Automotive News Europe - September 2011 - 3

AUTOMOTIVE NEWS EUROPE

LETTER FROM THE EDITOR Harald Hamprecht is Editor-in-Chief at Automotive News Europe. He can be reached at hhamprecht@crain.com

PHOENIX IN THE ASHES

hat a summer! A historic downgrade of the United States’ credit rating, a worsening of Europe’s debt crisis, the threat of national bankruptcies, a slowdown of China’s growth, the rising fear of a global double-dip recession, falling stock prices and rising raw material costs. The world’s financial markets are more volatile, uncertain and connected than ever before. These are tough times for even the most successful automakers, and for a struggling brand like Saab the troubles could deliver a fatal blow. It has been a brutal year for the Swedish brand. ■ In March, Saab had to halt production after suppliers stopped delivering goods as they had not been paid. Several starts and stops followed. From June until August, Saab’s Trollhaettan plant was dormant. ■ In May, a deal with potential Chinese investor Hawtai Motor collapsed. That same month, Saab CEO Jan Ake Jonsson retired after six years on top. Has Jonsson, at 59, really left only to spend more time with his family? ■ In July, Jonsson’s successor, Victor Muller, who also heads Saab owner Swedish Automobiles (formerly Spyker Cars NV), sold 50.1 percent of the Trollhaettan plant to a group of real estate investors to raise cash. Saab now leases the plant from the investors. Muller also had to sell shares in the company to help pay suppliers as well as employees. ■ In August, Saab pulled out of this month’s Frankfurt auto show and Sweden’s Debt Enforcement Agency froze some Saab accounts because the company failed to meet a payment deadline. Survial instincts Despite the challenges, Saab refuses to quit. The company is used to near-death experiences. Following chronic financial losses, thenowner General Motors started winding down Saab early 2010. Muller gave Saab new life when he closed a last-minute deal to buy the automaker for $400 million – $74 million in cash and the rest in deferred shares. It wasn’t the first time Saab was close to collapse. When GM acquired half of Saab in 1989 the company was near bankruptcy. GM was able to push Saab’s sales to a peak of 133,000 units in 2006, but sales have been declining steadily ever since. In 2010, Saab only sold 31,700 vehicles – globally. In March, Muller told Automotive News Europe that Saab’s aim was to sell 80,000 cars in 2011 and 120,000 cars in 2012. These goals will be “re-evaluated” after Saab resumes production, a spokesman said.

SWEDISH DREAMS
Saab’s product plans 9-5 sedan ....debuted June 2010 9-5 wagon .....autumn 2011 9-4X ...............autumn 2011 9-3 .................Oct. 2012 9-1 .................2014 (at earliest) 9-6X ...............no date announced 9-7 .................no date announced
Source: Company

Saab boss Victor Muller

What went wrong? How did Saab end up in this mess? There are three key reasons. 1. Product: No brand can survive with a portfolio consisting of two lines. Add to that, the 9-3, launched nine years ago, is long overdue for an update, as was the 9-5, which was sold for 13 years – two life cycles – before the new generation arrived last year. 2. Brand: To fix the problem mentioned above, GM launched the 9-2X, a rebadged Subaru Impreza a.k.a. the Saab-aru, and 9-7X, a rebadged Chevy TrailBlazer. This move upset Saab’s core customers, who cherish the brand’s quirkiness, and it did not win any new customers. 3. Production: Doing business in Sweden is costly. Wages are high. Taxes are high. Muller said the company’s break-even annual sale level was 80,000, a number that must make GM executives shake their heads in disbelief as this is only half as much as in the past. Today, more and more dealers and customers are losing faith in the

brand. Even Trollhaettan Mayor and former Saab union leader Paul Akerlund has publicly stated he is making preparations for a shutdown of the automaker. That would be a tragedy for Saab’s 3,700-person global work force, of which 3,500 are based at headquarters in southwestern Sweden. Saab’s 900 dealers and 800 suppliers also would suffer. What would make a shutdown even more frustrating to Saab fans is that the company is not far from reversing its product problem. The new 9-5 sedan is in its first full year of sales. The 9-5 wagon was due to be at dealers early this year but that won’t happen until production resumes. Saab would love to start selling the new 9-4X crossover – which is derived from the Cadillac SRX – in Europe this autumn. The GMbuilt car went on sale in the United States in July. The next-generation 9-3 was supposed to arrive in October 2012 and be underpinned by Saab’s so-called “Phoenix” platform. Also on Muller’s wish list are the 9-7 flagship, 9-6X large crossover and 9-1 entry-level car to challenge the Audi A1. Sweet Swedish dreams! The reality is an ongoing fight for survival. The company wants to sell a 29.9 percent stake to China’s Zhejiang Youngman Lotus Automobile Co. for 136 million euros. Meanwhile, Pang Da Automobile Trade Co. offered to pay 109 million euros for a 24 percent stake. The deals are expected to be approved in October. Honestly, 245 million euros is a drop in the bucket, especially since Saab wants to pay back 217 million euros it owes the European Investment Bank so that it can allow entrepreneur Vladimir Antonov to invest in the carmaker. Even with the Russian’s cash, it will be hard for Saab to finance its expansion plans given that a completely new model line costs roughly 1 billion euros. Can Saab compete against premium brands just by buying engines from BMW? Also, will China sales really save the brand? The Swedes have high hopes for success in the world’s biggest car market. But the automaker sold just 257 cars there last year. So what is next – an amazing rebirth or quick death? I would love to see the brand rise like a phoenix from the ashes because I like the automaker, its design philosophy and its passionate people. But I fear Saab’s obituary is already half written and will read like this:

Saab (1949 – 2011) Beloved Swedish automaker was the decade’s first casualty in a market plagued by chronic overcapacity. Rest in peace.

SEPTEMBER 2011

ANE EXECUTIVE EDITION

Automotive News Europe - September 2011

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