x Abu Dhabi, UAESunday 23 July 2017

Saab's final countdown

David Booth reviews the Swedish car maker's troubles and explains why even a new approach to buy the company is doomed to fail.

I had a dust-up in the blogosphere recently, the angry e-mails and nasty dismissals the modern equivalent, one supposes, of the "meet you on the playground later" that got me in so much trouble at school. Avatars slugged it out, childish invectives (mostly mine) were hurled and egos bruised, pretty much standard fare for a schoolyard brawl save that using a digital keyboard instead of bare knuckles did spare us the skinned knees and inevitable bloody nose.

The bloggers in question were fans of all things Saab and, as with all loyalists to failing brands, the final remnants of the dedicated diaspora remain the most earnest. Hence their exceptional exception to my dismissal of Koenigsegg - hometown saviours of the good ship Saab - as being woefully unprepared for the machinations of trying to mass produce, market and sell Saabs to an increasingly disinterested world. Koenigsegg may indeed be masters of building supercars that about 20 super rich customers will add to their garage every year, but that offers precious little expertise in building cars that must compete with the might of Lexus, BMW and Mercedes for the hearts and minds of those with a little less money.

My opponents on the other side of the ring countered with protestations of Koenigsegg's commitment, enthusiasm and the credibility that not feeding completely off the government umbilical cord (as in not relying completely on government-guaranteed loans) as proof of both their sincerity and the viability of Saab. And, they point out, the original deal signed some five months ago was to include significant private investment.

Alas, it seems that said private investors have taken a good, hard look at the outlook for car makers and, fearing they were throwing good money after bad, pulled out of the deal to buy Saab from General Motors. What my online sparring partners at www.saabsunited.com had not factored in, but almost assuredly swayed the powers that be behind the buyout, is that the world does not need Saab. In fact, the world does not "need" a whole bunch more manufacturers than just Saab. Depending on which expert you're listening to, the world can now produce about 80 million to 85 millions cars a year, yet current sales are less than 60 million.

That monumental overcapacity even outstrips the best year for peak automobile consumption, 2007, when consumers around the world stumped up for roughly 72 million cars. And despite the continuation of China's economic miracle and its ever-increasing love of four wheels, it's unlikely that world consumption will reach those levels again any time soon. What's been lost in the gut-wrenching economic headlines that plagued us this last year is that, other than in North America, there has been very little culling of the herd.

Indeed, General Motors - and aren't they lucky to be at the centre of all these controversies - is right now trying to find a way to make Opel, its European subsidiary, profitable, without actually closing any factories lest the unions and politicians object. Most amusing is watching all the supposedly "aligned" governments of the European Union insist that any factory closures take place in somebody else's backyard.

Europe is probably the most recalcitrant of all car-producing areas in resisting any mention of the rationalisation of the car manufacturing segment, each country insisting that its "national" car makers are essential. But why does Sweden, a nation of only nine million people who will purchase about 200,000 new cars this year, "need" two domestic car makers? And, so we are not seen by the good folks at www.saabsunited.com as picking on the blond and socialistic, why does France need two and Germany four (but many more if you start counting Audi, Porsche et al as separate units). As long as we're being cut-throat, why indeed does the United States need three when the North American car industry would probably be best served by two convincingly healthy companies?

But Saab sold just 93,000 cars last year and is projected to sell less than 50,000 worldwide in 2009. Blame the mismanagement of General Motors; blame market conditions; blame even, if that's your bent, the destructive forces of globalisation. But it doesn't change the fact that Saab has been in decline for almost two decades and now so clearly lacks a raison d'être that it probably should close. Even Sweden's leading newspaper, Dagens Nyheter, is trumpeting "It's Over Now" headlines and describes the Koenigsegg takeover as "a joke from the beginning."

The fallout from the failed deal, however, has been far from funny. Fritz Henderson, General Motors' CEO for only eight months, recently resigned/stepped down/turfed out largely, say analysts, for failing to dispose of GM's unwanted brands in an expeditious manner. Though preceded by the failure to sell Saturn to Roger Penske and the squashed Magna-Opel deal, there seems little doubt that the Saab deal was the proverbial straw that broke Mr Henderson's back.

Indeed, the ousting was so unexpected that the disgraced CEO was only replaced as the Los Angeles Auto Show's prestigious keynote speaker (by none other than vice-chairman Bob Lutz) a day before the December 2 speech. Despite most experts' sentiment that Saab will go the way of the dodo, rumours persist that the Swedish brand may yet be saved. Unfortunately for fans of cars Swedish, that saviour is Dutch niche sports car maker, Spyker.

I say unfortunately because Spyker is a yet another boutique supercar manufacturer (they make about 40 cars a year compared with Koenigsegg's 20) with extremely limited expertise in the mass production of cars. Worse yet, they have virtually no experience of turning a profit. Last year, they assembled only 43 hand-built supercars but still managed to lose $36 million. And in a twist that defies coincidence yet will almost assuredly scuttle any deal with GM, Spyker is said to be financed by a Russian bank, the Konvers banking group, raising the same intellectual property questions as the failed sale of Opel to Magna and Sberbank.

It is one thing for General Motors to sell the tooling and intellectual property of the current 9-5 and 9-3 models to China's Beijing Automotive Industry Holding Corp (BAIC). Those cars are being phased out and, indeed, some of their technology is already more than a decade old. And since BAIC will be rebranding the cars now to be assembled in China, GM sees little possibility of these former Saabs competing with its new products.

However, anyone buying Saab as a working entity will be gaining access to the technology to build the extremely attractive but probably never to be released 2011 Saab 9-5 unveiled at the most recent Frankfurt motor show. What troubles GM so much is that the 9-5's Epsilon platform also underpins Buick's brand new LaCrosse, the Opel Insignia and the forthcoming Cadillac XTS. GM's new board is worried that Russia's, shall we say, flexible approach to intellectual property rights will result in some of that proprietary technology being leaked to troubled Russian car makers, an especially galling prospect since The General sees the former Soviet Union as one of its more significant growth opportunities in the coming decade.

That the Konvers Group is run by the son of Alexander Antonov, a Russian banker who was shot seven times last March in an apparent assassination attempt, does nothing to assuage the Americans' concerns and the loss of whatever monies they might wrangle from the sale of Saab is unlikely to be worth the risk. Saab is almost assuredly on its last legs, the latest, but surely not the last, once-proud car maker to succumb to the recent turmoil in the world of car manufacturing.

And, for all my fans on the blogs who are ready to put fingers to keyboard once again, you should know that I am not picking on Saab. The list of other car makers that either should, or will, close their doors is long. *The National