Impact of Saab Shutdown on Dealers – and on the New 9-5
…including why the new 9-5 won’t see the light of day.
By Chris Haak
As we noted earlier today, the deal for GM to sell Saab collapsed during the due dilligence phase. This means that Saab will be shut down in an orderly manner and operations will end in the near future. It also means that all 218 of Saab’s US franchises will also close.
GM Europe President Nick Reilly said in a statement, “We regret that we were not able to complete this transaction with Spyker Cars. We will work closely with the Saab organization to wind down the business in an orderly and responsible manner.”
He also was sure to note that Saab’s closure is neither a bankruptcy nor a forced liquidation process. Consequently, the company expects Saab to satisfy all of its debts including supplier payments and to wind down production and the distribution channel in an orderly manner while looking after our customers.”
Saab’s sales have slowed to a trickle over the past few months as the brand’s future has been in serious jeopardy. Just 7,812 new Saabs found owners in the US through the first 11 months of 2009. The brand’s peak year in the US was 48,181 in 1986, before GM owned a share in the company. Peak Saab sales during GM’s two decades of ownership occurred in 2003, with 47,914 cars sold. In November 2009, just 371 units were sold. That’s just 1.7 cars per dealer, and hardly enough to sustain the high costs of operating a franchise anyway. So dealers are now stuck with an average of 10 orphaned cars that they will have to sell over the next few months, likely at large discounts.
Nationally, there are about 2,100 Saabs in dealer inventory right now, which equates to a 130-day supply (or about 10 cars per dealer). The Saab dealer closest to me appears to have already prepared for the inevitable over the past year. The stand-alone showroom built in 2000 to accomodate a new Saab franchise in 1998 (pictured above) was converted to a Kia showroom this past year, and the Saabs were moved across the street to the Cadillac store. Although there are a few Saabs interspersed among new Cadillacs, the dealer didn’t even bother to give its Saab franchise the dignity of a permanent sign. Instead, a vinyl Saab banner is tied to the bottom of the Cadillac sign. First class all the way.
We’ve already seen many folks clamoring online for GM to salvage the finished-but-not-launched Saab 9-5 sedan and slot it into another brand. While it would be technically possible to do, the 9-5 has numerous Saab-specific design and interior features that would look out of place anywhere but on a Saab. You can’t stick a Chevy bowtie (or even a Chevy front clip) on a 9-5 and take the car seriously. Yes, it’s a huge shame that lots of money and labor went into a 9-5 that will likely never see production, but the Economics 101 principle of “sunk costs” will probably sink the car. In case your college economics book is a little dusty, the theory of sunk costs basically states that any costs incurred in the past should not influence a decision going forward if that decision is not the best one at the moment. GM would spend tens of millions of dollars (if not more) to produce and properly launch the 9-5 as another car, it wouldn’t fit into the lineup, and its chance of success is far from a sure thing.
This situation is truly a shame – both for Saab, its fans, its employees, its dealers, and even the stillborn 9-5. But in the unlikely event that you can manage to get your hands on one of the pre-production 9-5s, you may want to hold onto that one for a few years. It seems to have the makings of a collector car.
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