Saab aims to break even next year with the help of a job-cutting restructuring plan announced last November. The idea is to trim Saab’s breakeven point to an annual sales level below 140,000 units. Combining Opel and Saab operations in areas like marketing, distribution and product development will certainly help to reduce costs. But market conditions are not favourable and if turnaround is not evident by 2004, GM may consider more drastic measures.
It was way back in 1991 that GM acquired a 50% stake in Saab. For the next decade the company was effectively left alone. GM it seems, was sensitive to issues of autonomy for the Saab brand and anxious not to sully or dilute it in any way. The ‘hands off’ policy was in stark contrast to Ford’s ‘hands on’ policy with regard to its UK executive car unit Jaguar. Putting product onto generic group platforms, new models for new segments, raising output. These were all part of the Ford Jaguar project. By contrast, GM left Saab with an ageing two-model line-up and sales tailed off.
But Saab’s financial problems grew. Sales in 2002 were around 120,000 units and the losses of the unit – around $500 million – severely impaired GM Europe’s performance, Opel itself showing already showing improvement on Olympia cost-cutting measures.
In November 2002, Saab chief Peter Augustsson announced the Viggen cost-cutting plan for Saab, starting with restructuring, which included cutting 1,400 jobs, mostly in Sweden. Modelled on Opel’s Olympia plan, Saab hopes that Viggen cost-cutting measures will trim Saab’s breakeven point to an annual vehicle sales level of 130,000 to 140,000 cars. Moreover, the company hopes that the new 9-3 line, including a convertible unveiled at Geneva earlier this year, will help to boost sales. Breakeven in 2004 is the target, profits thereafter.
Augustsson has said that he expects worldwide Saab sales to climb to 135,000 vehicles this year, helped by strong sales of the 9-3 in the USA.
Saab is also eliminating costs by moving production of the 9-3 and the larger 9-5 car to the same assembly line and integrating engineering operations with GM Europe. Saab’s sales and marketing operations are also being combined with Opel’s.
GM Chief Executive Rick Wagoner has made no secret of his view that the best way to get Saab profitable is to sell more in the US. To do that it needs to expand its product portfolio. Wagoner has said that the 9-3 model had been received very well but the firm needed more products, and quickly. This may even mean contemplating US production for some forthcoming Saab models.
Saab 9-3 Convertible
Subaru opposition to ‘Impreza 9-2’
But right now, a rebadged Subaru Impreza is the favoured stop-gap. It will be made for three years only and is based on the Impreza Wagon. Two models will be made – a 2.5 litre flat four and a turbocharged 2 litre. It will have a Saab nose and a new tailgate and bumper. US sales only (at least to start). Look out for it at the LA Show in January.
But the 9-2 stop-gap raises questions. Is Saab’s last chance for a future turning sour at the 11th hour? Is a rebadged Subaru Impreza enough to turn fortunes around? Does Subaru really want to help Sweden’s other carmaker?
General Motors’ demands that Subaru build a lightly facelifted version of the Impreza for Saab to sell as a 9-2 in the United States is meeting strong opposition from both Saab and Subaru.
The plan, hatched by General Motors under the guidance of product supremo Bob Lutz — the man responsible for the Holden’s US Monaro exports — has been labeled “an act of desperation” as the world’s biggest carmaker struggles to pull the Swedish subsidiary out of a financial tailspin.
Industry watchers believe General Motors resisted taking charge sooner, instead giving Saab the opportunity to turn its fortunes around. A US $500million loss in 2002 was the last straw, GM sending in the cost cutting troops.
GM’s plans for Saab start with the Impreza-based 9-2 and extend to a mid-sized SUV based on the Chevrolet Trailblazer. Both vehicles are, at this stage, planned for the US market only – the world’s largest car market, with more than 16 million new vehicles sold every year.
Takeshi Tachimori, Subaru’s general manager of total vehicle performance, revealed that Subaru and its dealers in the United States are unhappy with the plan.
“The dealers think our unique and individual character — our symmetrical awd drivetrain — is important for selling Subaru,” he said. “They don’t want to see the same horizontally opposed, all-wheel drive vehicle next door with a different badge.”
Tachimori, like many others in the industry, is skeptical about ther success of such blatant badge engineering. “We are working with the Saab people, we are trying to understand why they say they can sell the Saab more expensive than the Subaru.”
“We ask them, and they say it is because Saab is a premium brand in the US.”
So why get involved. Why relinquish the company’s biggest selling proposition, its unique, symmetrical all-wheel drivetrain? Is this merely a case of Subaru doing what GM — which owns 20 percent of Subaru — tells it to do? “Aah, yes,” Tachimori agreed. “We do it because Bob Lutz tells us to do it.”
Publicly, Subaru is upbeat about the project. “We are very proud of our technology and it is a good opportunity to spread our technology through the GM group,” said Hiroshi Suzuki, corporate vice president of Subaru.
Suzuki believes the relationship is only good: “It doesn’t harm us, it brings benefit to us.” He does admit, however, that Subaru played hard at the bargaining table.
“We give them our AWD technology and [in exchange] we learn a lot from their emission technology and hybrid know-how.”
Suzuki believes the 9-2 is only the start. “We are going to expand our collaboration in the future,” though he won’t be drawn further, saying it is too early to tell. “We watch this one first, then we see in three or four years.”
The Saab 9-2 version of the Subaru Impreza is set for sale in North America in 2004, and will be sold in hatchback bodystyle only, with a 2.5-litre and turbocharged 2.0-litre engine. It will have Saab design themes around the headlights, taillights and bumpers — limited time prevents any alterations to the roofline and doors.
According to Tachimori the 9-2 will have a unique Saab character. “We want to differentiate the taste of the vehicle. This we do through suspension, steering and throttle [response and feel].”
Inside, the dash and centre console will change, as will seat fabrics. “Saab is also asking for curtain airbags,” revealed Tachimori. Saab also asked for Subaru to relocate the ignition barrel and key to the centre console beside the handbrake. “Yes, they did ask for that,” he said. “We said no.”
At this stage there are no plans to build the 9-2 in right hand drive, but this wouldn’t be hard to do on the Impreza-based vehicle. If the vehicle is successful in the lucrative US market, Saab and Subaru may look for opportunities are the globe.
If ‘Plan Saabaru’ fails to rescue the ailing Swedish carmaker, it is unclear whether General Motors will continue to throw money at it, try to offload the company, or let Saab slip quietly off the face of the earth. 2004 will be the crunch year.