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Saab Dealers Prepare For The End

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Saab dealers prepare for the end



NOVEMBER 30, 2009 - 12:01 AM ET

When its Swedish suitor jilted Saab last week, U.S. dealers were disappointed but not shocked. Most had already downsized operations -- and expectations.

In June, dealers signed termination agreements that said General Motors Co. would wind down Saab and terminate franchises if the sale to Koenigsegg Group AB fell through, unless another buyer stepped forward.

Also, the aborted sale of Saturn to auto retailer Roger Penske in September and the brand's subsequent death had brought a fresh reminder that Saab's future was shaky. Before that, Saab's Swedish bankruptcy had further clouded the troubled brand's future.

"The whole thing has caused us to be pretty conservative in doing anything with Saab over the past several months," says Geoff Kelly, general manager of Kelly Cadillac-Saab in Lancaster, Pa.

Now many dealers are assuming they are entering their last days of selling new Saabs -- while still hoping the GM board will save Saab in its meeting on Tuesday, Dec. 1. Koenigsegg's Chinese backer, Beijing Automotive Industry Holding Co., may offer hope after saying it was re-evaluating the situation, Reuters reported. Saab has 218 dealerships in the United States.

Plan B

Kelly's dealership is one of the 81 Saab stores to receive notice that Koenigsegg would terminate their franchise agreements. So he was already preparing to shift to Plan B.

Kelly says he recognizes the brand probably is on its way out. Saab's U.S. sales had fallen 62 percent in the United States through October, to 7,441 units. That's on top of a 35 percent sales drop in 2008.

The dealership made about a fifth of its profits from Saab, most of that in the parts and service department.

Kelly has just 10 Saabs in inventory, including four he uses as loaners. He sold only one Saab in October and hadn't sold any this month as of Wednesday, Nov. 25.

So if Saab dies, Kelly will concentrate on picking up business from Cadillac dealers whom GM will wind down by next fall, and he hopes to do some Saturn service work.

"We think that we're going to be able to pick up additional business to offset" the Saab profits, Kelly says.

Used-car hopes

For Kevin Jones, owner of two stand-alone Saab stores in suburban Los Angeles, the situation seems grimmer.

Selling new Saabs this year has been unprofitable, he says. But the dealerships have stayed in the black this year with other operations.

"We've basically been in the used-car business for the last two years with Saab's reorganization," Jones says.

Jones' two dealerships have been selling 30 to 40 used vehicles a month, and more than two-thirds of those usually are Saabs. That compares with the three or four new Saabs the stores together sell each month. They have 13 new Saabs in stock.

Nationally, Saab had 2,300 Saabs in inventory as of Nov. 1 -- a 125-day supply. The brand sold just 513 units in October.

"So if they wind down, we've got 13 cars to move," Jones says. "And I'll be out there buying all the other guys' '08s and '09s."

Michael Simon, general manager of Saab of Downers Grove, is part of a management group that took over the suburban Chicago stand-alone store in July under new ownership.

The owners' investment comes to $10 million, including the facility and property. The dealership purchase included discounts on vehicles, so the store is selling Saabs at about $5,000 below invoice, not including GM rebates.

"We thought with everything going on, this would be a great opportunity," Simon said. "If it all falls through, we're going to have to find a different franchise."


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