Chery After Volvo? Why Not Try Buick, Pontiac or Saab?

Posted by: David Kiley on July 7, 2008

volvo-v70.jpg


Caijing Magazine quotes unidentified sources as saying Chinese automaker Chery is looking for bank and equity investor help for a possible bid for Volvo, Ford’s Swedish nameplate.

Hmmm. Chery has not exactly been a good judge of opportunity, talent or value up to now. And this deal, if true, is no exception.

Chery is known for its obstinate, unbending, mercurial ways of doing business with Westerners. Just ask the folks at Chrysler who have been trying to get a small car program off the ground with the company. It’s aborted foray into the U.S. via a deal with Malcolm Bricklin speaks for itself.

It will take, I’m guessing, something like $4 billion-plus to get Volvo away from Ford. And then, you have some pretty dug-in, obstinate Swedes to deal with. You want to know how tough to work with? Just ask the Ford people who have been trying to wring costs out of that unit for the last eight years. Saab workers, I think, may be more flexible to do a deal on labor costs and rules with Chery knowing the company is not going to be as bendable as GM has been.

If Chery really wants to buy into the West, it should try and take advantage of General Motor’s neediness right now. Make GM an offer to take Saab Cars off the automaker’s hands. No money changes hands. And offer them $1 billion for the Buick brand or Pontiac brand. Why Buick? Buick is huge in China. Go figure. Yes, the joint-venture GM has in China is with Chinese automaker SAIC, so that might be a stumbling block. But Pontiac could be an interesting flyer to take. Again, GM might just give the brand to Chery if it will assume the task of supplying dealers with product to head off lawsuits against GM by dealers. Then, combine product development and distribution of Saab and Pontiac businesses in China and Europe, and send China-made Pontias that are Federalized over to the U.S. to dealers who still want to carry the brand.

Chery could probably strike some sort of alliance deal with GM through which GM stays in the manufacturing end of Pontiac as a U.S. alliance partner. But I’m guessing GM might want to be done with it as much as possible and show Wall Street is finally taking out the trash.

GM, because Buick is so strangely popular in China has been loathe to part with the brand. But it would gladly give up Pontiac and Saab.

If the Swedes give you pushback Chery, tell them that Saab manufacturing is moving to China or Eastern Europe, or the brand will be shuttered. You won’t have paid anything for it, so you have nothing to lose. Closed. Done. Here is a secret. Saab Cars has never…NEVER, NEVER, NEVER…earned a dime. Whatever profits have been squeezed out of Europe have always been more than offset by losses in the U.S. That’s why GM would be glad to get rid of it for free.

Reader Comments

Nick

July 7, 2008 10:07 PM

Volvo has a good brand identity and modern products, versus all the generic Ford sub-brands (Mercury, Lincoln, Saab..). I'm surprised that Volvo isn't yet profitable considering its product range. Chinese car makers are selling their tin-cans the same way as toilet brushes or a pair of sneakers..they don't see the difference.

Markus Fors

July 7, 2008 10:32 PM

No Mr David Kiley, I will not take this. I'm one of those people you just called "pretty dug-in, obstinate Swedes to deal with". I've worked on the assembly line at the Torslanda plant since 4 years now. Have you ever been to a Volvo assembly plant or been in contact with a Volvo worker lately or ever?

To call us all pretty dug-in obstinate that are tough to work with is a bit harsh I think to say at least. Let me just tell you this: The improvement that has been done lately this year to cut costs at the assembly plant has mostly been done by teamleaders together with the workers at the plant, not Ford guys, not even our own executives. A team-leader take care of 5-10 workers and we are all blue collors. You're completely wrong about your judgement about us blue collors working at the plant and you are totally out of touch by saying that we are dug in and obstinated that are tough to work with. We are everything BUT that.

I recommend you to visit the place and see what we have done and what we are doing to improve our business. It is people like you and statements like this that makes people at the plant a bit unmotivated to keep on making sacrifises everyday due to the declining value of the dollar or do you seriously mean that it is our fault that the dollar is falling faster than you can spell George W Bush. We are aware that Volvo cars's losses has been substantive since the dollar has fallen so fast in so short period of time but it has more to do with the U.S domestic economy then it has to do with Volvos worker being dug-in obstinated or not.

I strongly disagree with your statement and I think it shows poor judgement on your behalf.

Best Regard
Markus Fors, On the line assembly worker for Volvo Cars at the Volvo Cars Torslanda Assembly Plant.


From Kiley: I respect your position very much. And I have no doubt that individual workers are tremendous people who do not want to see their jobs go away. But the history of the Swedes (Swedish management, union heads and the government) working with Western owners to find profitable solutions has not been good. The culture, as it has been described to me over the years, not unlike the UAW in America, is more about protecting jobs than creating profit in a global economy.

Bill Schmidt

July 7, 2008 10:45 PM

A really good proposal.

Buick? I always wondered why they kept Buick but let Olds go. Olds has quite a history -- whereas, for the last 50 years, Buick has seemed like a brand for older drivers.

I was told that the 1969 Olds Cutlass Supreme Coupe (yes, I'm dating myself) was GM's top seller at that time.

Toronado was exceptional and very unique -- especially the early years. And it's drivetrain powered the incredible GMC Motorhome.

Aurora and Alero technology was also quite good, considering anything else GM was selling at the time.

Someone told me they kept Buick because they'd signed Tiger Woods. If that's really true, no wonder the General is having so much trouble hanging onto his stars!!!

Swade

July 7, 2008 11:59 PM

Here's another secret. David Kiley has never....NEVER NEVER NEVER... had a good thing to say about Saab, who must be the most miraculous company ever to survive for 60 years without ever making a cent.

My mistake. They may have made up to 9 cents at one stage. But they've never made a dime.

Saab are one of the brands GM owns that actually has some points of difference and real untapped potential.

Jon Towne

July 8, 2008 12:33 AM

And what specifically will "Cherry" do for my love of Volvos?
I will never buy the brand 'asian' if the Chinese get their hands on them.
I buy Volvo and I like the new Saabs; but God forbid if a Chinese company becomes the 'owner' of the brand.
It was hard enough to swallow Ford ownership; at least the Swedes were left to their own designs/manufacturing.
The Chinese will destroy the brand and the Swedes will be worse off for it.
I pity Saab. I really do like the brand.
I pity the world if Chery dictates Volvo.

saabyurk

July 8, 2008 7:50 AM

"Saab Cars has never…NEVER, NEVER, NEVER…earned a dime."
Not to nitpick, but there was 1994 (and all the years up to the mid 1980s:
http://www.answers.com/topic/saab-automobile-ab?cat=biz-fin

From Kiley: My understanding is that is that the Saab Cars unit, just the unit that makes cars, when it was isolated from the trucks business and other Saab divisions, has never earned profit.

Some Dude

July 8, 2008 9:06 AM

Selling Buick brand is out of question because it is GM's premier brand in China. Saab likewise is priced out of Chery's budget.

Chery still is a small auto manufacturer by global standard, worth less than $4.3 billion it offered for Volvo with debts counted in as assets.

WooDz

July 8, 2008 2:47 PM

I realise that people in journalism have a job to do and must fill space but this article is a weak watery soup with no substance and is a barrage of ill-researched blether at best.
It is obvious you have no understanding of the global auto industry and world cultures. You may have a good grasp of how it is done in America but to be honest this the biggest problem facing Detroit’s big three. Unlike many other global manufacturers who are quite capable of producing a diversity of vehicles from one architecture with it’s own brand identity and driving dynamics. US car builders on the other hand think the idea of badge engineering is as it sounds and just change the bright-work and logo, then ponder as to why the product doesn’t sell.

You could be right is saying that the Swedes are a difficult bunch to work with, mainly due to the fact that in Saab’s case; they have been banging their heads against the wall for 18 years in trying their best to educate their owner that a Scandinavian vehicle is not an American one with a Swedish badge on it. Neither is it a German one with a different logo. I’m quite sure employees at Volvo have had the same problems but at least they have managed to keep their heritage and brand image intact though-out Ford’s ownership.
Saab on the flip-side have not had such luck and have seen the loss of their notorious Hatchback design and many innovations have been touted as a waste of R&D funds and an exercise that will not be repeated under GM ownership. These have included a passive 4-wheel steering application and a 32-Bit optic-fibre engine management controller, that not only makes safety systems react in 100th’s of a second but also reduces the excessive weight that normal cabling produces.

For nearly 5 years auto-makers have been aware of the steady increase in fuel prices yet have still forged ahead with their SUV programs, all blindingly lead by greed and the natural large profit margins expensive SUV’s deliver. Although compact vehicles don’t offer the same margin levels, they have the advantage that they are more affordable and in Europe at least, often outsell SUV’s ten-fold. Some may argue that SUV’s are not as attractive in Europe as they are in the US. However; this is with good reason, at nearly $6.50 a gallon and $700 in road-tax per year people’s attitude toward small versatile cars are changing very rapidly. USA’s transport industry alone contributes 6% of the world’s total CO2 output, so it is good to see that just as fuel prices reach $4 a gallon, buying trends are a changing.

Just to give an idea of how much 6% is, Sweden’s TOTAL carbon footprint for 2007 represented just 0.2%.

GM may be in a bit of a pickle at present but they are far from alone. It would be suicidal right now for GM to sell the ‘supposed’ struggling Saab brand where Saab’s engineering applications can be found in millions of GM products from the Chevy Cobalt to soon to be launched OPEL Insignia. Not to mention that Saab is GM’s only true global brand and has a 15 year advantage over Chevrolet, GM’s only other newly re-formed global brand.

Saab a company based on innovative design and engineering, that have a sporty, fun to drive appeal that are safe and ecologically friendly.

Now who wouldn’t want to drive a car like that.

Katie Leung

July 8, 2008 3:42 PM

Jon Towne

Stop abusing God's name.

I believe God treats everyone equally and with love.

So stop taking His name in vain.

Mike

July 8, 2008 6:57 PM

Markus Fors: He's got it pretty much on the nose. Compared to us in the US, Swedes are pretty inflexible. Want to make things a certain way and will not waiver.

I think that Chery needs to re-think their Western aims in the first place. They will not be successful with their lack of understanding of Western culture and safety requirements.

I can see it now.... lead paint, weak structural members that fold in a crash, lack of parts availability, no warranty support and on and on.

They will fail. Miserably.

Seann Scot

July 9, 2008 12:35 AM

SAAB is the most innovative company GM has right now and isn't going anywhere. They are not stupid enough to sell it off. SAAB has been a leader in engineering, style, and safety. Thier cars typically get 5-star crash ratings, which cannot be said for the rest of the GM line up- they still have something to learn from their Swedish little brother.
On another note- SAAB is also leading the way in alternative fuels as well, which is the future of GM and all automakers

ballbuster

July 9, 2008 5:10 AM

Markus Fors and Woodz:
Both of your responses have given Kiley more credit than he deserves. Despite his pretension, Kiley knows "jack" about Volvo and its car production. If his article did not appear with the BW badge behind it, readers would conclude Kiley couldn't write out of a paper bag. Even the best of Kiley's articles are more akin to tabloids than in-depth researched and carefully thought-out journalism about the global car business. So, for all of you serious readers, you need to lighten-up on Kiley. After all, Kiley, like the rest of us still needs his job.

ballbuster

July 9, 2008 5:16 AM

Katie Leung:
Please do not use this forum to express your religious belief. This Blog is about cars. Jon Towne's reference to God was just a passing colloquialism where as yours is intended to express a religious belief.

bigdawg

July 10, 2008 7:40 AM

With the chinese so anxious to buy foreign nameplates, GM should make a quick buck by selling them the Oldsmobile name (the same goes for Chrysler and the Plymouth nameplate). What use are they to GM and Chrysler? Ford paid six mil for the Rover name....Olds should be worth more.

Luis Stancato

July 10, 2008 1:04 PM

I agree with Marcus Fors from Torslanda`s Volvo assembly plant.
Volvo `s problems are not their workers.About that, I`m proud of my 1992 Volvo 960 sedan car. It is bullet-proof and well made. And I don`t want to change the car every 4 years. I`m a really "green" consumer.
Luis Stancato, Buenos Aires, Argentina

Ovidiu Miron

July 11, 2008 11:54 AM

Even if Chery is known for its obstinate, unbending, mercurial ways of doing business with Westerners I guess this image could be changed.

Bob Irwin

August 26, 2008 1:07 PM

While I will be the first to admit that SOMETHING needs to be done with Volvo & Saab, your proposal to sell to the Chinese is terrible. I propose that the Swedish government grow a pair and fund the re-purchase of Saab & Volvo, combine the assets, and once again offer the world the elegance of the Swedish engineering teams that made these cars so valued in the first place.

Of course, these brands will not compete on the world market if forced to produce generic, pedestrian models, but if allowed to produce the world's safest, most fuel efficient/horsepower, functional cars, buyers will buy them.

There is a reason that many will pay a premium for a BMW or a Mercedes. The reasons may be different on why a buyer will pay a premium on a Saab or Volvo, but having owned 3 Saabs over the years, I will tell you that they were the most satisfying cars I have ever owned. Before it was popular, my 1986 Saab 900 SPG delivered 30 mpg, had the highest NHTSA safety ratings, could pin the speedometer at 140 mph, and oh, by the way, I could put a sofa through the hatchback with the seat folded down.

Let the Swedish engineers be Swedish; we need them!

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