The news of SAAB's bankruptcy filing was altogether not unexpected. Further to a reported loss-making run stretching from 2001 until now, set against the extremely fragile state of GM accounts and the pressure to show Congress recovery steps, as the weakest brand portfolio member SAAB was ever destined.
Given (GM's) standard practice not to reveal individual company results under the parent umbrella, there could be an argument set-forward that it was GM internal accounting that has consistantly over-loaded Trollhatten operations with group-wide costs year on year. Done so under the auspices to 'trickle-down' Swedish systems and component quality into mainstream operations, but also providing the benefit of pulling-out cost from North American & European operations. But SAAB knows that given the long-time cash hemorrhaging of NA and recent troubles of Germany & UK, that 'transferable cost' argument which has undoubtedly been delivered time and time again in Detroit, is now purely academic.
Corporate submissions to the Swedish authorities show that on paper SAAB lost Skr2.19m in '07 compared to Skr2.90 in '06, which whilst showing a slight upturn over that year, was effectively torpedoed by an atrocious 2008.
The truth is that back in the late 90s when GM management belatedly concluded the need to match Ford with its own Euro-premium marque acquisition, the only remaining 'wall-flower' that hadn't been asked to dance was SAAB. Unfortunately, the pair were mismatched from the start. GM a hulking none-to-sensitive Quarter-Back type, with a modus operandi apparently formed from limited knowledge, and so unsubtle steps applied with overt gusto. This, versus a small overtly sensitive, intelligent and demure type of girl who took time and patience to coax-out the best. After some years of trodden toes and knocked knees, she was eventually hoisted upon his feet to dance his way, and so there formed a critical disconnected with only a veneer of her former self outwardly shown.
That forced relationship now appears greatly diminished, and destined to be over by 2010.
The insolvency action heard on 20.02.09 at the Vanersborg court included the appointment of an Official Administrator who could ultimately act as a welcome White Knight. One that provides the fair maiden with her highly valued independence.
That Knight is reportedly Stockholm-based law firm Lofalk Advokatbyra AB. Able to provide an initial 3 month alleviation from creditor pressures, time for CEO Jan Aake Johnsson to plan a restructure and importantly seek new financial stakes from 3rd parties under the Swedish government's Skr25bn / $3.1bn loan guarantee scheme. [ Provided to SAAB & Volvo after ruling-out a complete nationalisation].
Those stakes could possibly come from: the incumbent share-holder Investor AB (the Wallenberg's family wealth firm), a Swedish led domestic or international cartel, or the aired possibility of GM sourced liquidity to ease the transition; but offered only with a conditional state guarantee. And of course there is the prickly idea of converting creditor debt into reduced debt or debt for equity convertibles.
To gain that investment Johnsson will have to ensure the turn-around plan looks clearly viable. This obviously means negotiations with suppliers on parts costs (eg Autoliv, Continental, BASF)... talks with unions regards labour rates and social benefits... discussions with dealers about ex-factory re-pricing of cars, accessories & parts... and of course debt re-scheduling with SEB Bank and other lender and equity holders. So much to be done, but the CEO appears upbeat regards core financing, giving the impression he has been tentatively addressing this looming issue over the last 6 months.
Unlike the US's Chapter 11, the Swedish system demands visible and meaningful progress within 3 months if the Administrator is not to fully wind-down the company – it cannot crawl along protected but in a zombie state as we see happen in the US (as could be the possibility for GMNA).
That plan includes 3 new models replacing an aged 2 (9-3 & 9-5) and an additional small (9-1) stemming from the Aero-X concept. But such a plan put to action asap would demand the continued use of GM or other VM platforms, probably the Astra platform, hence GM's previous intention to have an undecided car built alongside its DNA-sibling in Russelsheim. Of course that whilst the theoretical business case may look sound on paper with, as ever, optimistic volumes and cost savings the truth of the matter is that once the development programme gets underway the 'cost reality' bites and accountancy-led compromises are made. The North American initiative between SAAB & Subaru that re-skinned Impreza and Tribeca demonstrated the 'ugly-ducking' consequences.
And SAAB's have been ugly ducklings for some time, caught between the limitations of shared engineering (especially engineering hardpoints and surface form parametres), probably limited budgets and a push for intrinsic SAAB individuality. The present set of cars have perhaps been the worst ever, aesthetically caught in the transition stage between 2 evolutionary design themes. That's not unusual, infact a norm for the industry as facelifted cars take on the elements of the next new models. But the fact is that 9-3 and 9-5 metamorphosis toward tomorrow's aircraft aesthetic looks very cheaply done for maximum effect, the headlight and grille surrounds that indicate tomorrow's face look little more than tacky, gaudy 'stick-on' trim – a world away from the modernist aero-design ideals of Sixten Sason & Gunner Ljungstrom.
In today's highly competent premium segment under GM governance the mainstream saloons have become little more a pastiche of their former selves. Thankfully restraint has been applied to the iconic convertible which could perhaps serve as the ideological centre-point looking forward - SAAB's equivalent to BMW's 3 series coupe or Mini's Cooper S – the Centre of Gravity for the brand.
But that is tomorrow, and given the major headwinds facing the company as a very very marginal player on the global stage, it has much to contend with. With 0.4% of the European market, it produced only 93,300 cars in '08. With a workforce of just over 4,100 that gave an average of less than 25 cars per employee. SAAB obviously isn't a Rolls Royce or Maybach to support such a poor productivity ratio, and the auto-analysts more than know it; many stating the firm will simply whither away in due course given the heavy cost-disadvantage.
Its national peer Volvo finds itself in a similar. if not quite so precarious position, producing 366,249 vehicles in 2008; so in capacity terms is 4 times the size of its national rival. And similarly, it too is looking to create its own future once released from the Ford fold
Although ostensibly to date rivals operating on the outer fringes of the premium segment, their similar positions as relative small-fry players 'versus the world' (ie Germans & Japanese) and palpable shared cultural values highlights their match as ideal candidates for a 'co-opetition' agreement.
Both were adopted by powerful parents only to be arguably diluted and discarded, so why not band together under the umbrella of national interest to formulate a strategic framework that seeks technical step-change and provide scale efficiencies in architecture and major sub-systems that enable a mutuality yet provide enlarged scope for critical brand differentiation?
To, in time, discharge themselves from complete dependence upon a 'major benefactor', they need to eventually create their own proprietary mid-high volume flexible platform systems that offer a broad design/packaging envelope to enable a potentially broad portfolio of vehicle types.
In the short-medium term this avenue could be pursued using borrowed solutions from the worlds best flexi-architecture producers. Perhaps aligning its methods to the operational ethos of PSA which leverages best-practice multi-alliances and Toyota's own highly evolved flexible production lines. Overtones of the previous NedCar effort with Mitsubishi may be unavoidable but the essential aim is to create as close as possible reach to the mass-customisation production-line. That short-medium term strategy would eventually morph into the medium-long term ultimate goal of home-grown proprietary advanced structures which offer a step forward in materials engineering & package configurability.
This would provide Swedish industrial independence. An independence born from eco-tech that not only acts as a salient global market USP but provides a technology basis that can be made internationally salable to old guard & new-comer automakers via platforms, sub-systems & IPR. Such independence would provide a dual (B2C & B2B) revenue stream for Sweden and undeniably attract latter-day inward foreign investment.
Such a policy develops the present-day local advantage. As a consequence of national policy, innate culture, and Ford & GM's global R&D orientation, Sweden has developed as a centre for safety, clean-tech propulsion, telematics and efficiency-seeking of ICE propulsion. Thus instead of selling the nation's crown jewels to the Americans (or others) Sweden could sweat its assets for wholly its own gain. Converting Crown Jewels into “Krone Joules”.
As investment-auto-motives suggested previously, such a nationally orientated policy could well be set within an international eco-industrial policy for the Scandinavian & German auto-sectors. In effect utilisng each country's innate core-competencies through-out the value-chain and across differing production scales. As such if planned properly SAAB & Volvo could be re-energised as the centre-piece players of tomorrow's GreenWorld, a remotely conjoined relationship that marries developmental and production efficiencies with marque uniqueness.
It is a road that the likes of VW-Porsche have trodden with veritable success, a road similarly trodden by Jaguar-Land Rover that has provided much needed access to lightweight, hi-content aluminium structures that were desperately needed.
Automotive history highlights that alliances only tend to work, paying dividends, when both parties are nationalistically and culturally aligned. (When they are not there is little point as each party tends to pull in its own direction so fracturing the tie). As of today, there can be perhaps none closer, none ideologically better suited than a Swedish government inspired 'Green-Car' SAAB – Volvo scenario.
