When GM decided last year that, in its struggle to survive, it needed to cut Saab adrift – there were mixed feelings throughout the Saab organisation. But, as Knut Simonsson, Saab’s director of global operations, tells Dave Leggett, it has given the company a chance to change and presented a new business opportunity.
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We don’t live in happy times for firms in the automotive industry. It’s a very, very tough environment wherever you look.
You could perhaps forgive the people at Saab if they were a little nervous at the thought of the considerable challenges ahead on their own and without the giant GM parent in the background. But the thing is, GM never exactly managed the Saab brand in a manner that would have Saab loyalists shedding tears over the parting of the ways.
For a long time, GM appeared not to know what to do with its quirky Swedish premium brand. There was an almost criminal paucity of investment in new Saab product. And twelve year model cycles aren’t a recipe for competitive success. Even worse, industrial planners at GM were keen on consolidating output on a plant-platform basis so that more Saabs would be made by Opel at Russelsheim.
Moreover, the GM Epsilon architecture-sharing 9-3, some said, had become Saab’s equivalent of the Ford/Jag X-Type mis-step, while making a Europeanised Cadillac simply stuck in the throat. Finally, GM decided, after a long period of by default mismanagement bordering on neglect, that it didn’t actually want Saab after all. By now, they were spitting pickled herring at Trollhattan.
Knut Simonsson, Saab’s Director, Global Brand and Sales Operations, sees a sea-change in Saab’s prospects and is relishing the opportunities for the brand now that new product is finally arriving.
At a UK media launch for the new Saab 9-5, he sets the scene. Saab, he feels, will benefit from being a small company with the agility to partner with others and develop a sustainable business model. It is moving from being a small brand in a big organisation, to being a big brand in a lean, small organisation.
Most importantly, there is a wave of new product starting with the 9-5. Given past new product famine at Saab, he is perhaps understandably a little delirious to have an all-new flagship car to sell. But he is keen to emphasise fundamental and positive changes for the underlying business.
“We have accomplished a lot in a short space of time,” he says. “We were given the chance to change and we are doing that. Since the reorganisation began in February we have taken out excess stock, lowered our cost of production and transformed our balance sheet. We are very confident about our business plan.”
Saab, Simonsson maintains, now has a lower break-even level of production and a loan guarantee from the Swedish government underlines a healthier business case.
And there is undisguised joy that from the list of 34 potential buyers for Saab, the new Nordic owner – Koenigsegg – is facilitating a kind of Swedish homecoming for the brand. The Trollhattan plant will be the undisputed manufacturing and engineering heart for New Saab, something that will be cemented further when the tooling from Graz, Austria – where the 9-3 cabrio is made – has been moved to Trollhattan (with production planned to restart early next year). There have also been substantial truck shipments of production equipment from Russelsheim.
A more immediate concern is securing a loan from the European Investment Bank (EIB) and completing the sale of Saab to Koenigsegg. A binding agreement has already been signed and the deal is expected to be completed in a matter of weeks. Watch that space.
If Saab faces challenges in its established markets, there is at least a willingness to seize potential new growth opportunities. For example, there’s a slightly ironic Chinese connection that can now be exploited. In speaking with Saab executives, you can’t help sensing relief that they are not faced with the uncertainties and risks that may have come with a new Chinese owner. Beijing Auto was a serious bidder for Saab. Although its bid was unsuccessful, it can still play a part in Saab’s future via its 10% stake in Koenigsegg.
Simonnson enthuses over the Chinese connection. Saab currently sells around 1,000 cars a year in China. He reckons importing cars for distribution by Beijing Auto could yield an immediate volume rise to 5,000-8,000 a year. If an agreement could be struck for local assembly, that figure should be three or four times higher.
“Through Beijing Auto we can get access to China’s market. We can sell many more cars in China, I am certain of that. And Beijing Auto could be a very strong industrial partner for us, too.”
There is still clearly much work to do on the Beijing Auto connection but he’s pleased with the way ideas and discussions on such partnerships are conducted in the new organisation that is unencumbered by big company processes and bureaucracy – though he doesn’t actually use that word, preferring to accentuate the positives of the new agile and flat organisation.
“The speed with which we can move now is really something,” he says.
“And there are many possibilities for partnerships for us now.”
While the pressures weighing down on the whole industry right now are considerable, Simonnson is undaunted. A smaller and leaner Saab, he believes, is well placed to take advantage of the shifting sands affecting everyone. Partnerships are key.
“The automotive industry is changing. Suppliers are taking more responsibility and you don’t need to be owned by a big company. You can partner with others and get many benefits.”
That’s all very well, but what about product? The long-term question-marks remain, but the new owner at least inherits a brand new 9-5 flagship. There’s some breathing space with a raft of new product coming to market over the next 18 months.
A 9-3x is imminent (US debut late this year). After the 9-5 sedan, there’s a 9-5 sport-combi (estate/wagon) and a 9-4x next year.
There are hints that Saab will still be looking to do a smaller model at some point (a 9-1 based on GM’s delta platform never quite made it).
Simonsson is upbeat about electric drive, too. He sees a place for Saab hybrids and talks expansively about the ‘electrification of the turbo’ (not literally) as having an important place in Saab’s future.
It’s hard not to feel sympathy for Saab. Saab executives are clearly enjoying their new found freedom, which is happily coinciding with new product. They also see a new owner, the opportunity to work with new partners and a strong brand with a loyal following. It’s a platform to build on; a glass that is seen as half-full rather than half-empty. ‘Demob happy’ is a phrase that springs to mind.
Simonsson sums it up: “These are exciting times. We have a small, flat and innovative organisation. We have experienced life at the bottom of the food chain, but now we have a new opportunity.”
There is just the small matter of delivering on the promise and potential. It’s a tough world out there for premium brands. Saab’s brand has been almost dormant for a long time, its loyal customers effectively forming a secret and rebellious society turned off by the established German prestige marques. Can Saab find space for volume growth? Can it really produce and sell cars profitably? We’ll know in five years’ time how this project shaped up.
But for now, Saab at least has an unfolding business strategy and a shot at survival. The firm’s executives seem to be up for the fight.
Dave Leggett
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