Saab Should Be Euthanized

By Chris Haak

As a fan of diversity and healthy competition in the global automobile industry, it’s not easy to write this.  I think there would be nothing better than a healthy, self-sustaining Saab, pumping out the new 9-5 sedan (and soon, a 9-5 SportCombi), GM-built 9-4x crossover, and new Saab-developed models such as the next-generation 9-3 and a potential smaller 9-2.  However, the reality is that Saab is an extremely sick company, one that hasn’t buit a car in five months (and therefore has no incoming cashflow) and whose short-term existence is dependent upon the good graces of the Chinese government in approving investments of Pang Da Automobile Trade Co. and Zhejiang Youngman Lotus Automobile Co. in the struggling Swedish automaker.

Yesterday, Saab’s parent company, Swedish Automobile NV, has filed for protection from its creditors under Swedish law.  While this does not explictly mean the end of the line for Saab, it’s not good news.  Under Swedish law, protection from creditors status – if granted – is similar to a US Chapter 11 bankruptcy.  ‘Bankruptcy’ in Sweden is something different from this.

Swedish Automobiles’ filing – if approved – would have ensured that employees are paid in the short term, and the company’s management – including CEO Victor Muller – is taking pains to paint the filing in the best possible light as a transitional step in the company’s evolution.  Management’s line is that once the Chinese equity investments, which between the two companies represent a majority 53.9 percent of Saab, are approved by Beijing, Saab can resume normal operations, pay its employees and suppliers, and carry on as a premium European automaker.

First, the Chinese government doesn’t seem to be particularly keen to approve the acquisition of an obviously struggling company.  Why buy Saab when its global sales aren’t even in the six figure range and its brand equity is so damaged after the company’s recent struggles?  Beijing didn’t let a Chinese company buy HUMMER from GM, after all, and while HUMMER had its own environmental baggage, at least it didn’t have the kind of financial baggage that Saab is carrying.

Second, what of the Saab brand?  In its best year ever, 1987, the company sold 134,112 cars.  The most cars it’s sold in the GM era (1989-2009) was 133,167 in 2006.  Let’s just say that global sales weren’t anywhere near those peaks in 2010 and 2011 as it was either in the process of being wound-down (2010) or having its primary assembly plant idle for half the year (2011). In 2009, Saab sold just 27,482 cars worldwide, and in 2010 it sold 31,696.

Even when Saab is actually building cars for people to buy, they don’t want to buy them.  And after the latest news (heck, even before the latest news), who in their right mind would spend their hard earned money – luxury car money – on a new Saab?  It’s hard to imagine more than a handful of even Saab’s most devoted fans buying a new Saab considering the company’s precarious condition.  We’re not talking about $10,000 Chinese cars here.  We’re talking about $35,000 and up European luxury cars.  The news about Saab over the past few months, and certainly over the past few days, is not going to help them exceed 2010 sales numbers, making the company’s objective of breaking even at 100,000 units seeming ever more unlikely.  The company’s current cost structure requires between 140,000 and 160,000 annual sales for breakeven; it’s no wonder the company is bleeding money.

Third, are we to believe that new-product development is continuing in earnest while the company has almost no incoming cash flow and can’t afford to pay its employees and suppliers?  Though of course I have no evidence of this and am only speculating, it seems as if Saab management’s sole focus for the past several months has been on the company’s survival.  If this guess is true, what does that mean for the late 2012 timeframe the company announced for its in house-developed next-generation 9-3, with its BMW-sourced engine?

Fourth, today the Vanersborg district court in Sweden said that it was not approving Saab’s request for protection from creditors.  The company is appealing the decision, but if it stands, it appears that the only hopes Saab has are 1) winning its appeal (unlikely), 2) getting money from the Chinese partners almost immediately (unlikely), and 3) convincing suppliers and employees to “hold their horses” (in Muller’s words) to give the company time to await the appeal’s outcome.

Muller called their appeal “Plan C,” and declined to say what Plan D might be, or even if they had one (but said that even if he did have one, he wouldn’t tell the media what it is at this stage).  He pledged to fight to the last man to keep his company alive.

You have to admire his tenacity and energy to fight for Saab’s survival.  Muller really seems to be a man who believes that if Saab can just get some extra working capital, if it can just get some approvals, if it can just get some more time – all will be good, it can sell Saabs in China, develop a broader lineup, and actually make money.  Car companies are not in the nostalgia business and are not in business for fun.  They are in business to make money, and Saab can’t seem to be able to do that, and prospects for doing so seem to be rather bleak.

We can debate the reasons that Saab is in its current state all day, but it’s likely due in very large part to the damage caused by GM shutting it down and beginning liquidation, only for Spyker to swoop in and take the company over.  But Muller’s unrealistic sales projections and high breakeven levels certainly did the company no favors.

So what’s the point of all of this?  Every piece of bad news that comes out about Saab’s financial health (or lack of, as is the case) is just another nail in the coffin.  This is a company in its death spiral, and one that has been there for quite some time.  Saab is not going to survive, at least in anywhere near its current state.  The best hope for the company is for a Chinese firm to buy the intellectual property during the company’s bankruptcy liquidation and build Saabs in China (or cars that look mostly like Saabs, but perhaps with different names and front and rear styling).

My unsolicited advice: just end the suspense, declare bankruptcy, let the Swedish government take care of a portion of wages due to the workers, and let the company’s creditors pick over the remains of the bankruptcy estate as it’s sold to get a portion of what is owed to them.

Even if Saab somehow manages to survive the next few weeks, its long-term demise seems to be all but certain.  This is a company that has used up eight of its nine lives already, and prolonging the torture doesn’t seem to be a worthwhile exercise.  Saab certainly has its fans – I know at least one die-hard, and I happen to root for the brand as well – but dragging out this process doesn’t seem to be the best course of action.  Rest in peace, Saab.

Author: Chris Haak

Chris is Autosavant's Managing Editor. He has a lifelong love of everything automotive, having grown up as the son of a car dealer. A married father of two sons, Chris is also in the process of indoctrinating them into the world of cars and trucks.

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6 Comments

  1. I think the Swedish government has essentially euthanized Saab, the actual death is just being prolonged by the the company’s (and Muller’s) unexpected tenacity. This whole situation that has unfolded since production stoppage in April has been painful to watch, but it seems like the actual end is imminent.

  2. It’s sad to see what is happening to Saab. In reality, Saab died as soon as GM took over and cars like the 9-2X and 9-7X “Saabs” started rolling off the assembly line.

  3. Agree, they got it terribly wrong in the beginning, but, you have to give GM credit for creating the beautiful new 9-5 and 9-4x. These are some of the best cars that GM or SAAB have designed. They did finally get it right. If SAAB was still in their line up there would have been more money to market the new cars and a sense of stability. I like my ’07 9-3 sport-combi and I would love to see SAAB stick around and see a new 9-3 and the 9-5 sport-combi. It has been a very reliable car and fun to drive. I live in a city where people like SAABs, but I have only seen one new 9-5 on the road, and on a recent 500 mile trip I saw only a handful of 9-3s.

  4. The problem, as you’ve pointed out, is that even if Saab were to get the money they needed tomorrow, their retail dealer network is in tatters, their future product planning is frozen, and most consumers believe, and will continue to believe for some time, that Saab is no longer operating. It’s a very daunting public relations/marketing challenge.

    Too bad; always appreciated Saab’s take on design and engineering.

  5. Things certainly look different today. Saab has made it through about 8 levels of Hell. They still have one to go,but I am confident they will make it.

    I bought the new 9-5 aero. It is the best car I have ever owned, and I have owned some nice cars(7 series, infiniti, Volvo). It was not really a GM designed car. The car was designed in Sweden, by Swedes. 70 percent of the car is unique to Saab, and not shared with any other GM vehicle. The car was built in Trollhattan. It does have GM parts, of course, and GM is the beneficiary of fantastic Saab design. For instance, The Haldex xwd system was designed for Saab. The Hiper strut was designed by Saab. The engine is GM, but turbocharged by Saab.

    The new 9-5 is a great car, with a 4 or a 6. It handles as good as a 3 series, but has the room of a 7 series. The design is breathtaking. It doesn’t look like everything else. That is good enough for me.

  6. I own and drive a 1999 SAAB 9-5 which has travelled nearly 270,000 Kms. It looks and drives like new and remains the best car I have ever driven. There is just so much about my car that I admire. The engineering, the tremendous amount of thought that went into its design and production. The high quality of the engineering, design and, most importantly, the build. Everything about my SAAB says “quality”. I would give my eye teeth for a current 9-5 – beautiful motor car.
    The demise of the company and the cessation of production is, in my view, a tragedy.

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