It’s not much fun being a Brit at the moment and having to worry about the outlook for Jaguar and Land Rover, writes Rob Golding. And it’s getting a bit like that in Sweden with Saab and Volvo both in the same situation.
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They are not formally for sale yet, but ownership respectively by GM and Ford means that the holdings can only be described at best as “loose”.
Those of us who follow the two wounded American players quarter by quarter, have seen an interesting switch of positions. GM looked like it was getting there. Ford’s inferior financial position made it look like it might not. The third quarter announcements by both last week suggest that GM is making heavy weather of the markets and that Ford is more confident that it is – as CEO Alan Mulally kept saying as he trotted through his slides – “on plan.”
It is within that context that we must consider the remarks made by Ford and GM about their Swedish brands.
In answer to his first question on Volvo, Mullally said: “We can do better than we are today at Volvo. It has got a good product. Now we have got to get the cost structure.”
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By GlobalDataVolvo is going to be orphaned because Jaguar and Land Rover will have disappeared from the Premier Auto Group (PAG) early in the New Year. Ford says that Volvo’s financial performance will be broken out in the accounts in future in the way that PAG is today.
One interrogator on the analyst’s conference call wanted to know if Volvo had been loaded up with all the PAG overhead costs in order to liberate Jaguar and Land Rover at prices that buyers could stomach. No, said Don Leclair, Ford’s CFO. PAG’s overheads were inconsequential. Getting costs right were a pure Volvo issue whose problems have been exacerbated by very unfavourable exchange rates. Volvo is to be retained and restructured after Jaguar and Land Rover are gone. “We are keeping Volvo, and that is what we have decided…for now,” was the way that Mulally put it. The “…for now” was very telling.
On Wednesday, GM’s CFO, Fritz Henderson, had been closely interrogated about Saab. “We have continuous challenges at Saab,” he said. The product isn’t in a good position. There is not enough excitement and the model clarity is not great, but GM’s viewpoint is that currency is the killer. “Sweden to the US is not easy. Translation of the Euro and the Swedish Krona to the dollar is very tough,” according to Henderson.
Planning a car business around currency forecasts is no way to go, but negative trends are usually enough to nudge managers into reviewing the competitiveness of the whole business. That is clearly what is happening at Saab. It’s a good brand and the people that buy it remain extraordinarily loyal but conquest sales are very hard to come by.
It is clear that both Swedish brands would be sold if there was a buyer, but the established motor industry has wised up to the idea that growing your own brand is far better than trying to consolidate an established one.
The emerging makers though, have such a strong need to accelerate their learning process that they will buy off-casts, which is why MG and Rover brands now reside in China and Indian interests have their chips on the table in the auction for Jaguar and Land Rover.
It’s a fair bet that the only reason that the ownership of the two Swedish brands is not on the move again, is because the car brand market, like the global car market itself now, has more sellers than buyers.
Rob Golding
