When it was built in the early 90s, SEAT’s factory at Martorell epitomised Spain’s post-Franco economic miracle and signalled owner Volkswagen Group’s intent to turn SEAT into a major brand in the European car market.
It’s hard not to be impressed, even now. Martorell, just outside of Barcelona, is one of the most advanced and productive automotive facilities in the world, capable of constructing over 500,000 vehicles a year with state-of-the-art, robotic efficiency. It really is a marvel of modern engineering. Of course, they said the same thing about the Titanic...
The financial crisis made a very convincing iceberg. Demand sank rapidly in 2008-9, and brought SEAT’s earnings down with it. For seven straight years, it struggled to stay afloat in a sea of red ink. The total loss from 2009 to 2015 was a staggering €1.1bn, against a Group profit of €78.8bn.
If you do a few quick calculations on the back of a cerveza mat, you’ll see that to break even, production at Martorell needs to be north of 400,000. At its low point in 2009, it was only 301,000.
Even the patience of VW’s calm-headed patriarchs in Wolfsburg has its limits. Had things not picked up, SEAT could perhaps have been one of the great casualties of the recession, perhaps shut, perhaps sold, perhaps nationalised, if the Spanish government could find sufficient euro stashed behind the back of its sofa.
But in 2012, something miraculous happened. People started buying SEATs again. Production and revenues started to increase. Revenues in 2015 were double what they were in 2009, and by 2016 the company was in the black once again. It’s now the fastest-growing car company in Europe, a picture of health.
Yet the man at the wheel for this astonishing turnaround, SEAT president Luca de Meo, takes no credit.
‘I know for the media it’s a good story for it to be the Luca de Meo show, but it’s not true in reality,’ says the youthful Italian, who arrived in late 2015 from Audi. ‘There are a lot of people that move things, so I don’t want to take any personal credit for that... and a lot of the good work at SEAT started before I came.’
It sounds like false modesty, but it’s not. The seeds of SEAT’s renaissance were indeed sown by his predecessors James Muir and Juergen Stackmann. Their genius was to convince sister-brand Audi to start production of its Q3 model in Martorell, simultaneously solving SEAT’s under-production problem – 30% of the factory is still devoted to it – and earning it a handsome annual income to boot. Combined with the VW Group’s decision to allow SEAT access to its most advanced core technology platforms, the move also importantly enabled SEAT to raise the technical standards of its own models.
Throw in some snazzy design work, and you’ve got the best product line up in decades.
(Don’t just take our word for it. The petrol-headed doyennes of MT’s sister publication Autocar assure us that SEAT’s recent crop of youthful cars is indeed unusually good. The Ateca SUV, for example, is ‘mildly sensational’, with the ‘makings of a class leader’.)
It would be a mistake to think that the slickly dressed Italian has the company on cruise control, however. Much is ado in Martorell – and MT joined de Meo for the day to find out what.
It's all about the brand
The top floor of SEAT’s administrative HQ has the glossy openness of a showroom, with two metre automotive models and little tables with brochures on them. De Meo’s office itself lacks a desk, having instead a large meeting table and small cabinet against the wall, with biros and a half-completed Rubik’s Cube. It has huge windows overlooking the motorway, rather than the factory itself.
This is fitting, for where his predecessors were mostly concerned with production, de Meo’s mind is above all on SEAT’s brand. He wants to get it back in the race.
‘Looking for volume only is pretty dangerous,’ de Meo says, gently chewing gum. ‘What’s relevant is that we achieve share. The problem we have is that in many markets we are below the radar. Below 5% segment share, you’re invisible, you don’t exist. So our first target is to become visible, because the best advertising you can get is seeing the car in the street.’
SEAT’s brand, de Meo says repeatedly, is intimately intertwined with the city of Barcelona – fun, youthful yet at the same time cultured and sophisticated (and still currently part of Spain, a topic that's unsurprisingly off-limits). It’s perfect first car material. For automotive wunderkind de Meo, this is familiar territory. After stints at Renault and Toyota, he went to Fiat where he headed up Lancia, Abarth and then Alfa Romeo while still in his 30s, before joining the VW Group in 2009 as chief marketing officer and then sales and marketing VP at Audi.
‘A lot of people said to me, "but Audi’s the final link in the chain, why would you come here?" But it’s exactly the kind of thing I like. I had the feeling that something could be done, that we could sharpen the strategy and create a story out it.’
Helping him out with that is Wayne Griffiths, SEAT’s VP for Sales and Marketing, who followed him from Audi. The Brit, who’s lived on the continent for decades and took German nationality after the Brexit vote (he does have a slightly Teutonic twang to his Lancastrian lilt), shares his boss’s optimism about SEAT’s golden opportunity to expand.
Take Italy and France, two of SEAT’s toughest markets. After years of languishing, it’s going on a ‘now or never’ offensive there. MT asks why it’s so difficult.
‘Because they don’t like Spanish wine,’ Griffiths replies, gesturing to de Meo. ‘Try selling him a Rioja.’
‘It’s all history,’ de Meo leans back on his chair, running his hands through his hair. ‘In Italy the mentality was that SEAT was a second class Fiat; in France, it was distributed in the beginning by private distributors trying to sell cheap cars and it slowly moved in the boy racer corner. To move out of these things is difficult.’
Success in the European market, where SEAT currently does 85% of its business, would of course be welcome, but de Meo’s biggest ambitions lie elsewhere. He wants the rest of the world to comprise 30% of SEAT’s trade, and is paying particular attention to Latin America. The idea is that the brand of Spain and Barcelona will play well there - there are plans for a new team in Mexico and new operations in Argentina and Chile. Griffiths smells an opportunity among Latinos in the US, but de Meo is unconvinced. ‘They feel they’re more American than immigrants – the first thing they’re going to do is buy a big Ford,’ he gestures widely, to illustrate the point.
There's no I in team - or group
At the end of their meeting, Griffiths runs through SEAT’s plans to become the biggest car brand in Algeria. The question they’re debating is which model to lead with, which raises the issue of how the wider VW Group would react.
It is, of course, a critical element of running a company like SEAT. De Meo not only has to compete in a crowded market; he also has to negotiate with the powers that be in the vast VW Group. He’s well placed to do so, having spent a few years at the corporate HQ at Wolfsburg. ‘It was good for me to start there, because I got to know the language and the culture. It would have been more difficult to connect if I’d started out here. I know everybody.’
De Meo claims to ‘feel very autonomous’, which probably has more to do with SEAT’s much improved numbers than its geographical distance from the German headquarters. In any case, whatever the constraints are of running a business under the shadow of a much larger parent (the emissions scandal tars strictly by association, but not overly so – frankly, not enough people know that SEAT is part of VW Group for it to stick), SEAT gains far more from the arrangement.
Firstly, there’s the reach and prestige of the group’s dealership network, which de Meo is integrating SEAT into after successfully doing so in the UK. Even more significant is the ability to access the group’s immense R&D resources, without taking any financial risk.
‘We have a different business model from the others. Nobody else could break even with 400,000 cars, nobody. We don’t have to invest in the development of certain technologies, we just buy it from the group, with a fair margin. If we want an electric car, we get an electric car. If we want autonomous driving, we get autonomous driving.’
De Meo in a minute
1967: Born in Milan
1992: Starts career in car industry at Renault.
2002: Joins Fiat. Initially responsible for Lancia, then Abarth and Alfa Romeo
2009: Joins VW Group in marketing role
2012: Becomes VP Sales and Marketing at Audi
2015: Becomes President of SEAT
As it happens, autonomous driving is not especially high on the agenda. The R&D SEAT does – and where it has a strong reputation in the group – is largely concerned with the ‘connected’ car. It will shortly become the first brand, for instance, to integrate Amazon Alexa directly into the user interface. There’s also an app being developed that will effectively allow SEAT to enter the on-demand rental market, with company owned cars in strategic locations that can be virtually booked and unlocked using a smart phone.
That illustrates an important trend. Increasingly, car manufacturers will depend not on the excellence of their hard-engineered drive shafts or advanced brake sensors but on software and consumer technology.
This is because of a long-term shift from ownership to renting, which is gradually transforming car companies from manufacturers into ‘mobility service providers’. It’s a transition de Meo understands all too well.
‘I think Luca is the right leader for the right time,’ says SEAT’s HR chief Xavier Ros. ‘He’s very far in the future. He can envision where the automotive world is moving.’
Ros admits the shift from alloys to apps comes with problems. ‘It can be difficult to attract talent who are not petrol heads. Until now, we could find everything we wanted from among our competitors, but it’s not as easy convincing someone working at Google to come into car manufacturing.’
(De Meo himself, it should be noted, is still clearly a lover of cars. When some of his colleagues are showing us the latest models from SEAT Sport, he takes an age circling it, before picking off a piece of lint from the matt paintwork, as though it were his own.)
Recognising the challenge, de Meo last year opened SEAT’s innovation hub, Metropolis:Lab, in Barcelona proper, not Martorell, to develop an ecosystem of apps. Inside the plant itself, engineers and designers have been placed together on one floor in an effort to break down silos and develop a project-based organisation. For a place that once prided itself on employing many generations of the same families, providing company apartments, a company supermarket and even a company church, this is no small shift.
Yet if the move away from jobs-for-life has had any impact on morale, it’s hard to perceive. Walking through the place, watching de Meo shake hands and greet staff by name – those in overalls as well as those in suits – the positivity is palpable. The firm’s recent successes perfume the air like engine oil. As de Meo puts it, ‘when you start the game 1-0 down it’s a bad feeling. Then it was 1-1, now maybe it’s 2-1 up.’
A maintenance engineer tells MT with pride that his counterparts from elsewhere in the group come to Martorell to see how they’re using the predictive technology. The engineers speak with the same tone about how many patents SEAT now has. It’s a plucky underdog whose fortunes have changed. And de Meo, who exudes optimism as marketers often do, is naturally at home here.
It raises the question how long he’ll stay – whether SEAT successfully shifts gears from recovery to growth or not. After all, you’d hardly expect someone who’d already run several major car brands by the time he turned 50 to hang around anywhere too long, and especially somewhere of SEAT’s comparatively modest scale. But, surprisingly for someone with his foot on the gas, de Meo insists he’s not in a hurry.
‘Because I had so much from my career so early, I don’t have the mood for ambition, money, power. I look for situations where no one else has managed to solve the thing. I’ve read the books, I’ve spoken with my predecessors, some of them 85 years old, and we’ve never experienced such a position in the history of the company,’ de Meo says. ‘When it stabilises, then maybe it would be the right time for me to move on.’
3 challenges facing de Meo
- Lure tech talent from Google and Facebook
- Keep his bosses at VW Group on side
- Crack the Latin American market
Image credits: SEAT