As GM looks to offload its Hummer brand, how does the company feel about perennial financial underachiever Saab? GM COO Fritz Henderson tells Dave Leggett that while the brand is strategically important to GM, it is no sacred cow and has to perform.
Like Ford, GM’s management has taken a decision to offload any assets or brands that is does not see as vital to its long-term survival. Cashing in is part of a restructuring process to rebalance the company, get better use of capital and focus efforts on making the commercially viable parts of the company as profitable as possible.
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And these are tough times demanding that some tough decisions need to be taken. In GM’s case, Hummer is well and truly on the block with rumours of initial expressions of interest from Russia and India.
Is it worth the effort (management time) and expense (investment bank fees) to sell something like Hummer? Is it a distraction with the integration issues and didn’t Ford end up spending a lot of management time on the Jaguar Land Rover sale to Tata?
“I’d do a little work for $2.3bn, actually,” says Henderson.
And Hummer, he believes, was at a crossroads that demanded a decision as part of GM’s strategic planning.
“In the end, we have to decide what we want to do with the Hummer brand. Do we want to reinvest, grow it, what do you want to do with it? You’ve got to make some decisions…”
While he sees Hummer as a strong and iconic brand, the problem is that it doesn’t fit GM’s plans going forward.
“With all the things GM needs to do, I’m not sure it lands in our priority list any more. Therefore we have to look at alternatives.”
There is interest in Hummer, he maintains, but it’s too early to say how concrete that is.
“ Information memorandums will be made available this month to interested parties and then we’ll see. My objective would be reach some decisions on this no later than the end of the year. That doesn’t mean that we will necessarily close by the end of the year, but we’d like to reach decisions and I think that’s a reasonable timetable.”
So, if GM wants rid of Hummer, what about putting Saab in the shop window? The unit has long been a loss-maker and, while GM has upped product development plans for the Swedish minnow in recent years after a period of protracted neglect in which the maker eked out a meagre existence on just two models, how committed to Saab is it? Desperate times require desperate measures?
Or is Saab a kind of sacred cow?
“No, it’s not a sacred cow and we want all of our brands to perform. But if I think of the global premium market, what’s one of the fastest growing segments? Entry premium. It is still large and growing.
“Where are our customers going? They are looking at smaller packages and four-cylinder engines, turbocharging. Saab meets those requirements – that’s its DNA.
“We’ll have to see if the next generation of Saab vehicles is successful, but this is a brand that doesn’t cross-sell with other GM brands, the customers are highest income, highest level of education, the vehicles are highly fuel-efficient, turbocharged four-cylinder engines…I think it’s worthwhile for us at GM to try to make it a success.”
And Saab is now heavily integrated into GM now, Henderson says, with the idea of a standalone 100,000-unit auto manufacturer in Sweden disassembled over time.
Henderson acknowledges that Saab’s financial results haven’t been satisfactory.
“Historically, Saab has not been a source of profitability for us.”
But he believes a strategy is coming together with two elements – the brand and manufacturing economics – to address that.
“On the brand issues, the product range was too narrow, we didn’t have sufficient scale and so it’s about broadening the brand and making it more relevant with a bigger product portfolio.
“And on the economic issues, concentrating production 100% in Sweden for a global manufacturer, with exposure on exchange rates, wasn’t the right thing to do. So what we’ve done is take steps to integrate Saab into GM. We’ll build a Saab crossover vehicle in Mexico, we’ll build a Saab mid-size sedan in Russelsheim and we will build Saabs in Sweden too.
“All of that addresses a currency footprint which, over time, was posing unacceptable risk.
“What we want to do is make the Saab brand successful and that’s our objective.”
Dave Leggett
