IMPORTANT NEWS: National Electric Vehicle Sweden has agreed to buy the assets of Saab Automobile and the sale is expected to be finalized during the summer.

Monday, December 19, 2011

Saab died three years ago

Today will be remembered as the day the car brand Saab died. But don't let anyone fool you. Saab died more than three years ago in an office thousands of miles away from Trollhättan.

The Saab car division was established after WW2 when Saab needed to find new products to produce and sell. Saab was originally a war plane developer and manufacturer and when the war was over the company needed one more leg to stand on. After experimenting with a few other products, the company developed its first car, the UrSaab in 1947.

From there on Saab was a car company. The first car to hit the market was the Saab 92 in 1949. A two door aerodynamically shaped car with a two cylinder two stroke engine and front wheel drive. It was a small revolution in the car world. Saab improved the car year by year and during the 1950s and 1960s Saab became a victorious car brand in rally competitions.

Saab was always an engineer driven company and did not always do what was the financially best option. It was all about the cars, and the founder and car guy Marcus "Dodde" Wallenberg made sure that the development of the Saab cars could continue despite financial statements written in red.

In 1977 Saab shocked the world by introducing the Saab 99 Turbo. The world's first family car with a reliable turbo powered engine and sports car performance. A few years later the Saab 99 was developed into the Saab 900 which saw to it that Saab turned into a successful company with record sales and nice profits.

Then at the end of the 1980s things started to look difficult. Saab needed new and modern platforms to develop new cars and partners to share the costs. At the end of 1989 Saab-Scania was in the last stage of selling the car division to Fiat. Then General Motors showed up. GM had just lost Jaguar to Ford and was desperate to buy an European premium car brand. In the eleventh hour GM bought Saab, without any thoughts about what it wanted to do with the brand.

Unfortunately GM never paid much attention to its odd Swedish car brand and even worse, instead of giving Saab the needed money to develop a competitive car portfolio, it found it better to use that money to cover the yearly losses.

When GM itself was on the brink of bankruptcy in 2008, the company decided to clean up its car brand portfolio. And in that office thousands of miles away from Trollhättan it was decided that Saab would have to go. And if GM could not have Saab, no one else would either.

And so every other week we could read in the news yet another GM executive putting Saab down. Saying that the brand was a disaster. It never had made money. Saab had lost piles of money year after year. Saab would never be a success, etc etc. Was that the way to sell an asset? Would you describe the house you are selling as full of ants, mold infested and falling to pieces? Of course not! If you are serious about selling, you keep your mouth shut if you have nothing good to say! Just look at how elegantly Ford sold Volvo.

GM was (unfortunately) saved by the tax payers of the USA. The biggest car company in the world was itself in need of charity and good will from some one bigger than itself. Charity and good will it decided in 2008 that it was not willing to show Saab.

To GM big surprise several parties turned out to be interested in buying Saab. As mentioned already, GM did all it could to discourage any buyers, but the lure of the Saab brand was stronger than the warnings from GM.

Among the twenty or so parties interested, there was Geely, which was the second biggest automaker in China. We also had a financially powerful US company called Renco Group, which among other things produced the Humvee military vehicle. There was even a tiny Swedish super car company called Koenigsegg.

In June 2009, to much surprise, GM announced that it was negotiating with Koenigsegg Group. A consortium spun from the small Swedish company producing the Koenigsegg sports car. GM had chosen not to negotiate with Renco Group and Chinese Geely (which ended up buying Volvo), despite their offers being better than the one from Koenigsegg.

Why did GM chose tiny Koenigsegg? For at least two reasons. First, the company was too small to constitute any threat to GM in the future. Secondly, because GM did not believe the deal would be followed through. It was all an act by GM to have an alibi when people later would look for someone to blame when Saab was to be liquidated. Then GM could say that it had tried to sell Saab without luck.

In November tiny Koenigsegg gave up just like GM had foreseen. And GM announced that Saab would be liquidated, all according to plan.

But something happen that screwed up GM's plan. An even tinier Dutch company called Spyker Cars entered the field. And this company had a tenacious CEO that never gave up. Spyker handed in bid after bid and at the same time the pressure from fans and press became too much even for GM.

And in February 2010 GM sold Saab Automobile to tiny Spyker Cars. But GM had at least avoided selling Saab to a competitor, and had added several clauses in the deal with the buyer Spyker Cars which said that GM would have to approve any future changes in the ownership of Saab.

Not surprisingly, Saab soon ran into financial problems. It turned out to be harder than expected to rebuild the brand. A brand GM had damaged almost beyond repair with all the negative comments from the GM executives during 2009. Saab's CEO and Chairman Victor Muller then negotiated a deal with China's and the world's biggest car distributor Pang Da and the upper class coach builder Youngman. This was a fantastic deal. A deal that had the potential of making Saab an important player in China, the world's biggest market.

But GM did not like this deal. China had overtaken the US as GM's biggest market. If there was something GM did not need, it was another premium competitor in China. Especially one that could produce high quality cars locally and distribute them through the biggest dealer network in the country. And so GM decided that if Saab finalized any deals with the Chinese, GM would stop supplying Saab with technology and cars.

Saab had been developing its own vehicle architecture since 2008. But this architecture was still 1 – 2 years from market launch. And in the mean time Saab was totally dependant on GM's technology. GM knew this and insisted that it could not supply Saab with technology should Saab's deals with China be finalized.

Don't let GM or anyone else fool you. This was never about protecting technology. This was all about protecting its market share in China. The technology Saab uses in the Saab 9-3 is old (pre 2003) and has not been unique for several years. The technology Saab uses in the Saab 9-5 is still unique, but within two or three years even this technology will be widespread. And the Chinese would need at least two or three years to make use of this technology in their own vehicles. And that is assuming that they would "steal" the technology, which is an outrageous assumption in the first place.

And so the company which crawled to Washington D.C., went down on its knees and begged for mercy and money to be saved from bankruptcy and extinction, held the axe that killed Saab. The mercy GM was shown in 2009, it could not pass on to Saab.

And so Saab did not die today. Saab died three years ago by the hands of GM.