Spyker holds talks to build new version of 1950s Saab model

Spyker Cars NV, Saab Automobile's owner, is in talks with automakers to share technology and a platform for a new car based on a 1950s Saab model, CEO Victor Muller said.

“Discussions are already ongoing,” Muller said in a telephone interview on his way from Gothenburg, Sweden, to Saab's plant in Trollhaettan. “That will be on my plate for the next 100 days.”

The new small car would be tear-drop shaped, inspired by the Saab 92 model that was in production between 1949 and 1956, he said, declining to say with whom he's been negotiating.

Spyker, the Dutch maker of supercars, bought Saab in February from General Motors Co., completing a 14-month effort by GM to either unload the company or close it down.

Saab, which begins selling the new 9-5 model May 31, has spent the last three months restarting production and severing the GM ties.

“Saab is going to have to reignite interest in the brand, go back to its core values” of the 1980s and 1990s when it appealed to “creative” professionals such as architects, said Ian Fletcher, a European automotive analyst at IHS Global Insight in London. “Muller has to be optimistic.”

Saab sales goals

Saab aims to sell between 50,000 and 55,000 cars this year, of which 17,000 would be the new 9-5, Muller said. Next year Saab targets sales of 100,000 cars, including 40,000 9-5s and about 10,000 9-4X, a midsize crossover SUV to be built at a GM plant in Mexico starting in April 2011, he said.

Spyker, after considering the U.K. and Sweden, is leaning towards moving its stock listing to Stockholm from Amsterdam, Muller said, explaining just a fraction of its business remains in the Netherlands.

“I'm very optimistic about it,” Muller said of the Stockholm listing. “99.5 percent of our business is Swedish, is Saab, and we do feel that a listing in Amsterdam clearly is no longer logical in any way, shape or form.”

Saab aims to reach an agreement with a Chinese distributor within a couple months, he said, denying media reports this week that Saab and Beijing Automotive Industry Holding Co. have reached a distribution deal.

Ford said to be preparing to wind down 'forgotten brand' Mercury

Ford Motor Co. is preparing to wind down the Mercury line, created in 1939 by Edsel Ford, after sales plunged 74 percent since 2000, said two people familiar with the plan.

The automaker's top executives are preparing a proposal to kill Mercury to be presented to directors in July, said the people, who asked not to be identified revealing internal discussions. Mercury, losing two of four models next year, will be starved of products and promotion, the people said.

CEO Alan Mulally emphasized the automaker's namesake brand as he revived the only major U.S. automaker to avoid bankruptcy. The timing of Mercury's demise depends on how fast executives can persuade the brand's dealers, who also sell Lincoln models, to close or merge with Ford showrooms, they said.

"Mercury is a forgotten brand," said John Wolkonowicz, an auto analyst with IHS Global Insight. "Many Americans probably already think it has been discontinued. Mercury was too similar to Ford from the very beginning."

Mulally also is unloading Ford's European luxury brands, after the automaker failed to achieve a goal to have them generate one-third of automotive profits. Ford in March agreed to sell Volvo to China's Zhejiang Geely Holding Co. It sold off Jaguar, Land Rover and Aston Martin in the last three years.

“We continue to evaluate all of our models and brands,” Mulally told reporters in Washington, D.C., Thursday. “We have no change in our position about Ford or Lincoln or Mercury.”

Mercury would join Pontiac, Saturn, Oldsmobile and Plymouth among the departed Detroit brands of the 21st century. Sales will end within four years, one of the people estimated. General Motors Co., as part of its U.S.-backed reorganization last year, sold or closed four of its eight brands sold domestically.

Established by Edsel

Edsel Ford, son of founder Henry Ford, established Mercury during the Great Depression as a mid-priced alternative to mainstream Ford and upscale Lincoln. Edsel's great grand-daughter, Elena Ford, now the automaker's director of global marketing, initially opposed discontinuing Mercury, which she was in charge of promoting prior to 2002, the people said.

Doing away with Mercury is supported by Ford Executive Chairman Bill Ford and other members of the founding family, who have 40 percent voting control of the automaker through a special class of stock, the people said. With Mercury accounting for 1.9 percent of Ford's global sales in the first quarter, the family has decided ending it is best for the business, the people said.

“Edsel Ford is revered in the family, and Mercury was his creation,” said Wolkonowicz, a former Ford product planner. “This is the end of an era.”

Bill and Elena Ford also declined to comment, spokesman Mark Truby said.

1978 peak

Mercury's U.S. sales peaked in 1978 at 579,498, when it had the slogan “The Sign of the Cat.” Deliveries fell to 92,299 last year. As the U.S. auto market recovers, Mercury's sales are up 23 percent this year through April, less than Ford Motor's overall gain of 33 percent. Mercury had 0.9 percent of the U.S. market through April, unchanged from 2009.

Mulally, since arriving from Boeing Co. in September 2006, put a priority on improving quality and expanding the offerings of the Ford brand to lessen its dependence on pickups and SUVs. He ended three years of losses at the automaker by earning $2.7 billion last year and has said 2010 will be “solidly profitable.”

As Mulally focused on the namesake brand, Mercury withered, the people said. Ford's ad spending on Mercury fell 88 percent from 2005 through 2009, according to researcher Kantar Media of New York. Last year, Ford stopped selling the Mercury Sable, a sibling to the Taurus. The Mountaineer, Mercury's version of the Explorer, is to go away next year as Ford rolls out a new version of the SUV.

Since Mulally's arrival, Ford stopped giving Mercury exclusive features and technology, the people said. That made Mercury less distinctive than comparable Fords, which tend to be priced lower.

“The reason Mercury failed throughout its existence is because Ford never wanted to spend any money on it,” Wolkonowicz said. “Ford always wanted to do it on the cheap and the results were what you'd expect.”

Milan #1

Mercury's top-selling model is the Milan, a sibling of the Ford Fusion, with sales up 53 percent this year. Mercury also sells its own version of the Ford Escape SUV, known as the Mariner, which has had a 22 percent sales gain through April. Ford is scheduled to replace those models in 2012 and 2013 and could drop the Mercury versions, Wolkonowicz said.

Mercury's second best-selling model, the Grand Marquis, is being retired next year as Ford stops producing a trio of large, rear-wheel drive sedans that also includes the Lincoln Town Car and Ford Crown Victoria. Mulally has emphasized more fuel- efficient models, such as the Fiesta and Focus small cars Ford is introducing this year in the United States. Neither has a Mercury counterpart.

“The Grand Marquis has the oldest buyer demographics in the industry with an average age of 70,” Wolkonowicz said. “There are still members of the Depression generation who will miss Mercury.”

Mercury's cultural heyday came in the 1950s, when hot-rodders favored its engines, which were larger and faster than those found in Ford models, Wolkonowicz said. Along with Lincoln, Mercury sponsored “The Ed Sullivan Show” on CBS in the 1950s and 1960s. Detective Steve McGarrett drove a black Grand Marquis in the “Hawaii Five-0” TV series on CBS in the 1970s.

As Mercury's sales plunged, so too have its profits, Wolkonowicz said. With one-quarter of the sales it had a decade ago, it's hard to rationalize the line's continued existence, he said.

“I'm not surprised to see Mercury go because they don't sell enough of them,” Wolkonowicz said. “It's been a case of benign neglect for years.”

BMW plans 3- and 5-series full hybrids

BMW AG plans to take its 5-series ActiveHybrid concept into production as early as next year and expects to introduce the dual-powertrain technology into its smaller 3 series.

"As early as next year, the new BMW 5 series will also be available as a full hybrid. And we are anticipating the hybridization of further models series, such as the 3 series," CEO Norbert Reithofer told shareholders at the carmaker's annual meeting in Munich.

As emission standards become ever stricter, BMW needs to lower the carbon footprint of its fleet in coming years as Brussels targets an overall level of around 95 grams of carbon dioxide by 2020 for new cars sold in Europe.

"We want to reduce our global fleet's carbon emissions by at least another 25 percent between 2008 and 2020," Reithofer said.

At the end of last year, BMW's European fleet emissions equated to 150 grams of carbon dioxide per kilometer, down from 156g at the end of 2008.

First shown at the Geneva auto show in March, the 5-series hybrid can be driven entirely in electric mode -- like the Toyota Prius -- after the sedan's brakes recuperate enough kinetic energy initially generated by its petrol engine.

This would be BMW's second full hybrid on offer after the BMW ActiveHybrid X6 launched at the end of last year.

By comparison, the larger BMW ActiveHybrid 7 luxury sedan that went on sale this spring is a mild hybrid, meaning it cannot run on zero-emission electric propulsion alone.

Reithofer pointed to government incentives for hybrids as a key driver of demand, particularly in Japan. "Sales of hybrid vehicles (there) have skyrocketed. If you don't have a hybrid in your portfolio, soon you might not be selling any cars in Japan at all," he said.

VW makes ‘last attempt' to save Seat

Seat, Volkswagen AG's most unprofitable unit, aims to stem losses within five years and halt a flight of customers to rivals by expanding its model range and growing outside its Spanish home market.

“This is the last attempt for Seat as a brand, it would not be sensible to view things differently,” CEO James Muir said Wednesday in Hamburg. “If one would want to get rid of Seat, one would have to give the other party money to take it.”

VW named Muir, Mazda Motor Corp.'s former European chief, as Seat CEO last September after predecessor Erich Schmitt failed in his three-year effort to turn around the automaker. Concern about Spain's economy as a result of Greece's fiscal crisis may further hamper efforts to boost revenue from the unit.

Martorell, Spain,-based Seat's first-quarter operating loss of 110 million euros ($139 million) was more than double VW's two other unprofitable units, Bentley and commercial vehicles. Without a turnaround, Seat may endanger the German automaker's plan to become the largest automaker by 2018, analysts say.

“It will be difficult to turn Seat around,” said Marc- Rene Tonn, an analyst at M.M. Warburg in Hamburg. “Most of their sales stem from southern Europe where the crisis has hit small-car makers particularly hard.”

Falling new-car sales

Deliveries of Seat vehicles such as the Ibiza compact and Alhambra minivan fell 8.5 percent to 337,000 units last year. Spanish car sales slumped 21 percent in 2009, according to the Brussels-based European automakers association ACEA.

Spain's once-booming economy started contracting in the second quarter of 2008 and has taken six months longer than the 16-nation euro area as a whole to return to growth as households pay down debt. First-quarter economic expansion was 0.1 percent. Spain has the eurozone's highest jobless rate at 20.1 percent.

Standard & Poor's cut the country's credit rating on April 28, saying the government was underestimating its fiscal woes and overestimating growth prospects. Prime Minister Luis Rodriguez Zapatero said yesterday he will cut public wages this year amid pressure to rein in Spain's budget deficit.

“Seat is the undisputed trouble-spot in VW's brand portfolio,” said Stefan Bratzel, director of the Center of Automotive at the University of Applied Sciences in Bergisch Gladbach, Germany. “Solving the problems there may take years and a clear-cut remedy isn't in sight.”

Surpassing Toyota

Seat, which gets 56 percent of its sales from the Ibiza model, must expand its range of offerings for models such as the Leon compact and reduce its reliance on Spain, Muir told journalists during a roundtable discussion.

Fixing Seat will be key to plans by VW, which also makes Skoda, Audi and the namesake VW brand cars, to surpass Toyota Motor Corp. in profitability and deliveries in 2018.

As part of that target, Muir yesterday reiterated VW's goal of more than doubling Seat's sales to 800,000 vehicles. Wolfsburg-based VW posted record sales last year of 6.3 million units.

“It seems to me that VW hasn't fully committed itself yet to the brand image of Seat,” said Mike Tyndall, an automotive analyst at Nomura Securities in London. “At some point they wanted Seat to be the sporty brand within the VW family, but some of the model decisions don't add up.”

VW Chief Financial Officer Hans Dieter Poetsch said March 11 that a “comprehensive program” of cost cuts was under way to return Seat to profit after the unit's operating loss in 2009 quadrupled to 339 million euros. The goal is to trim fixed outlays by raising capacity utilization, he said.

Martorell plant gets Audi SUV

To that end, VW will build Audi's new Q3 compact SUV at Seat's main plant in Martorell, near Barcelona, beginning next year, with a goal of making 80,000 vehicles a year. The factory, which can produce 500,0000 vehicles per year, has a capacity utilization of 60 percent currently, Muir said, adding that he needs to reach 90 percent to hit the breakeven point.

“Our clear focus over the next three years will be to improve utilization,” Muir said. “One cannot solely rely on cost reductions to make Seat profitable.”

Muir has made his own missteps since taking over Seat, running into resistance from the German carmaker's labor leaders after announcing plans to lay off about 300 workers. He later backed away from that plan after works council chief Bernd Osterloh criticized his efforts, saying cost reductions weren't enough to save Seat. VW has owned Seat since 1986.

Worker representatives hold half the seats on VW's supervisory board and have played a crucial role in the past in ousting executives that tried to cut jobs, including former VW CEO Bernd Pischetsrieder.

“I'm coming from outside the company straight into the CEO position,” Muir said. “That's a sign that there is a certain frustration about Seat at VW.”

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