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Down, but not out, for historic British car brands

Two items of news caught my attention at the weekend. First, the Financial Times reported that Great British Sports Car Company (GBSCC) is to buy the illustrious Austin-Healey brand from new owners Nanjing Automotive. The second is that production of MG’s will begin again at the forsaken Longbridge car plant. Will this saga never end?

A joint venture between Leonard Lord of Austin cars and a leading automotive engineer called Donald Healey, Austin-Healey lasted 20 years and produced some exhilarating machinery. The name was last used in 1972, but has remained somewhat legendary ever since. Several bidders for the remains of failed car manufacturer MG Rover expressed a desire to create a modern interpretation of the brand, but it sounds like GBSCC’s plans are the most advanced.

The FT regards the news as good for Longbridge; a sign that progress is being made and investors lined up. The company’s statement to ex-MG Rover dealers says that production of the MG TF and part of the ZT and ZT-T will re-start at Longbridge. China will start rebuilding the ZR and ZS. Plans for the future are bold, with talk of new models being sold globally, including the vital North American markets.

Surprisingly, no mention is made of GBSCC, despite the company being named as a strategic partner when Nanjing purchased MG Rover in July. It had been widely believed that GBSCC would oversee any UK production of MG, but perhaps this, along with the Austin-Healey brand rights, means the British firm has its own announcement to make.

This is all very exciting, but for both Nanjing and GBSCC, the road ahead will be steep and winding. Nanjing is aware that its future will require new models and engines. Both know they’ll need to establish significant new operations that will require complex to negotiate partnerships and joint ventures. This is not out of the question. The MG brand has significant equity in the US and the potential inclusion of Austin-Healey strengthens the case for a return. For one, there have been long been rumours that the Qvale family (investors in what became the MG SV supercar) are interested in helping MG return to the crucial US market.

Getting to this point could be almost impossible though. Nanjing intends to reintroduce the entire, recently defunct MG car range across Europe, but half of the models are now seriously dated. If produced in China and sold in Europe for peanuts they may sell, but at what (further) damage to the brand? On top of this the dealership network has now largely dried up, or converted to other marques. GBSCC only has one new model to work on, but tied as it is to Nanjing and Longbridge, the company’s future is largely reliant on an improbable success for MG.

In the US, MG and Austin-Healey remain aspirational due to their iconic, historic appeal. A budget car strategy played out in Europe does not bode well for an economically successfully global return. I seriously doubt whether sales of the old models outside of China would be profitable. Better then to limit the old MG Rover stock to the home market and focus on developing something outstanding that enables MG and Austin-Healey to return in a blaze of glory.

With this approach, Nanjing would gain huge respect as a Chinese company that has what it takes to compete on the world stage. And some great British car brands would be back on the market for misty eyed fans like myself.

UK waves goodbye to the Safeway brand

Supermarket brands are increasingly international. The UK’s ASDA now proudly proclaims itself as “part of the Wal Mart family” and Britain’s own answer to the hegemony of Wal-Mart, Tesco, is now to be found across Eastern Europe and Asia. America’s Whole Foods Market (a topic for a future post) is set to bring its brand to the UK soon in a move that’s expected to shake up the UK’s grocery sector. So, it is perhaps rare to witness the disappearance of a familiar brand – even one that hails from overseas.

Safeway will vanish from the UK this week as new owner Morrisons completes a 20-month conversion programme to change the livery of the stores it purchased for £3 billion ($5.16 billion) in March 2003. Of the 479 Safeway stores, Morrisons has converted more than 200, with most of the remainder sold off to rivals. The few remaining Safeway stores not being sold will close this Saturday.

The chain was founded in the UK in 1962 as a subsidiary of the US retailer Safeway Inc. The parent company was acquired by New York based private equity firm Kohlberg Kravis Roberts in 1986. In 1987 the UK business was sold to Argyll Stores, which later changed its name to Safeway plc. Slow growth and a purchase offer from Morrisons led to a takeover battle in 2003. Competition rules and the drop out of some bidder meant Morrisons was victorious and so began the process of Safeway’s removal.

For 43 years, until the Morrisons buyout, changing ownership of Safeway had left the brand intact and shared with its erstwhile American parent. For the majority of UK consumers however, nationality of ownership was never an issue. This is probably because most regarded the company as indigenous.

Whether foreign ownership in the supermarket space is something that really matters to consumers is an unanswered question. ASDA has grown under Wal-Mart, but the American owner has shied away from a full re-branding. In Paris shoppers went crazy for Britain’s Marks & Spencer, situated in the one of the most chic shopping areas of the capital. Its closure, due to poor results in the UK, brought Parisians out onto the street to protest, but across the rest of Europe the British favourite has struggled.

To be successful abroad, a store chain must examine its market in detail and present itself accordingly. Whether the brand is an import or originates from home is less relevant than the need for the offering to fit in seamlessly with local tastes and provide precisely for their expectations. For example, Wal-Mart did not succeed in Thailand or Indonesia, where customers preferred scruffy street-market-style stores, to which they were accustomed, rather than clinical Western ones. In more up-market locales however, there needs to be an appeal to a sense of snobbery, appearing to offer something new, exotic and exciting. It not for nothing that Whole Foods Market is opening its first own-branded store on London’s ritzy Kensington High Street.