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Saab's sob story

Why the Swedish automaker's plants have been mostly idle for the last few months.

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Victor Muller, CEO of Spyker Cars, poses between a Saab car (left) and a Spyker (right) in Stockholm on Jan. 26 , 2010 after General Motors announced an agreement to sell Saab to Dutch luxury sports car maker Spyker, in an 11th-hour deal saving the storied Swedish brand. (Olivier Morin/AFP/Getty Images)

STOCKHOLM, Sweden — As summer vacations wind down across Scandinavia, most Swedes are heading back to work — but not those who work for Saab.

The Swedish automaker has struggled to gain traction since being sold last year by General Motors to the small Dutch sports car manufacturer Spyker, now called Swedish Automobile. Now company managers are looking east, to China, for salvation.

Saab’s sad story is a black spot in Sweden’s otherwise robust recovery. The company’s main factory in southwestern Sweden has sat idle more or less since April and the company has delayed paying wages twice in the past months to its blue- and white-collar workers all in an effort to cut costs and buy time as it searches for more money. No date has been set for production to resume, the company said, though factory workers are still receiving pay despite the shutdown.

“The outlook is extremely grim at the moment,” said Jens Nordstrom, a reporter for Sweden’s TV4 and author of “Cirkus Muller,” a biography of Victor Muller, Saab’s CEO and Spyker’s founder. “If a solution doesn’t happen soon, I think people will begin losing patience both within and outside of the company.”

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On Monday, Swedish Automobile announced it was issuing 4 million new shares to raise cash and that talks continued “with parties to obtain further short-term funding to be able to restart and sustain production.” This marks the third time since May the company has issued shares to help raise new funds.

“What we’re going through is a challenging period and it’s very much due to being, in essence, a start-up company,” Saab spokeswoman Gunilla Gustavs said, noting the automaker’s 18 months of independence from GM.

Gustavs said Saab is still in talks with Chinese investors but that a deal struck between Saab and Chinese car distributor Pang Da and carmaker Zhejiang Youngman Lotus Automobile Co. had yet to be approved by shareholders and European and Chinese regulators.

“We have reason to believe that could happen as early as the fall,” she said.

While it has long struggled, Saab’s troubles deepened during the 2008 financial crisis when GM and other American auto giants entered bankruptcy. Part of its restructuring plan coordinated by the U.S. government required GM to either close or sell off some of its brands.

Industry observers, however, say the challenges facing Saab began much earlier under GM’s nearly 20-year stewardship. Saab, established in 1937 as an aircraft manufacturer, was known for its well-engineered and powerful sedans but experienced little in terms of updates and additions to its fleet.

“The Saab brand was a bit diluted,” said Hans Nyman, a senior advisor with Automotive Sweden, an independent group that studies the industry. He said Saab also wasn’t poised to shift with changes in the automobile market. The company was building larger cars with not much emphasis on fuel economy when consumers began steering toward small vehicles with better gas mileage.

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Nyman said the company’s outlook remained murky and added its top priority now is finding new investors to continuing paying suppliers and employees. But with a shaky global economy, Saab will be fighting an increasingly uphill battle.

“It will be tough times again,” he said, if a second recession hits. “You buy nice, new cars when the times are positive.”

Muller said earlier this year, before the production stop, that he hoped to sell 120,000 vehicles in 2012 and become profitable. Last year, Saab sold about 31,700 vehicles worldwide, down significantly from its global sales peak of 133,000 in 2006.

Saab dealerships in the United States and Europe are also struggling. This month a large dealership in Albany, N.Y. shut its doors after selling the iconic Swedish brand for 50 years. On its website, New Salem Saab told its customers that “the continual disruptions of the Saab brand and its operational difficulties put us at a disadvantage that is uncorrectable with Saab’s current state of affairs.”

Nyman said the investments from Chinese companies could be a boon to Saab, giving it the necessary influx of cash and access to the sizeable Asian market. But many worry the longer Saab’s predicament continues, the more customers will abandon the brand for something more stable.

“The big problem is this tarnishes the image of Saab,” said Nordstrom. “It scares the buyers away.”

He went on to say that Muller’s plan to turnaround a languishing Saab might prove to be overly sanguine.

“He’s a great visionary but he bites off more than he can chew,” Nordstrom said of Muller. “He underestimated the huge costs there are in running Saab.”

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Saab’s spokesperson Gustavs, however, remained optimistic despite the uncertain future, saying the carmaker would be rolling out a new sport utility vehicle model, the 9-4X, as well as a second-generation sedan and wagon version of its classic model, the 9-5.

“We haven’t been able to [advertise] those cars as much as possible,” she said adding the company is channeling its available funds into kick-starting production. “We’re still here fighting.”
 

http://www.globalpost.com/dispatch/news/regions/europe/110815/saab-auto-industry-news-sweden-economy