Press Comment : Saab faces the same challenges as MG Rover

David Bailey, Birmingham Post, 18th August, 2009

Whilst GM and Saab’s prospective bidder Koenigsegg Group AB reached an outline agreement over the sale back in June, talks dragged on over the latter’s financial muscle. This appears to be now resolved, with the two parties agreeing a deal. The handover of Saab may even take place before the end of the year.

Yet it’s an odd coupling. Koenigsegg was set up in the mid 1990s by the Swedish businessman Christian von Koenigsegg. It employs just 40-odd people, and – as Top Gear viewers will know – makes just 18 superfast sports cars a year that sell for over a €1 million a car.

Saab, meanwhile, employs around 3,500 people in Sweden and sold around 93,000 cars last year. It has been on a downward trajectory under GM ownership, with sales sliding and the marque tarnished by bland GM platforms which have knocked the sheen off a once proud, sporty brand.

Sadly, the operation has highlighted all that was wrong with platform sharing. Indeed, last year it sold fewer cars than MG Rover did in its last year of operation, such has been the firm’s downturn.

Saab and Koenigsegg reckon it can break even at 100,000 units by 2012. That may be doable in the short run as Saab – unlike MG Rover back in 2000 – has a range of new models about to be launched which will buy it some time.” Professor David Bailey, Coventry University Business School

Koenigsegg said its wants to transform Saab into a stand-alone, vibrant, entrepreneurial company and make it “sustainable by making it profitable”. That will mean having to shift the brand up-market and repositioning Saab as a niche brand. That all depends on the quality of the products of course.

Saab and Koenigsegg reckon it can break even at 100,000 units by 2012. That may be doable in the short run as Saab – unlike MG Rover back in 2000 – has a range of new models about to be launched which will buy it some time.

Yet longer term it needs to develop new models and it’s not clear how Koenigsegg will actually do this on limited volumes given the R&D costs involved in new model development unless Saab shifts upmarket considerably and/or it finds a partner to develop models jointly.

This is my own hunch but, given the GM links here, Saab and Shanghai could usefully team up – with possible benefits in developing joint Saab and MG models. Indeed, as the AROnline website reported recently, it is rumoured that Shanghai is giving ‘serious consideration’ to adopting GM’s Epsilon II platform for the MG 7/Roewe 750 replacements.

This is my own hunch but, given the GM links here, Saab and Shanghai could usefully team up – with possible benefits in developing joint Saab and MG models. Indeed, as the AROnline website reported recently, it is rumoured that Shanghai is giving ‘serious consideration’ to adopting GM’s Epsilon II platform for the MG 7/Roewe 750 replacements.” Professor David Bailey, Coventry University Business School

This platform underpins both the Opel/Vauxhall Insignia and Shanghai’s Chinese variant of the Buick Regal. And, the new Saab 9-5 is based on a long wheelbase variant of Epsilon II, which may be what Shanghai is now also looking at.

Yet all of this is still be subject to Swedish Government backing for an application for an EIB loan. By the way, let’s hopes the Swedes move quicker than Her Majesty’s Government did here in the UK, where talks with JLR dragged on for months until Tata found alternative ways of guaranteeing the EIB money, and walked away.

If the EIB does OK an €500 million ($704 million) loan, the consortium will have managed to raise 70% of the capital it feels it needs. Meanwhile, the Swedish Government has again emphasised that the state won’t buy a stake in Saab or help it in any way other than possibly providing guarantees for the EIB loan.

Whilst the deal may offer short-term hope, as we saw with MG Rover, this is no guarantee of long-term survival, and the firm faces many of the same challenges that faced a newly independent MG Rover back in 2000. Saab faces a long, hard road ahead.

[Source: Birmingham Post]

[Editor’s Note: Professor David Bailey works at Coventry University Business School.]

Posted in: AROnline News, MG Rover
Clive Goldthorp

About the Author:

Clive claims that his interest in the BMC>MG story dates back to his childhood in the 1960s when the family’s garage premises were leased to a tenant with an Austin agency. However, back in the 1920s and 1930s, his grandmother was one of the country’s first female Garage Proprietors so cars probably run in his genes! Admits to affairs with Alfa Romeos, but has more recently owned an 06/06 MG TF 135 and then a 15/64 MG3 Style… Clive, who was AROnline’s News Editor for nearly four years, stood down from that role in order to devote more time to various Motor Racing projects but still contributes articles on as regular basis as his other commitments permit.

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