SAIC to purchase Buick? Rumor mill in overdrive
Rumors regarding the possible purchasing of Buick by SAIC have been going around since the probability of GM going bankrupt started early last year.
Various media outlets are linking SAIC to the possible purchase of either Buick or Saturn. The potential Buick purchase is linked to the brand only, which which give SAIC the rights to use the Buick brand in China on any car they see fit. Seeing as SAIC already have the MG, and have spent a lot of money on developing the Roewe brand, we cant see a purchase of the branding alone being a gigantic benefit for SAIC, although Buick sales in China are still very strong.
SAIC has also been linked to a purchase of the Saturn dealership network in North America. This would give SAIC a ready made dealership network covering the USA, for a potentially very low price. But do SAIC have cars that they can deliver to Saturn straight away? The answer to that is likely to be a firm no, but the MG brand is growing outwards, could we see the first MG hit American shores in 2010 via Saturn dealerships? Maybe, but probably not.
Tweet This
Share on Facebook
Digg This
Save to delicious
Stumble it
RSS Feed
Saturn is out of question because Saturn dealers own the majority of Saturn Distribution Corp under the proposed spin-off, and Saturn Distribution Corp already announced that they found a “world-class” automaker willing to supply a full-range of vehicles to be sold under Saturn brand in place of GM from 2012 model year(Starts from September 2011), which suggests they landed a sourcing deal with some Japanese or Korean automaker already selling in the US(This is why this new partner could supply a full US-legal vehicle line up by September 2011). Saturn’s new partner will be announced in 3 weeks.
As for buying Buick brand, this is actually feasible because GM’s heading to bankruptcy court(already decided), and SAIC could make a direct cash bid on Buick brand to bankruptcy judge. But Buick is considered a critical asset of “New GM” under Obama administration and SAIC’s cash bid on Buick would trigger a diplomatic dispute with the US administration trying to restructure GM through prepackaged bankruptcy process.
@IHC:
Saturn’s “announcement” was made by a dealer, who pretty much looked like a nutjob to me. I don’t think it’s gonna happen. Even if it’s true, which Japanese or Korean automaker would be remotely interested in Saturn? They don’t need Saturn; it would be more of a liability than anything else. A Chinese automaker on the other hand, would instantly gain access to a network of dealers in the US.
To complete the post;
Then they could sell their cars as rebadged Saturns. Like Saturn A3, or Saturn Panda.
@ Fiziks
> Saturn’s “announcement” was made by a dealer.
That dealer is the head of Saturn Franchise Operations Team. In other word, he represents all Saturn dealers.
> I don’t think it’s gonna happen.
The deal has already been struck.
> which Japanese or Korean automaker would be remotely interested in Saturn?
That mysterious Japanese or Korean automaker is not going to buy Saturn Distribution Corp. Saturn Distribution Corp will be majority owned by dealers themselves as GM’s divorce alimony to dealers(Otherwise GM has to pay back dealers $1~2 million to buy back each franchise, a total of $0.5 ~ 1 billion that GM doesn’t have), with the mysterious automaker investing in a minority stake to provide operating capital.
> They don’t need Saturn
Well, it is sort of like your local supermarket’s private brand product concept. The mysterious automaker simply sells Saturn-branded vehicles and parts to dealers as wholesale for a profit. Profit comes from volume sales and utilization of idle capacity, which every automaker has right now.
> A Chinese automaker on the other hand, would instantly gain access to a network of dealers in the US. Then they could sell their cars as rebadged Saturns. Like Saturn A3, or Saturn Panda.
But Saturn dealers don’t want to risk their business with unproven Chinese vehicles. The replacement vehicles from this mysterious automaker has to be equal to or better than previusly GM sourced vehicles in order for Saturn dealers to continue business as usual, which excludes possibility of Chinese cars. Reselling Saturn’s former competitor’s vehicle is risk free. The same isn’t true with Chinese vehicles from Chinese venders, which can’t even have a full US-legal vehicle line up ready by September 2011, the cut off date.
Saturn is already off limit to Chinese automakers for now. They must wait 2015 or so before Saturn dealers could consider selling vehicles from another automaker.
IHC – Would you adjust your argument a little if you knew that shortly before the Saturn dealer announcement, Nanjing Auto returned home from the USA stating that they had found an entry path into the US market?
I would also like to point out that the Saturn announcement was not about a world class automaker but of an automaker of world class cars…
@IHC:
So, basically what you are saying is, this Japanese or Korean automaker would assume the role of GM in supplying cars and parts for GM? That’s downright stupid. Why would anyone get into brand fratricide when the Big Three already showed what redundant brands will get you into?
@Windy: This means we will have MG’s over here? Yay!
“in supplying cars and parts for Saturn”. That’s what I meant.
@ Windy
> Nanjing Auto returned home from the USA stating that they had found an entry path into the US market?
Saturn dealers must start fielding non-GM vehicles on their lots starting early next year and complete the transition by the September of 2011(GM’s stated cut-off date). Nanjing clearly cannot deliver a full line-up of US-legal vehicles by September 2011. Only an Asian manufacturer already selling a full vehicle line-up in the US could meet such rapid transition schedule.
@ Fiziks
> So, basically what you are saying is, this Japanese or Korean automaker would assume the role of GM in supplying cars and parts for GM?
GM would supply parts and warranty(US government if GM files for bankruptcy) for GM supplied Saturn brand vehicles prior to September 2011 transition.
This new Japanese or Korean automaker would supply parts and warranty for Saturn brand vehicles it supplies to Saturn Distribution Corp.
> That’s downright stupid. Why would anyone get into brand fratricide when the Big Three already showed what redundant brands will get you into?
GM’s problem was that GM could not supply Saturn-brand vehicles to Saturn dealers without taking a loss on them due to their high cost structure. The substitute Japanese/Korean manufacturer would not be burdened by such high legacy cost structure of GM and turn a profit on cars they supply to Saturn Distribution Corp.
@IHC
January 2009 sales figures for Saturn – 6,172 units.
If I have that figure correct then SAIC could easily match those numbers by 2011 with a little extra investment. Obviously the Saturn dealers are going to want significantly better sales than that but matching current figures while building up would be better than bankrupcy! It makes sense for Nanjing/SAIC and if the dealers don’t have a better option… For SAIC, now is the time to do it, while they have the opertunity.
@ Windy
> If I have that figure correct then SAIC could easily match those numbers by 2011 with a little extra investment.
US federal homologation is a tough, lengthy, and expensive process(Just ask Geely, which did try US frederal homologation and was humiliated), something that even companies like Ferrari sometimes runs into trouble. There is no way SAIC could have replacements for each one of Saturn’s current 7 model line-up homologation by September 2011.
> Obviously the Saturn dealers are going to want significantly better sales
Which is done by reselling better than GM supplied models, not selling Chinese cars. If you are a Saturn dealer, would you really feel comfortable selling unproven Chinese vehicles on your lot???
> It makes sense for Nanjing/SAIC and if the dealers don’t have a better option…
They do, reselling rebadged Saturn’s competitor’s vehicles. Dealers know what they are selling, and there is no risk to it.
> For SAIC, now is the time to do it, while they have the opertunity.
Saturn Distribution Corp will be majority owned by Saturn dealers themselves who are resistant to selling Chinese vehicles, and the only way SAIC could convince Saturn dealers to go along with its plan is to subsidize GM supplied vehicles so that GM would continue supplying existing Saturn models past September 2011 and slowly substitute them with SAIC’s models one per year over 7 years. In other word, pay GM $20,000 for GM supplied Saturn vehicles and resell them to Saturn dealers $17,000.
Replacing GM-supplied Saturn line-up with SAIC supplied Saturn line-up is totally different than say Nissan or Hyundai supplied Saturn line-up.
http://www.tradingmarkets.com/.site/news/Stock%20News/2262676/
So SAIC has valued Buick brand at $1 billion. It would be interesting what would happen when SAIC submits $1 billion bid on Buick brand to bankruptcy court during GM bankruptcy proceedings.
Its better for GM to dispose both Saturn and Buick brands and sell it to SAIC,besides SAIC has the money and power to make these brands more popular and profitable…
@IHC:
> GM’s problem was that GM could not supply Saturn-brand vehicles to Saturn dealers without taking a loss on them due to their high cost structure. The substitute Japanese/Korean manufacturer would not be burdened by such high legacy cost structure of GM and turn a profit on cars they supply to Saturn Distribution Corp.
“Legacy costs” as you call them represent a small fraction in the cost of an automobile. Any automaker as big as the Big Three have huge overhead – high cost structure. Just ask Toyota; they have been burning through their cash for a while now; losing billions each month.
And what I meant was; what sense does it make for Hyundai to supply Saturn a RWD coupe, for example, if that is going to compete with the Genesis Coupe? And then there you have your redundant line-up.
@ boogiecat
> Its better for GM to dispose both Saturn and Buick brands and sell it to SAIC,
GM will not sell Buick, nor will Obama administration. Buick is essential in GM’s Chinese market sales strategy and Obama administration will raise a diplomatic confrontation with China if SAIC makes a bid on Buick brand in bankruptcy court.
Even so, SAIC’s cash bid on Buick brand in front of a bankruptcy judge handling GM bankruptcy case is fully legal and the judge must consider the bid, irrelevant of Obama administration’s plan, so who knows what may happen.
As for Saturn brand, ownership of Saturn Distribution Corp will be transferred from GM to its dealers, who will call the shots. Obviously, Saturn dealers aren’t keen on selling Chinese cars on their lots and this is why they went to certain mysterious Japanese/Korean automaker for a supply deal.
@ Fiziks
> “Legacy costs” as you call them represent a small fraction in the cost of an automobile.
Not really. It’s UAW health insurance and pension fund that Asian automakers are not subject to. This puts US automakers at $2,000 per car cost disadvantage over Japanese/Korean automakers assuming same pay and efficiency.
But the production efficiency of Asian and US automakers aren’t the same. For example, GM Daewoo produces 150 cars/workers/year, whereas GM’s US plants do 35~40. This is why Cruze cost $9,000 MSRP when built in Korea, but $18,000 MSRP when built in the US.
> And what I meant was; what sense does it make for Hyundai to supply Saturn a RWD coupe, for example, if that is going to compete with the Genesis Coupe?
Hyundai gets to build more Genesis Coupe, regardless of badge on it. And increased productino builds economy of scale and lowers Hyundai’s overall cost.
Right now, there is massive idle production capacity at every automaker and many are wlling to go with this privade brand distribution scheme.
a couple points:
1. Saturn dealers aren’t covered by franchising agreements; they are in a contract with GM with zero rights on their part.
2. Buying Saturn and having the current level of sales would be in a year every saturn dealer would close. they need sales too– and not having any product to sell (or new models ) for 2-3 years would mean those dealers would disapper. Saturn has one vehicle right now (Vue) that is selling and you can’t sustain a dealer on 10-15 vue sales a month for a year.
3. Selling Buick branding rights to the Chinese would be good but only worth maybe $150 million. Given that Roeve won’t pay Ford or Tata $10 million for the Rover name, I don’t see the Chinese bidding. Buick otherwise has no value — all Holdens or Daweoos.
4. Selling GM Daweoo and Saturn as a unit might be interesting. Lots of smal l cheap cars. Chinese could buy that, run the Koreans into the ground, then try to sell chinese made saturns.
5. The most logical buyer for Saturn would be opel. Great lineup, but with the euro-dollar exchange rate no way to make money — as Gm already found.