THE CASE OF SAAB AUTOMOBILE AB – From core capabilities into core rigidities – A trajectory towards demise (Part First)

Let’s leave for a post the flow of memories of managers, mechanics, racers, designers and specialized journalists to deal with how the academic world has recreated and explained an event that has left enthusiasts from all over the world and an entire nation stunned: the bankruptcy from Saab in 2011.

Giacomo Buzzoni and Magnus Eklund, students of the University of Gothenburg, analysed without biases the history of the Swedish company and the dramatic events happened in the last years of the Trollhättan manufacturer’s life, trying to understand the reasons that led the second Scandinavian car manufacturer to bankruptcy.

The couple’s strategy is simple: bringing to light the responsibilities of General Motors and the Swedish managers through interviews with the protagonists (the former heads of engineering and IT, some industry experts, the potential buyer Koenigegg) and the analysis of the numerous sources that have dealt with the matter.

Thanks to the memories of Olle Granlund (an engineer who worked for 35 years in Saab, developing the Ford-derived V4 engine that replaced the obsolete two-stroke engine), Niels Hakansson (another engineer with 37 years of experience in the Swedish company), Bo Anulf (10 years in Saab as technical and IT manager) and Christian von Koenigsegg (founder of Koenigsegg Automotive AB, the company that tried to buy Saab in 2009) the two researchers manage to recreate the path followed by the house of the griffin from the success to termination of the business.

Saab

Saab Automobile AB was founded at the end of the last world war, when the company (at that time the largest private aircraft manufacturer in Europe) decided to diversify its production to compensate for the collapse in military aircraft orders. The management wants to take advantage of the aerodynamic competencies available internally to make a car much faster than the DKW, a very successful model of a few years earlier.

The first car (the model ‘92’ which went into production at the end of 1949) was an immediate success, as it was the ‘93’, which marked the entry into the challenging American market. The following products fared even better: a total of 110,000 units of the ‘95’ were sold while the ‘96’ reached 547,000 units sold.

The successes of the last one in the gruelling rallies in the 60s (the ‘96’ won three times the RAC rally and the Monte Carlo twice) created the sporting myth of the small Swedish house (“Saab was more similar to Porsche than to Volvo“).

The first crisis was recorded in the two-year period 1964-66, when sales dropped from 29,000 to 19,000 units.

The reasons for the decline are both technical and managerial: Saab offered two-stroke engines, more thirty for fuel than the four-stroke offered by the competitors and the attempts to keep them alive by introducing a triple-barrel carburettor are unsuccessful. The choices of the Saab management complicated the situation even more, refusing to abandon the two-stroke before having reached the break-even point of the investments made in this technology.

Saab

The merger with Scania took place in 1968, while ten years later the more promising one with Volvo vanished, probably due to old and never forgotten grudges (the advertisement a few years earlier “If you have an accident with a Volvo you are protected. If you are in a Saab…” is a small example of the competition between the two manufacturers).

Fortunately, the energy crisis of the mid-seventies did not impact the house of the griffin, which sold 91,000 cars in 1975 and 96,000 the following year and amazed the world by launching the ‘99’, the first large production car with a turbocharged engine, in 1978.

The 99 turbo is an example of how a manufacturer with a lean structure (a test by top management on a prototype was enough to get the green light for the project) and an engineering with an important weight in the decision-making process can introduce an innovative and profitable product: the car improves the fortunes of Saab, which had recorded losses of 200 million Swedish crowns in the two-year period 1977-78.

The 80s started with two unfortunate decisions:

  • Saab withdraws from rallying (new rules don’t require more money, more car modifications and bigger teams);
  • his salesman decides that next cars must be more luxurious and less sporty.

The fact that Saab is still a technical point of reference (“at the Frankfurt Motor Show some Italians came to me, they were from Ferrari. They asked me how we managed to solve the problem of detonation in our engines”) is not taken into consideration at all.

Saab

The results of these choices were immediate: in 1989 losses were recorded for 2.2 billion Swedish crowns, which rose to 4.6 billion (Swedish crowns) in 1990 and 27 billion the following year.

General Motors’ decision to buy 50% of Saab for $600 million (1990), eager to respond to Ford‘s purchase of Jaguar, is interpreted by many as the beginning of the end of the Trollhattan company’s financial difficulties.

The new ownership focuses on the efficiency of the factory (a car is produced in 40 hours and no longer in 57), on suppliers (who to renew the contract had to guarantee a 2% annual price reduction), on the employees (who in two years moved from 14,000 to less than 10,000), on synergies with other brands in the GM universe (platforms are shared with Opel).

If old problems are solved, new ones are introduced: the ‘900’ suffers from reliability problems, bad finishes and undersized Opel-derived components (wheel bearings and the air conditioning system), the Germans do not get along with the Swedes (“I can imagine Opel managers very annoyed by their younger cousins who came from Sweden to tell them what they had to do”), Saab has to pay royalties every time it uses a GM-derived component.

THE SECOND PART

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