Motors - How Did Saab Fail?

How Did Saab Fail? 

At the time of writing, the news has only just broke that Saab is being pursued by the Swedish government’s debt collectors for over £850,000 the company owes suppliers and despite selling off huge chunks of it’s factory and letting the buildings back, and securing millions in investment from China. So how did Saab reach the point where the company is swirling the plug hole?

It’s a hard question to answer really. Saab had been allowed to get outfrom under the GM brand, and was back in full Swedish ownership thanks to the purchase of the company by Spyker. However, the company did take the designs for GM’s Epsilon platform which it uses for the 9-3 saloon, GM engines and drive trains as well as the so called ‘Hi-Per’ strut, a version of the MacPherson strut suspension that Saab engineers designed for the American conglomerate.

Saab 9-1 Concept

And to top off the announcement of a new 9-3, a 9-4x SUV, Spyker announced that they had reached a deal with BMW to buy the 1.6l turbo petrol from the current MINI Cooper S and the 1.6l turbo diesel powering the MINI Countryman.

These engines would be used for the 9-3 range, but also a 9-1 super mini to rival the MINI and Audi A1.

Saab, a brand known for it’s sensible, upmarket attitudes could finally flex it’s muscles. And then suddenly, it completely hit the fan.

Back in March 2011, Spyker announced that it’s CEO was stepping down to be replaced by Victor Muller. Jan Ake Jonssn would take up the role as Saab CEO. The announcement that an importer network for Russia felt like good news, things were happening, Saab seemed busy. The 9-3 and 9-4X were apparently well under way in development and the revised 9-5, while not perfect, was a serious imporvement for the brand.

Just a few days later however, production was halted at the Trollhaten plant for a few hours. This may not sound like a major incident, but in the 21st century world of the 24 hour factory, this was major news.

When a factory with more than 17,000 square meters of space stops working, it can only mean bad news. And it did. About two weeks after this first haltage, Saab announced it was seeking ‘short and medium term funding’ as suppliers stopped parts deliveries over unpaid invoices. Saab was now a car company that wasn’t manufacturing cars and current sales of it’s 9-5 saloon and aging 9-3 were not generating enough income. Despite this, Saab executives were adamant that the 9-4X and new 9-3 would be enough to save the company, they just needed to survive till these cars could be released.

2012 Saab 9-3

In early May, Saab announced a £105m investment from Chinese company Hawtai to manufacture Saab’s for the crucial Chinese market, a key component to profitable business. In return, Hawtai would take a 30% share in the Swedish company and have access to it’s European dealer networks. This funding, according to Victor Muller, would secure funding for the 2012 9-3 replacement and the ‘Phoenix’ modular platform.

It seemed Saab was going to haul itself out of the fire at the last moment.

However, just a week later, the shock announcement from Hawtai was that the deal was off due to the Chinese company failing to obtain shareholder approval on the deal. Saab was once again hanging by a thread. In addition, a refinancing deal with the European Central Bank has been revised down to £240m from £350m, with Saab saying all the money was needed to get the 9-3 and it’s Phoenix platform into production. Despite this, the company had announced the deal with BMW to purchase the engines powering the MINI cars.

The tenacity of Saab’s executies was shown by the fact just a couple of days later, a deal was done with Pang Da, a Chinese distribution firm, for £39m worth of cars and a further £57m for a 25% stake in the Swedish marque. So finally, a month and a half after production group to a halt, Saab began making cars again, with efforts to shift the 6500 car backlog underway, no small task for a factory with a capacity of 218 cars per day. However, the company’s medium term future was safe and Saab would get the crucial Chinese presence it so vitally needed.

On top of this good news, Saab announced the company had hired Jason Castriota to take up the position as head of design. Castriota’s CV is impressive, including the Maserati Birdcage concept, the Ferrari 599 GTB and Maserati GranTurismo. He had previously been head of Ferrari’s Special Projects division which makes one-off cars for private customers.

Saab PhoeniX Concept

Castriota’s first effort was the truly stuning PhoeniX, a working concept car based on the Phoenix platform and featuring a 1.6l turbo petrol engine. A sign of the potential Saab had if it could survive.

But the good news soon dried up. Just a few days after the announcement of Castriota’s appointment, production at Trollhaten stopped again, this time due to a lack of parts. After a near two month shut down, the parts had simply run out, with Muller admitting it was “hard to predict” when things would get started again.

Saab 9-5 SportWagon

Despite this, Saab announced the crucial 9-5 esate, due to go on sale early, available in late 2011, along with a raft of improvements to the engine line-up and interior equipment. This was despite the fact that production was still halted, and likely to remain that way till early July at best, and the information that Saab had only paid 10% of what it owed it’s suppliers with an obligation to have the rest of it’s debt paid by September.

At this point, the noises of Saab selling some of the Trollhaten factory and lease it back in order to raise funding in the short term began to appear.

The 'IF Metall and Unionen' Union group, whose members include Saab’s employees, announced that it’s staff had not been paid in July, and the true scale of Saab’s problems began to come to light. It turned out that the £11.5m the company had recieved for an order for cars detined for the Chinese market had been used to pay it’s staff in June, although it meant that it was being paid just £19,k per car, with a base 9-3 costing £21k in the UK. All the while the parts supply problems kept the factory silent.

The Trollhaten Factory

As well as this order, Saab announced it had sold 50% of the Trollhaten factory with a 15 lease agreement which was able to raise £25m worth of funds plus an additional £5m in shares sold to the same investment company.

Despite these two important and much needed pieces of good news, there was still not enough money to allow the factory to restart production. In addition, due to not recieving the funds in time, Saab was force to sell a further 17% stake to raise immediate funds. Unfortunately, the sale only is expected to have raised approximately £7m, with some £50m needed to allow production to be restarted and continued.

Sensibly, Saab announced last week it was no longer planning to attend the Frankfurt Motorshow, citing it, quite rightly, as an 'inappropriate use of resources'. While this was the only course of action the company could take, it had planned to exhibit the 9-3, production ready 9-4X, a 9-2 as well as the PhoeniX concept car.

Finally we arrive at the point where the Swedish government has begun taking steps to reclaim Saab’s debts. This is a three month process unless the company can pay it’s debts. If the company cannot pay, the Swedish Tax Authority will then have the power to declare Saab legally bankrupt.

But again the question of how has this happened? Saab’s future looked good, GM had taken steps to ensure Spyker had the funds and reassurances in place to sustain the company, Spyker even sold the sports-car business to fund Saab. It seems the famous Swedish marque has managed to achieve the same rapid fall into bankruptcy that Rover-MG managed, although that was due to the management taking vast sums of money from the company’s accounts.

The 9-4X SUV

Saab had the future models, it had the global pressence, it had the technology and the company was adament it had the funding, and yet somehow, something has gone horribly wrong despite a huge amount of outside investment, assest and share sell-offs and huge car orders.

History may reveal that, like Rover-MG, the company was grossly mismanaged at some point. It may also turn out, like Rover-MG and the MINI brand, that Saab had a game-changing car sitting in the factory begging for the funds and production space. BMW has been able to increase it’s sales continuously thanks to the Rover-MG designed MINI and 1-Series, while the Rover-MG brand sits dead at our feet.

It’s a sad state of affairs and miserable position for a brand that has consistently been a true innovator, which started out as nothign more than a division of the aircraft manufacturer way back in 1937. I will be sad to see Saab go out of business, but as things stand, there appears to be no way back for the famous Swedish car maker.

MD