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Seat gets last chance from VW

Analysts predict Spain and Portugal could follow Greece into financial malaise, which could spell the end for Seat.

Traditionally strong (some would say over-reliant) in its local market, Seat has been a problem child for VW recently.

Although Wolfsburg has owned Seat since 1986, VW seems fed-up with its Spanish subsidiary’s lack of profitability. Seat is the worst performing unit in the VW Group.

The issues at hand appear to be customers being conquered by rival brands (due to Seat’s narrow model portfolio) and the slowing new car trade in Spain – traditionally one of Seat’s strongest markets.


Brand heritgae, the Seat 133 with Bond girl Ursula Andress.

Fighting talk

"This is the last attempt for Seat as a brand, it would not be sensible to view things differently," CEO James Muir said yesterday 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’s former European boss, as Seat CEO last September after predecessor Erich Schmitt failed in his three-year effort to turn the company around satisfactorily. Concern about Spain’s economy amid contagion from Greece’s fiscal crisis may further hamper efforts to boost revenue from the unit.

Seat’s first-quarter operating loss of $138 million was more than double VW’s two other unprofitable units, luxury brand Bentley and the commercial vehicle division. Bentley has new product (Mulsanne) on offer this year and the commercial division is sure to pick up momentum as Amarok is rolled out to all markets.

Without a turnaround the Martorell based brand may erode any chance of VW becoming 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, who recommends buying VW shares. "Most of their sales stem from southern Europe where the crisis has hit small-car makers particularly hard."


Seat's Martorell  factory, opened in 1993. Its future is hanging by a thread.

Ominous numbers

Deliveries of Seat vehicles such as the Ibiza compact and Alhambra minivan fell 8.5% to 337 000 units last year.

Spanish car sales slumped 21% in 2009, whilst the once booming economy limped by on a mere 0.1% growth rate in the first quarter this year. Spain also boasts the Eurozone’s highest unemployment rate at 20.1%.

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 reduce public wages this year amid pressure to rein in Spain’s budget deficit. Unsurprisingly, Seat realises there will be no magic sales bullet for it domestically.

Seat, which gets 56% 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.



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