Table Of Contents:

Introduction

SEAT: A Brief History

Performance in recent years

Weaknesses, Threats ad Opportunities

Marketing Techniques and Motor Sport

SEAT in the UK and Ireland

Conclusions

Bibliography

Introduction:

I have decided to write my dissertation on the Spanish car manufacturer, SEAT. I will examine how the company came into being in 1950 and how it got to where it is today i.e. a market leader in European and worldwide car sales. The reason I have chosen SEAT for the subject of my dissertation is that I have an interest in car companies and when researching potential topics SEAT interested me as it was the first real Spanish car company and the story of its rise to prominence was a very interesting one.

In researching the topic I have found a number of valuable sources including books I located in the UCC library and a number of online sources such as journals and other websites. The opening chapter of my dissertation will be on the history of SEAT and its relationship with Fiat and later with Volkswagen. I will then examine SEAT as a modern day company, its recent performance and the direction in which it is headed. I will then look at the company’s advertising and marketing techniques, both historically and currently, as well as its role as a subsidiary of the Volkswagen group. Finally, I will draw a number of conclusions stating my findings, what I found most interesting and also any difficulties I have encountered while researching and writing my dissertation.

SEAT: A Brief History:

Prior to the Spanish Civil War Spain’s automobile manufacturing industry was not in a particularly strong position due to a number of foreign subsidiaries importing or assembling cars in their local plants. Spain therefore had a relatively low level of technical knowledge in this field and investment was hard to come by. By the end of the Civil War in 1939 the situation had only got worse (SEAT, 2011). The financial cost of the war further decreased Spain’s purchasing power and many of the foreign multinationals left Spain. Therefore the establishment of what was to become one of Spain’s largest and best known companies came at a very obscure and difficult time financially. On 22 June 1940, Banco Urquijo, a private Spanish bank, set up the Sociedad Iberica de Automoviles Tourismo (SIAT) with the support of the bank’s many industrial groups. The owners originally wanted to run the company as a private enterprise but in 1942 the company was taken over by the Instituto Nacional de Industria (INI). One of the INI’s main policies was to ensure that SIAT’s manufacturing process would be carried out exclusively in Spain and that in time the company could produce it own specific models from locally made parts. However due to Spain’s inexperience and lack of knowledge in the field SIAT’s owners decided to invite a foreign partner to help with manufacturing and financing the project. However at this time Europe was engaged in World War II and so this idea was put on the back burner.

It took another ten years before the company really got up and running. On 9th May 1950 the INI renamed the company Sociedad Espanola de Automoviles Tourismo S.A. (SEAT) and set up 600,000 shares which would be sold for 1000 pesetas each. Two years previously, in 1948, the Spanish government and the country’s six major banks had forged an alliance with the Italian motor company Fiat. The Italian company were already what SEAT aspired to be and therefore they were the perfect partner to help develop SEAT in return for a share of the profits. Fiat was already well established in Italy and had a monopoly of the automobile industry there. As well as this Italy’s market was very similar to that of Spain in that potential customers were of low incomes and the market for cars was therefore somewhat limited (SEAT, 2011).

The agreement was that Fiat would have a 7% share in SEAT and the Spanish company were now ready to help revive the country’s economy by becoming the largest employer throughout the 1960s and 70s and also contribute to the industrialisation of a country which was still a largely rural society. SEAT set up their manufacturing plant in the port of Barcelona. Although they had considered setting up in a less developed area in order to create jobs and prosperity, Barcelona’s duty free port and ease of access to the rest of Europe by land and sea were the deciding factors. The first president was announced soon after – Jose Ortiz Echeque, an aeronautical engineer who had previously worked on the construction of aircraft. The plant was to be called Zona Franca and opened on June 5th 1953 with the first car, the SEAT 1400 coming off the production line in November of that year. As for the company’s wish to use locally made parts and have a high level of autarky, this was proving to be quite successful with an estimated 93% of parts being sourced locally by 1954. A previous non-existent Spanish supplier industry had been formed and SEAT was the reason for this.

In 1957 the SEAT 600 was launched. This car is said to have motorised Spain being the first car purchased by many Spanish families. It was SEAT’s biggest achievement to date. However SEAT was still very much dependant on Fiat with many of the cars produced being simply re-badged or very closely modelled on previous Fiat models. It wasn’t until 1963 that Fiat presented its first fully self developed model with the launch of the SEAT 800. This four door saloon had no equivalent in Fiat’s range and was a huge step forward for SEAT. From this point the company expanded every year achieving economies of scale which allowed them to reduce prices and cut costs. By the early 1960’s SEAT had become Spain’s largest and most successful car manufacturer surpassing FASA- Renault, Citreon-Hispania, Authi and Barreiros (SEAT, 2011). So in 1965 the decision was made to expand further into the European market. The original agreement between SEAT and Fiat allowed SEAT to operate only in the Spanish market and not export to other countries (this was in order to reduce Fiat’s competition in Italy and the rest of Europe). In return for agreeing to scrap this condition Fiat’s share in the company was increased from 7% to 36% which made Fiat very much a controlling shareholder even though this was not quite officially the case. From here sales began to plummet and by the early 1980’s the relationship between the two companies had diminished significantly. A decision was taken, seemingly very suddenly, for the two companies to part way following a dispute over whether or not Fiat would invest more money in the company. Although SEAT was now out on its own they had not heard the end of Fiat. In 1982 SEAT produced their first car since leaving Fiat. The car was the SEAT Ronda and sported the company’s new badge, however Fiat claimed the car was a rip off of the Fiat Ritmo and brought SEAT to court. The case ended up in the arbitration chamber in Paris which ruled in favour of SEAT on the grounds that their model was unique enough so as not to be considered a rip off.

SEAT did not remain as a fully independent company for long. Their next business venture was to enter into a subsidiary agreement with Volkswagen. Despite discussions with Toyota, Nissan and Mitsubishi, SEAT allowed VW to produce the Passat-Santana and Polo-Derby models in their Zona Franca and Landaben plants respectively. The next few years brought about significant change for SEAT and its shareholders. In June 1986 VW became the majority shareholder by purchasing a 51% stake in the company and in December 1990 took over SEAT by gaining a 99.9% stake (Kamp 2007). The deal proved to be a success for both companies with SEAT’s profitability continuing while VW were provided a low cost method of expanding into the Spanish market. 1989 had seen SEAT continue to grow by setting up a new manufacturing plant in Martorell, near Barcelona to replace the old plant in Zona Franca. As well as this the company’s administration offices were moved from Madrid to Barcelona. Management, design, research and production were now centralised around the Martorell plant which became one of the most modern and efficient car manufacturing plants in Europe at the time. The SEAT Ibiza Mk2 and Cordoba Mk1 were the first cars to be produced in the new plant.

Performance in recent years:

So what of modern day SEAT? The company has remained a subsidiary of VW along with AUDI and Skoda. The 2010 fiscal year was a very ambiguous one for SEAT in terms of success. It is difficult for any Spanish company to be profitable at this time as Spain has been among the European countries hit hardest by the recession (Cremer, 2010). SEAT claim to have grown by 14% following a significant rise in sales and a turnover of 4,663 million euro compared with 2009’s figure of 4,101 million euro. Of their profit they re-invested 518 million euro back into the company and finished the year with profit after taxes of 104 million euro. This is quite a bit less than 2009’s figure of 187 million euro and considerably less than the 2010 after tax profit of Skoda (349 million euro) which is seen as a similar sized European car manufacturer. 2010 brought an important achievement both financially and psychologically. For the first time in 21 years SEAT became the best selling car brand in Spain. This led to an increase in production of 11% in the Martorell factory with a total of almost 340,000 vehicles coming off the production line in 2010. So all in all SEAT would appear to be in quite a strong position financially. However, this information has come from SEAT themselves and while the company is not telling blatant lies, they would have you believe that they have had a much better year than actually is the case and that they are not in any financial danger. The fact is that SEAT were the least profitable group in 2009 and 2010. Even SEAT’s CEO James Muir was forced to admit that SEAT’s latest ventures (penetrating the Chinese market and producing a new, environmentally friendly range of cars) were a last chance saloon to save the company.

Of all of VW’s units, three were unprofitable in the first quarter of 2010. The three were SEAT, Bentley and commercial vehicles and SEAT’s losses of 110 million were more than double those of the other two companies (Cremer, 2010). At that time it remained to be seen whether or not VW would keep on SEAT as a subsidiary as there was a risk that SEAT could hold VW back as it attempted to become the world’s largest car manufacturer by 2018.

The main reason for SEAT’s financial struggle around this time was the economic recession. Because most of SEAT’s sales came from Southere Europe, a region that was hit particularly hard by the economic downturn, SEAT was among the European companies most affected. As well as this Spain was among the countries most affected by the recession and car sales fell by an incredible 21% in 2009 (Cremer, 2010). As for what SEAT planned on doing about the problem Muir said it was important that the company did not rely too heavily on sales of the Ibiza model which had previously accounted for 56% of SEAT’s total car sales. Also, he stated that the company could ill afford to beso heavily dependant on the Spanish market. Since then, as mentioned, SEAT have made significant strides toward expansion into the Chinese market so they are on the right track. However this is not enough for SEAT’s management and certainly not enough for VW. The parent company wants to see SEAT double its sales figures and reach 800,000 vehicles sold per year by 2018. In order to achieve this VW want to cut costs as well as increasing utilisation in the Martorell plant. One area where SEAT will find it particularly difficult to cut costs is in employee numbers. Worker representatives hold half of the seats on VW’s advisory board and when Muir recently tried to cut 300 jobs within SEAT he was told that this was simply not an option (Cremer, 2010).

Weaknesses, Threats and opportunities:

Also, there are a number of factors which could further threaten SEAT’s already weakened position. These have been highlighted by a recent SWOT analysis of the company. Under the heading of weaknesses the company which carried out the analysis (Datamonitor) highlighted the fact that SEAT’s revenue had been declining in recent years as well as the problem with the company’s Martorell production plant being situated in a particularly expensive area compared with other rival manufacturers which have set up plants in low cost regions such as Asia. This leads to higher pricing for SEAT’s products and thus lower profits. As of yet SEAT have made no plans to move production to a cheaper area and this could prove problematic in the future. Under the heading of threats Data monitor (2005) reported that Japanese competition could be a danger to SEAT’s position in Europe and the rising cost of raw materials was seen as a serious threat to SEAT’s profitability. Also Spain’s (and SEAT’s) labour force in highly unionised and if a dispute were to arise SEAT could be faced with a major problem.

However, Data monitor (2005) did agree with many of SEAT’s claims about themselves, sighting its strong parent (VW) and its strong brand recognition as its main strengths and an increasing level of penetration into the market for diesel vehicles as one of its main opportunities. As well as this, SEAT recently announced plans to begin selling cars in China as this is one of the largest and fastest growing car markets in the world and is seen by many car manufacturers as a key customer base Blanchar, 2011). The company will show off its vehicles at the Shanghai motor show before launching the Ibiza and Leon models in 2012. SEAT CEO James Muir believes Chinese customers value technology and are very design conscious and he for these reason he believes SEAT will be successful in the region.

One area in which SEAT does seem to be showing initiative and taking stock of modern issues is that of the environment. SEAT have spent a huge amount of money in designing and producing a new range of ‘green’ cars, or the ‘ecomotive’ range as SEAT are calling it. The company claim that this new range is exceptionally good for the environment without sacrificing any performance or power. This looks like a promising business idea s the cars will appeal to a certain type of customer and also because EU legislation makes it much more economical for people to purchase environmentally friendly cars.

Marketing techniques and Motor Sport:

SEAT has always marketed itself as an affordable, yet stylish and sporty car. Its main rivals are Fiat, Renault and Peugot and SEAT is constantly looking for ways to get ahead of these rivals. Prior to VW’s takeover SEAT had suffered from a very poor reputation as a manufacturer of unreliable cars. Once VW took over however, SEAT began to be seen as a cost alternative to VW while still containing the German company’s best attributes such as reliability and performance. VW could achieve this low pricing due to Spain’s cheap labour in comparison with the rest of Europe.

Since 1997 SEAT have ran some very interesting and successful advertising campaigns. The idea of these campaigns was to not place too much emphasis on the actual cars and their performance but more so on their style and their appeal. The thinking behind this was that potential customers were in the market for an affordable car and generally were not car enthusiasts. Using modern and stylish images, SEAT have aimed their campaigns at the 18-35 year old age group. However it was important to not completely avoid talking about the technical aspect of their cars as the efficient German engineering and manufacturing would be an attraction for potential customers. The result has been a series of ad campaigns which highlight the affordability of SEAT cars which also contain a certain sophistication. The campaigns have proved to be quite successful and have contributed to the high regard in which SEAT is held today.

SEAT’s most recent campaign has been has been slightly more risqué but retains similar characteristics and is aimed at a similar market group as in previous campaigns. The campaign, which has been running on television and other media forms in recent weeks contains a modern day Cupid character whose arrows cause people to instantly fall in love with the new SEAT Ibiza.

Sponsorship:

In 2009 SEAT entered into a sponsorship agreement with the UEFA Europa League. Sponsoring the European football tournament went well with SEAT’s image as a European manufacturer of sporty, stylish cars. Other sponsorship deals include the Welsh Rugby Union, The Millennium Stadium and Fulham Football Club as well as affiliations with Latin pop singer Shakira and the new Pirates of the Caribbean Film.

Motor Sport:

Many companies are involved in motor sport, for example Renault in Formula 1 and Ford in rallying. The main objective for such companies when it comes to motor sport in marketing. Obviously if a car made by a certain company is winning famous races and championships, this will enhance the image of that company. SEAT’s most notable sporting success has come in the form of touring cars. This is a sport for a more regular brand of car as opposed to the very glamorous and unattainable Formula 1 cars.

Formed in 1985, SEAT Sport is an official department within SEAT. SEAT Sports develops SEAT’s most sporty models to race on the touring car world circuit. Although SEAT had previously been involved in Spanish rallying in the 1970’s this practice was curtailed due to financial restraints, until 1985 when their tiny front wheel drive SEAT Marbella achieved success on the Spanish rally circuit. SEAT then managed to break into the World Rally Championship (the highest level of world rallying) and due to the team’s success and the sports popularity in Spain VW (who had taken over SEAT at this point) allowed SEAT to continue until 2000 when cutbacks again brought SEAT Sport’s rallying career to an end.

In 2004 however, SEAT was back in the world of motor sport in the form of the British Touring Championship. The teams biggest achievement in the sport to date came in 2008 when SEAT driver Yvan Muller won the World Touring Car Drivers Championship and team SEAT UK won the team event for the same competition. Later that year however, following a lull in the sport’s popularity and thus a decline in the commercial value for the competing car companies, SEAT announced that it would no longer be competing in any form of motor sport in the foreseeable future.

SEAT in the UK and Ireland:

SEAT has had a relatively successful 2011 so far in terms of sales figures and profitability. One way the company wishes to continue this growth is by increasing its level of UK operations by expanding its network of UK dealers. While the current number of SEAT dealers in the UK stands at 122 the company plans on reaching 135 dealers by early 2012. Although this is quite an ambitious target SEAT are currently in line to achieve it. The reason being the company’s recent level of success. Many dealers are vying for the right to sell SEAT cars following very successful sales figures in the early part of 2011. Also, unlike many other car manufacturers SEAT are willing to interact with a wide range of dealers from small plcs to powerful nationwide companies and also single site owners which are privately owned. Each type of dealer stands to profit fro selling SEAT cars due to an increasing turnover which has surprised many following the company’s dismal performance in recent years. SEAT sold 7200 new cars in the UK in March which is a record for the company and also reached a record market share in the UK of 2 per cent SEAT’s presence in Ireland is proportionately similar with 25 dealers throughout the country.

Conclusions:

In carrying out research for my dissertation on SEAT I have found that as a car manufacturer they were, for a large number of years, a producer of unreliable and largely unpopular cars. It is quite clear that the VW group have saved SEAT as the Spanish company is now known for producing reliable and efficient cars while still offering good performance, attributes which are generally associated with VW cars. So the effect of VW’s takeover has no doubt been a positive one for SEAT, even though it has struggled greatly in recent years. Meanwhile SEAT cars till manage to retain a Latin flair in terms of styling which is popular with customers. From quite humble beginnings in 1940 (and a vitally important renaissance in 1950) SEAT has become a leading car manufacturer in Europe, despite recent difficulties, and is now beginning to penetrate markets further a field such as China. SEAT is now easily Spain’s largest car company and third largest company overall.

However, as with all companies, SEAT has plenty of room for improvement. This needs to start with ensuring that low profit levels in recent years are turned around. While expanding into the Chinese market and producing a new rage of eco friendly cars look like very promising business ventures in the current economic climate, I believe SEAT may have to abandon its Martorell plant in Barcelona on order to set up production in an are where labour and taxes are not so expensive. Many other European car companies have had success in doing this. Having said that SEAT have proved to be dynamic and successful in setting up and centralising all their major operations in Barcelona, with the Martorell plant being the jewel in the crown.

The aspect of the dissertation I have found most interesting has been the history of SEAT. Although the company is now effectively just another branch of VW I found their story to be an interesting and largely successful one. When carrying out research for my dissertation I encountered a number of problems. Firstly I used the SEAT official website for some information and this was understandably quite biased and I found that some facts contradicted what some of my other sources said. While information I found on the site regarding history, official figures and information about specific models was generally quite trustworthy, I found I had to be very careful when dealing with claims about recent success of the company and the glorification of some if its achievements.

When carrying out research online I found it quite difficult to locate a large number of useful sources such as online journals. However after a lot of searching I did find a number of very useful sources online. Many of my searches for ‘SEAT cars’ returned a majority of results dealing with ’car seats’ and I found it very time consuming to find the appropriate online sources for this reason. I encountered no such problems with the books I used which proved invaluable in gathering relevant information. Each book I used (see references) included an index which I could use to find important information about SEAT.

Bibliography:

Kamp, B., 2007. Location Behaviour and Relationship Stability in International Business Networks. Oxon. Routeledge.

Plunkett, J.W., 2009. Plunkett’s Automobile Industry Almanac. Houston. Plunkett.

Evans, J., Dangel Cullen, C., 2004. Challenging the Big Brands. Gloucester MA. Rockport Publishers Inc.

Datamonitor, 2005. SEAT S.A. SWOT Analysis. Available through: EBSCO Host Database (accessed on 8th April 2011).

Cremer, A., 2010. VW in ‘Last Attempt’ to Save SEAT Amid Spanish Crisis. [online] available at (accessed 23rd April 2011)

SEAT, 2011. 60 Years of SEAT History [online] available at (accessed 27th February 2011)

SEAT, 2011. A Race Back in Time. [online] available at (accessed 30th February 2011)

Blanchar, C., 2011. SEAT corteja a la juventud China. Available at El Pais. (accessed 25th April 2011)

Blanchar, C., 2011. SEAT desembarca en China con el Ibiza y el Leon en busca de compradores jovenes. Available at

Blanchar, C., 2011. Audi desvela el Q3 que se fabricara en la planta de SEAT de Martorell. Available at