bond & Partners, New York, to handle a brand positioning project for its Smart car, slated to launch in the U.S. in 2006.

Kirschenbaum Bond is long-established ad agency with a good track record for combining advertising, public relations and so-called "buzz" promotion. It did breakthrough work for Snapple in the 1990s when the soft-drink was getting off the ground. It also does work for Target, Citibank, and Hennessy Cognac.

Smart will launch in North America with the formore SUV in two years, and the plan is to grow the product lineup here with smaller vehicles targeted to European and Asian markets. Mercedes-Benz will be following on the heels of BMW's MINI brand and Toyota's Scion, trying to launch a brand aimed at youth and young-minded car buyers who shy from the bigger mass brands. -Jim Burt

DCX Extends Schrempp's Deal by Jim Burt (2/23/2004)
Bernhard moves to Mercedes as DCX shuffles its execs.

Subaru launches new ads

Subaru this week kicks off a new ad campaign for its 2005 all-new Legacy, refreshed Forester, and all-wheel-drive technology.

Subaru spends about $150 million per year on advertising. Six of the seven new television spots, all carrying the endorsement of spokesman Lance Armstrong, feature individual products with one TV spot specifically touting Subaru's all-wheel-drive system. The ads will run on cable and spot TV.

Subaru is in process of trying to take the brand upscale into premium territory where it hopes to be viewed more as a competitor to Volvo than Honda or Nissan.

New print ads feature high-fashion photography of the vehicles and an interactive layout. The print ads will begin appearing in late May in weekly publications such as People, Newsweek, Sports Illustrated, Time, and Entertainment Weekly. The ads will also run in the July issues of national publications including Cooking Light, Men's Health, Vanity Fair and approximately two dozen other national publications. The effort also involves the largest direct-mail initiative in the company's history, the first consumer ride and drive event in more than ten years, new Web ads for PDAs, online virtual test-drives, and vehicle support for the nearly 25 niche affiliate organization relationships.

TM Advertising created the ads. But Subaru is in the position of launching the new ads just after it announced it was beginning a review for a new ad agency, though TM is invited to compete in a review of ad agencies.

Subaru insiders say the company and brand is in a muddle, with Japanese management pushing U.S. managers to implement a strategy that will help the company justify more transactions north of $30,000. A loaded Outback wagon is above $30,000. And the company in 2006 is expected to launch a seven-passenger crossover it hopes will be compared by consumers against the Volvo XC90 rather than minivans like the Mazda MPV and Honda Odyssey, which are priced far lower.

Last year, Subaru sold 187,000 vehicles. This year, with the launch of the all-new 2005 Legacy and Outback, the company expects sales to increase to 204,000 units. -Jim Burt

 
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