Leaving Off The Saws

It’s now autumn, a time to reflect. Recently, DTW has been driving Lancias and we have discussed the decline of this once noble marque. It is not the only brand to have faded away.

The demise of Saab, Rover and Lancia

In the diagram I have marked the timelines of two other defunct brands: Rover and Saab. Rover closed in 2005 and Saab shut up shop in 2011. You’ll notice that while Rover had no new models in the Phoenix years (I don’t count the MG versions), Saab had new product in the pipeline right until the last minute. Lancia’s demise is more muddled.

First, the badge engineering of Fiat cars increased and then swapped around 2011 to the relabelling of Chryslers. The Lybra (1998) and Thesis (2002) count as the last proper Lancias. The Delta (2008) is a superficially restyled Bravo but nowhere near the quality of the 1998 Lybra. The latest Ypsilon is a reworked Fiat 500. As of 2014 FCA gave up rebadging Chrysler (I left one out – which?). And perhaps Alfa Romeo could be added to this chart…

2004 Opel Signum: no one here: Autoevolution.com

To this litany of decline, I could add Citroen. The Citroen C6 ran from 2005 to 2012, a genuine if patchy attempt to sell a proper, large Citroen. And from 2003 to 2008 Opel tried to sell the Signum as an alternative to the Opel Omega. Lastly, between 2002 and 2009 Renault sold a few Vel Satises.

So,’08, ’09 and ’12 were the years those three firms gave up on traditional large cars while the others petered out between 2005 and 2011 (Lancia staggers on with the Ypsilon and their own proper cars ceased between 2009 and 2014).  Now let’s dig out an old chart showing the way BMW extended down the price range into the lower reaches where Ford and Peugeot used to sell their larger cars:

This shows the change in BMW’s range since 1995. The pairs of bars represent 1995 and 2016 for BMW, Ford and Peugeot. Notice how Ford and Peugeot’s price range and therefore market coverage declined as BMW expanded down into the sub-30K area. BMW always had a car selling for the price of a Granada or 60- series but became better at selling them too.

Not all of the blame for Rover, Lancia and Saab’s decline is to be laid at BMW’s feet; it is just one of three firms (Audi and Mercedes) who ate into the middle market. Perhaps Skoda, Hyundai and Kia too have taken their share of sales in the time period in question, which probably calls for another chart.

2015 Kia Ceed

To summarise, the expansion of other brands has been at the expense of Rover, Saab and Lancia who, at the same time, didn’t really know how to respond to the competition. Of the three, Saab put up the bravest fight. Lancia had a final spasm with the Delta and Rover staggered on with old models for almost six years. In the times since, 2010, Citroen have tried to reinvent themselves with the DS line and Opel have completely replaced their range with ever-higher quality cars only to be overtaken by GM’s careless indifference.

Author: richard herriott

I like anchovies. I dislike post-war town planning.

12 thoughts on “Leaving Off The Saws”

  1. It’s been said before, but there are still mainstream large cars – they are just labelled differently.

    Driving to London on Sunday, I saw a 1980s Ford Granada (Scorpio) hatchback on the motorway. Bravely battling along with the faster traffic, it looked *tiny* in comparison with the cars around it. It is dwarfed by a contemporary Ford Mondeo. And the new Grand Insignia offers at least as much space as the Signum above.

    As for Rover, Saab and Lancia… they couldn’t afford to invest enough in compelling new product, but without new product you are dead. There were plenty of poor decisions along the way, but a lack of investment was the killer. VAG, Mercedes and BMW know how vital this R&D is to future prosperity.

    1. I agree there are mainstream large cars; an Astra estate is the same size as a 1989 Citroen XM. However, the character of the cars is different and they are made by someone else. With this article I wished to put a marker down as to when the long-established providers of upper-middle market were vanquished. It’s less about car size and more about branding.

    2. It’s an interesting discussion.

      I would contend that Rover, Saab and Lancia did not fail because the market disappeared from them. They failed because of a lack of investment and poor decisions.

      Upper-middle market is now, roughly, defined as ‘premium’. Mazda proudly describes its CX5 as having a ‘premium’ appearance, whatever that means. In fact the Mazda CX5 is exactly the kind of product that these three should have made – a fashionable SUV bodystyle but improved by intelligent engineering, set a little above the mass market. Honda sits here too, as do Subaru – well engineered cars that aren’t too flashy that appeal to relatively well-off middle class buyers.

      I am not sure how these brands are perceived in their home market, but in Europe and USA they are seen as a bit of a cut above.

    3. Hmmm. Good point – Honda, Subaru and Mazda as upper-middle. All three are Japanese and our three dead/deadish brands are European. How about a four way whammy: competition from Europe and Japan, a change in the market and a bit of bad management.

    4. Car manufacture (and selling) is a highly cash generative business, however you’re *supposed* to put a big chunk of that cash into R&D and product development if you’re going to be sustainable. If, however, you were a company that picked up a car manufacturer from the government for a song and planned to get shot of it as soon as you were contractually permitted to do so then you could just extract all the cash and then punt it on so someone else can deal with the consequences.

      The beauty of this is that the ignorant masses will blame whoever owns the company when they realise it’s now buggered and have to kill it, and you’ve long since robbed all the cash. You divest to anyone who’ll take it off you, the handful of good bits will survive and the rest you try to prop up until the optics aren’t so bad. The truth is that the fate of that company was sealed when it was first sold to the cash extractors.

      Now, what was it you were saying about Rover? 😉

    5. David: every case is a bit different. Rover’s resembles an animal killed by a parasite that preys on the already weak. Had Rover been in good fettle then the Phoenix Four would never have had a chance. Corporate predators killed Rover; it was vulnerable from the moment BMW lost interest (the 75 launch?)

  2. Meanwhile Skoda, Kia and Hyundai have all grown as competitors, as you point out in your article.

    All three had very low brand equity and had to build trust with customers. Orthodox marketing theory says that it is much harder to do that than defend an established market position. Yet Rover, Lancia and Saab all failed.

    Again, VAG group know how to build and sustain brands. They do ask Skoda to engineer a Panamera, even though they could certainly do it cheaper.

    GME forced Saab to adopt its Vectra platform for its own cars, and then the game was up. They should have tasked Saab with developing a new large car platform and developed it from there. Fiat should have invested in its larger cars years ago. An accountant would not understand, but this is how you create long-term success.

  3. With scale comes synergy effects, more cars sold means they can be made to a lesser price. That puts an advantage of being big and accumulating brands and spreading out the cost on different platforms. It also strenghtens the economy of larger companies the more cars they sell. The market thus favour bigger companies making smaller ones uncompetetive.

    And right now we only have the top six companies that are true Juggernauts, and everything else is up for grabs. Between them Toyota, VW, Gm, Ford, Renault/Nissan and Hyundai/Kia has 70% or so of the market. Before, smaller companies like Saab, Rover, or Lancia could survive by making a mainstream product to a premium price.

    They weren’t necessarily luxury products, though they had some kind of real quality their customers thought was worth the premium. That level of doing business simply is no more, as the business modell has drifted from product to branding. Nobody gives a shit about the quality of a Mercedes anymore, it’s all about the brand. And Mercedes can thrive on brand cachet alone.

    The Sloan ladder of doing business is obsolete, it was Ford that was right all Along. You really only need one big brand and a couple of smaller niche fillers in the sport, luxury, and suv market. The market has shifted towards price leaders at the bottom, bought by people paying with their own money, Company leased premium cars in the middle, and a small segment of very expensive and therefore profitable cars bought as luxury products.

    When BMW and Mercedes are pushing downwards, they can offer a perceived premium product for the price of a price leader. But to be seen as a premium brand they need top tier products. That effectively pushes the old entire middle market sector off the ground. Ford, PSA, Opel, Fiat etc, they just had the entire market pulled out from under Them. They can’t compete on scale or price and not even on product. Unless the conglomerate or merge they will never ever be as profitable as VW or Toyota.

    1. That’s a cogent and helpful post, thanks. I should print it and paste it into the back page of my notebook (it’s a paper notebook). “Nobody gives a damn about Mercedes’ quality” might not be poetic but it’s a clear statement that is not a thousand miles from accuracy.
      With respect to our sorry trio, we can note that unlike Lancia and Saab, Rover was not part of a bigger empire. The story of BMW’s inability to integrate the two marques is the story of unmet economies of scale. To the extent Rover staff resisted integration they assisted in the marque’s demise. It was a Brexitty moment in miniature.
      Rover probably was the doomedest of the three. Neither Lancia nor Saab had to die as they could draw on the bigger resources of their parent firms, Fiat and GM respectively. Rover lost that chance in 2000.
      The middle market die-off says something about globalisation and maybe culture. It’s US and EU brands that have died off: Olds, Pontiac, Mercury, Saab, Rover, Lancia and almost Alfa. When did the Japanese last shutter a brand? Daihatsu and Isuzu have withdrawn from some markets. Xedos never really got going.
      If anyone is familiar with K/J Technique as a knowledge-pooling tool, you might notice how this thread has gathered a lot of insights in a similar way.

  4. The Japanese aren’t really that strong. Toyota is the 800 pound gorilla and has the total sales of the next three brands combined, it’s bigger than Nissan, Honda, and Mazda together. Honda has always leaned on US sales, the brand is bigger in the US than in asia/pacific. Nissan only survives as part of Renault. Subaru survives on premium price and niche products, they would never be able to compete in the mainstream. Daihatsu is part of Toyota and Mitsubishi is really on the brink of collapse and bankruptcy. Do they even sell cars anymore? That leaves Mazda and Suzuki as the sick child of Japan. That leaves them and perhaps also Honda vulnerable for possible future mergers.

  5. Or perhaps Sloan was right after all? Hyundai, Kia, Dacia, Skoda is the new Chevrolet. Audi, BMW, and Mercedes is the new Buick, Oldsmobile, and Pontiac. And the Bentley Bentayga is the new Cadillac. There is a bottom rung price leader segment, middle market premium segment, and top tier halo products.

    The middle market sector is crushed from both ends. Not only are the premium brands pushing downwards, the price leaders are pushing upwards. The success of brands like Skoda and Dacia is built solely on keeping the price competetively low. The cost of production in the Czech Republic is about 70% of the cost of making a VW in Germany due to lower wages, god knows what little they pay at Dacia in Romania.

    The middle market really is up shit creek. Unless they pull themselves up in the straps like VW or Volvo. Or finds a profitable niche like Jeep and Subaru. Or finds a way to lower their costs stat and ship their entire production to India or China. Or merge with someone either premium or low cost. I ser a continous contraction of this entire market sector.

    1. Sloan’s idea involved one firm with several price classes. Because the mother companies don’t allow so much deep differentiation such a structure can collapse as in Ford and GM’s case; FCA is partial collapse and VAG is an exception.

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