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

THE FIRST PART

GM‘s decision to develop products for a wider market (thus losing appeal in the eyes of historical customers) and inconsistent industrial choices (“sometimes it seemed that everything had to be produced in Rüsselsheim, other times in Trollhättan, even Opel cars”) lead to an inevitable decline in sales.

Only the collapse recorded in 1996 (90,000 cars) convinced the Americans to change course, focusing on volume growth (abandoning the attention on cost reduction and efficiency) and leaving more autonomy to Saab; which achieved its best result ever in 1999, with 131,240 cars produced.

Even for the second generation of the 9-3 Sport Sedan launched in 2003 more autonomy was left to Saab, which was paid dearly: costs increased (by 23% for purchased components) also because too much money was spent on prevent any component from being used by other GM brands.

According to former technical manager Bo Anulf the Saab mentality of ‘we do what we think is right‘ didn’t help (“if any of us had asked ‘isn’t it too expensive? The value the customer will give it is the price we pay?” I think most of us would have said “what a boring guy, what is he doing here, he’s not a good member of the group”).

GM‘s reaction was immediate: the Sodertalje engine factory was closed; a “bean counter” was placed at the head of engineering (this is how Americans like describing the administrative staff only focused on the accounts and indifferent to products) and the range expanded by choosing among other brands.

Saab

The environment changes and several employees resign, as Bo Anulf still recalls (“Unfortunately the best ones left. They understood that it was no longer fun to work at Saab and went to Volvo trucks, Volvo Cars, Scania, in Germany. With this way of managing people, we lost a lot of skills”).

The new products have little success: the Saab 9-2X based on the Subaru Impreza (so similar to the Japanese that it is called a “Saabaru”) sells just over 10,000 units in two years, while the 9-7X sister car to the Chevrolet Trailblazer exceeds just under 20,000 units in four years of production.

Saab 9-7 x

In February 2009, GM threw in the towel and announced that Saab was for sale.

In this period the small Swedish house has few admirers: Bob Lutz (vice president General Motors) in his memoir book “Car guys vs. bean counters” comments on the divestment with an eloquent “a company always in passive, I was happy he left us”, while an official communication from GM informs that, without a buyer, Saab would have been closed.

Koenigegg (a small manufacturer of super sports cars, entered the Guinness Book of Records in 2004 for the maximum power of its CCR, which reached 806 horsepower), interested in buying, was surprised by how much time, money and people were required for the development of Saab (“We’ve always worked this way. GM has huge manuals for doing it, and we followed them blindly”).

The negotiation is complex (Koenigegg gets to have 80 lawyers) and capital and partners are needed because the small Swedish house, which up to that point had produced fewer than 50 cars, is unable to support the effort on its own.

The agreement with GM is not reached despite (or, according to some, because of) the entry of the Chinese from BAIC, the only one that does not leave empty-handed because with 200 million dollars it buys the equipment to build the old 9 -3 and 9-5.

Viktor Muller, owner of Spyker (a small Dutch company that will go bankrupt in 2014 after having built just over 260 cars) has better luck and manages to buy Saab in January 2010 for 400 million dollars.

The loan from the European Investment Bank, which guarantees 400 million euros for the development of new products, is however not enough to put the company back on track (Nordström recalls that “as usual we didn’t have enough money, and, even more importantly, enough time”).

Saab

In response of unpaid invoices from Saab, suppliers stop deliveries, blocking the production.

This affected the launch of the new 9-5 (“the best car ever made” according to Bo Anulf) and the overall sales, which in 2010 reached just over 28,000 units.

The search for a partner is unsuccessful (according to Victor Muller also due to the ostracism of GM) and he declares bankruptcy in December 2011.

Even the subsequent attempts by National Electric Vehicles Sweden (Nevs, a Sino-Japanese-Swedish consortium that buys the Trollhättan plant) do not reach the desired results: in 2014, after having built a handful of cars, new economic difficulties stop the production definitively.

All ends with a contributory negligence verdict: Saab and GM have very different mindsets that General Motors was unable to mediate (“Saab employees complained that they weren’t making real Saabs because of budget constraints and the must to use common parts [with the other GM brands]. At the same time GM was dissatisfied with Saab’s low sales volumes”), (“Saab never wanted to be truly integrated with GM, and always tried to demonstrate its engineering superiority and better approach in product development. Consequently both, although in different ways, are responsible for Saab’s bankruptcy. Undoubtedly GM affected Saab’s path to ruin”).

The beautiful Swedish Viking had to get married (“However, even if it hadn’t lost its uniqueness, Saab would not have been able to survive without a strong partner, considering that already at the end of the eighties the production volumes were not enough to sustain the new product launches”) but not with the rough cowboy from Detroit.

Overall, an interesting work for the academic rigor and the analysis tools applied, it is a pity that they didn’t dealt with commercial strategies (relations with the sales network and its development, management of importers, just to name a few) in the various markets.

I will try to supply this void in a future post.

Title THE CASE OF SAAB AUTOMOBILE AB – From core capabilities into core rigidities – A trajectory towards demise

Authors Giacomo Buzzoni and Magnus Eklund (supervised by Evangelos Bourelos)

Publisher University of Gothenburg (Faculty of Economics)

Pages 124

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