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SAAB CARS USA PRESIDENT AND CEO DEBUNKS FOUR GREAT AUTO INDUSTRY MYTHS AT AUTOMOTIVE NEWS WORLD CONGRESS

 DETROIT, Jan. 12 /PRNewswire/ -- William S. Kelly, president and chief executive officer of Saab Cars USA, Inc. doesn't wax nostalgic about the halcyon days of the auto industry, nor does he pin Saab's success on anticipated economic upturns.
 Addressing industry's most prominent executives at the Automotive News World Congress in Detroit, Kelly warned that, regardless of business climate, automotive importers and distributors could never again afford to base business strategy on four great industry myths that have prevailed during the past several years.
 Rational distribution practices are one of the benchmarks for success in today's -- and tomorrow's -- challenging economic climate, said Kelly. However, success has eluded many manufacturers because of persistent problems fostered by these unchallenged myths.
 Identifying the auto industry with a glamour industry is one of the most blatant myths, Kelly said, and creating sales plans based on anticipated economic turnaround is subsequently unrealistic -- and dangerously easy.
 Kelly stressed that the time has come to "take erasers to our portfolio of recessionary excuses." He pointed out that the current industry average reflects a dealer bottom line that ranges from losing "just" $5 a car to making $20 per car -- far removed from glamour status. Kelly also emphasized that manufacturer suggested retail prices are dinosaurs -- numbers that "Crazy Eddie used to prove that his prices were 'insane'...before he went broke."
 According to Kelly, the reality is that "we're going to have to figure out how to be profitable in a buyer's market, at reduced planning volumes, and lower margins."
 New product as a solution to fiscal problems is another great myth, Kelly stated. What's really needed is "more competitive product. This source of competitiveness doesn't come out of R&D labs and design studios so much as it comes out of the factories," he said.
 Saab has aggressively subscribed to this philosophy, increasing manufacturing productivity and cutting car production time from 115 man- hours in 1989 to 48 today. Manufacturing cost control and lean management are key, not rushed product development cycles, Kelly explained.
 Calling dealers poor businesspeople and blaming them for economic woes is yet another myth, noted Kelly. "It has been the tradition of our industry to kill dealers in the front of the store, and kick them in the pants in the back," he professed. Kelly pointed to warranty repair reimbursement as an example of "molten economics" -- a word coined by Kelly that describes dealers' resilient response to continual barriers built by the manufacturer.
 "Our industry increases its warranty coverage so that we can sell more cars," Kelly said. At the same time, manufacturers are "paying bottom dollar for dealer warranty work while expecting top-drawer customer treatment from dealer personnel. So, dealers increase their labor rates across the board." The reality, Kelly emphasized, is that dealers have actually safeguarded, not inhibited, the distributor's retail channel through molten economics.
 Reduced operating costs and redirection of savings into sensible retail marketing program investments is the only logical solution, Kelly said. Last year Saab did just that, offering dealers increased profit opportunities through an industry-leading warranty parts repair reimbursement program based on retail price, not dealer net.
 Perhaps the most laughable myth of all is the idea that distributors must build world-class organizations to support their product, Kelly emphasized. Playing catch-up with the competition shouldn't fuel today's business plan, he proposed. Instead, auto distributors should focus on their primary mission -- to market cars.
 "We don't have to build world-class support capabilities, we simply have to acquire them," Kelly offered. In the past year Saab has refocused on its core business -- selling and supporting Saabs -- and has outsourced several ancillary functions to specialists. For instance, Caterpillar Logistics Services (CLS) manages Saab parts distribution and MIS giant EDS handles Saab Information system needs.
 Those distributors that adopt the lean physique of a prize fighter instead of a fat-cat, will have a clear edge in the market-driven 90s, Kelly said. Other "must-do" agenda items include resiliency, flexibility and an economic status quo, product plans and manufacturing economics that reflect mature market conditions.
 "Maybe the automotive industry can learn survival tactics from the 20,000 or so car dealers out there that have been about to go extinct...anyday now...for the past 20 years," Kelly concluded.
 -0- 1/12/93
 /CONTACT: Steven Rossi or Elke Martin of Saab Cars USA, 404-279-6360/


CO: Saab Cars USA, Inc. ST: Georgia IN: AUT SU:

BR-CF -- AT013 -- 4230 01/12/93 17:42 EST
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