Monday, March 2, 2009

Confusing Size With Quality

Girlfriend: But it's so big and impressive.

Salesman: Size means very little. Bigger isn't necessarily better. I sound like Dr Ruth.*

Automakers around the globe are feeling the current economic pinch. We've already heard Detroit's Big Three bleat pitifully to Congress that they need help now or they're out of business. It seems for at least one of them, the problem isn't just here in the US.
German carmaker Opel is in talks with the country's economy minister about a 3.3bn-euro (£2.93bn; $4.16bn) cash injection from the government.

Carmaker Saab... has had its application to enter a reorganisation process approved by a Swedish court.

An administrator has been appointed to handle the process. Saab is seeking to create a fully independent business.

Opel has been a GM marque for many years. Saab was acquired in the 90s. Both have felt the recent pinch - and GM's apparent unwillingness to invest in a quality smaller car.

This brings me back to the quote that started this article.

I attended the auto show in Lakeland last weekend. Two things struck me very powerfully. First was the predominance in US-made cars: I recall one Morris; a pair of Rolls-Royces; a handful of little roadsters from Jaguar, Austin Healey, Triumph and MG; one pre-Ford Volvo; one pre-GM Saab; and one marvelous little three-wheeled BMW. That was about it for the imports. The second thing was size: until the 1950s or so, the higher end cars were all nearly double the size of their more affordable relatives, and all the US cars were substantially bigger than their international counterparts.

The "bigger is better" approach to US automaking has no doubt contributed to our current crisis. Bigger, less efficient, more expensive vehicles have been Detroit's measure for "quality" for many years, and the smaller more efficient vehicles have been treated like red-headed stepchildren by both design and production sides of the house. This fixation on the bigger-is-better model has had some unfortunate side effects, not least of which have occurred in the international arms of the Big Three:
Sales at Saab in 2008 were down 25% on the previous year.

The Swedish carmaker has not made a profit since 2001. In 2007 it made an operating loss of 2.19bn Swedish crowns ($248m; £175m), according to regulatory filings.

It estimates its losses in 2008 at around 3bn Swedish crowns and expects a similar loss this year, filings also revealed.

Stephen Pope, chief global strategist at Cantor Fitzgerald, believes GM "oversaw the destruction of the Swedish car company's soul".

"Just look at the current '93' [model] as an example," he said. "The '93' is just a Saab body skin placed on top of the Vectra from Opel/Vauxhall."
[emphasis added]

Anyone who remembers the disasters that were the 1982 Cadillac Cimarron or the 1986 Pontiac LeMans knows that Detroit's thinking on small cars is woefully lacking. The prevailing wisdom of taking outdated designs and putting them in party frocks doesn't sell if the vehicle under all the glitz isn't up to the task of providing long-term reliable transportation. And dressing up a cheap car still leaves the car with the failures of its origins and build quality. One of the reasons BMW, Volvo, Honda and others have been so successful in the US market is that, regardless of the size of the vehicle produced, the product was a quality item better built and more durable than its domestic counterparts; this is a concept that Detroit seems to have yet to truly comprehend either at home or abroad, as the quote from the Saab article clearly demonstrates.

Opel is unlikely to suffer very long. The company is a major European powerhouse building respectable if unalluring vehicles. The Saab situation may be more complex, and again part of the problem is GM:
We've also heard faint buzz about a new entry-level Saab car, smaller and less expensive than the 9-3. This would be sold mainly in Europe, to broaden the brand's market coverage there, but it might also come to North America for the same reason--if GM decides to build it. That's by no means certain. The model was first rumored during 2006, but hasn't yet been approved as far as we know. Even so, industry gossips say it could materialize fairly quickly, perhaps as a 2010 Saab 9-1.


Assuming GM gives the green light, the 2010 Saab 9-1 may be based on the latest German-designed Opel Corsa. Typical of such spinoffs, the Corsa would be adapted to incorporate Saab "brand values." That means Saab-specific styling, a more-upscale interior, more standard and optional conveniences, and sportier suspension tuning. All this would help justify a likely price point somewhat upstream of the Opel Corsa. But the price can't be too rich, as most American car buyers still equate small with cheap. [emphasis added]

Again we have the cause-effect conundrum. After generations of Detroit design efforts that seemed incapable of producing anything smaller than an Abrams tank that was worth driving, public opinion of small cars is low. Demand falls with opinion, and smaller cars sell for progressively less. But equating small and cheap, particularly after the successes of the Toyota Corolla, Honda Civic, BMW 318, Mini and others, is a difficult proposition and only really works when one discusses small US-originated vehicles. That goes right back to Detroit's continuing inability to perceive quality in the product and its insistence on building "higher-end" vehicles on (frequently outdated) entry-level platforms.

The problem is particularly vexing when one thinks of the generations of driver from Yuppie onward, who created the demand for the smaller upscale vehicle like the BMW, Honda Accord and others - including Saab. These people saw value in the construction, efficiency and reliability these cars offered, and appreciated the extras and image that came with the branding. GM seems to have understood the latter without giving thought to the former, and now it's paying for that oversight in lost prestige and profits.

* from Ruthless People.

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