Saab Automobile, part of General Motors, has announced a cost cutting initiative, axing 20% of its workforce in Sweden, streamlining its engineering organisation and working more closely with GM's units to cut costs.

In the first half of 2002, Saab posted a loss of $US131.4 million - blaming its poor performance on high start-up costs for the new 9-3, investments in its Trollhattan plant and a negative dollar exchange rate.

The company has now announced several improvements that it expects to make over the coming years, but declined to comment when it will return to profitability. It says it hopes to save $50-60 million through the job losses and through its other initiatives; it hopes to increase productivity by 20% in manufacturing.

Saab has undergone a similar restructuring effort to several other manufacturers, where job losses and efficiency gains have been the key focus. However, the company has a strong basis with GM behind it and a relatively strong brand, which is targeted to the premium/executive buyer. It finds itself in its most competitive of times with strong performances from BMW and Mercedes.

So if Saab is to get back into the black, cost cutting measures and improving productivity will be important - but the biggest and most important challenge is to re-position its brand to appeal once again to young professionals like it did in the late 1980s.

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