The Saving of Saab

MONTICELLO, NY One couldn't blame inventory-starved dealer Len Schrader if he wipes his eyes and thinks the new '11 Saab 9-5 is a moving mirage as it shows its stuff on a race course during a preview here. Schrader, the owner of a single-point Saab store, couldn't wait to start selling new vehicles again, beginning with the 9-5. Models began arriving at dealerships in August, ending a product famine.

Steve Finlay, Senior Editor

September 1, 2010

9 Min Read
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MONTICELLO, NY — One couldn't blame inventory-starved dealer Len Schrader if he wipes his eyes and thinks the new '11 Saab 9-5 is a moving mirage as it shows its stuff on a race course during a preview here.

Schrader, the owner of a single-point Saab store, couldn't wait to start selling new vehicles again, beginning with the 9-5. Models began arriving at dealerships in August, ending a product famine.

The flagship car, redone after 13 years, is the first new vehicle from the iconic Swedish auto maker since a series of convulsive near-death experiences that began in 2008 and ended this year with the sale of the company.

Until that happened, Saab Automobile AB teetered on the brink, went into liquidation, closed the homeland factory in Trollhattan, put the automotive obit writers on alert and left Saab dealers wondering if they should hang black crepe rather than colorful showroom banners.

Saab entered bankruptcy in January of 2009 after its owner of nine years, the former General Motors Corp., announced in December of 2008 that it was reviewing whether to sell or shutter the subsidiary. GM later went into Chapter 11 itself.

In June of 2009, Koenigsegg Group AB, a small exotic sports-car maker, agreed to buy Saab from GM. But when that deal fell through in late 2009, GM said it would kill the brand if it couldn't find a buyer by the end of 2009.

In November of 2009, Victor Muller, a Dutch businessman and CEO of Spyker Cars N.V., another small luxury sports-car maker, stepped in with a purchase agreement of $74 million for a car company some valued at about $1 billion. The Swedish government and European investment banks helped finance the deal.

That proposal hit snags of its own, such as when GM found one of Muller's partners unacceptable. But in January, GM confirmed it has struck deal for Spyker to buy Saab. The sale was completed the next month.

“It was very dramatic,” Jan Ake Jonsson, a 37-year Saab veteran and CEO under the new ownership, says of the series of fateful events. “It was an invaluable experience I hope I never have to use again.”

The sale was consummated Feb. 23. At that point, the factory was empty, there were no materials with which to build cars and Saab's global inventory was less than 5,000 units.

“We got through the drought by selling used cars and service,” says Schrader, owner of Reinertsen Motors Inc., a 40-year Saab dealership in Denville, NJ.

He recalls the year of uncertainty and dramatic moments as Saab's sob story played out.

“There were some heartbreaking moments,” he tells Ward's. “On Nov. 24, I was in my office telling a customer how optimistic I was of Saab's future despite recent events. Then my sales manager came in and said the Koenigsegg deal just fell through.

“But I always thought Saab would survive because of its heart and heritage,” he says.”I don't think it would die under Darth Vader.”

After going about a year with no new product to sell, Dave Grundstrom finally is starting to replenish the new-car lot of his Saab dealership in San Diego.

“The past is over, thank goodness,” says Grundstrom, the CEO of the Marvin K. Brown Auto Center, representing six brands.

He lost his Hummer franchise when GM dumped that brand. For a while, he worried about losing Saab. “But it is coming back meaner and leaner, well, leaner anyway.”

It was no small task to restart a major auto factory after a 7-week shutdown, “but now the plant is up and running as it should be,” Jonsson says.

Currently, it's building 250 cars a day and two models: the 9-3, Saab's bread-and-butter midsize sedan, and the new top-of-the-line 9-5 flagship, developed under GM ownership and sharing global underpinnings with the Opel Insignia, Chevrolet Malibu and Buick LaCrosse.

“But its ergonomics and suspension-system tuning are Swedish,” Schrader says. “And Saab powertrain engineers did a good job developing their own torque curve for the GM engine. Saab didn't sit back and let GM dictate.”

The top-line 9-5 Aero comes with a 2.8L V-6 turbo with 300 hp and 295 lb.-ft (399 Nm) of torque at 2,500 rpm. That model is priced at $49,990, more than Saabs typically have sold for.

Pricing has yet to be announced on an impending base model with a 2.0L turbo I-4, but it is expected to start under $40,000.

“A lot of people ask, ‘Can Saab sell a $50,000 car?’” says Schrader. “I think so, because Saab buyers are affluent and want value for their money.”

The stereotypical Saab owner had been a pipe-smoking professor wearing a tweed coat with elbow patches. As Saab attempts to nudge its 9-5 up one level from premium to luxury status, it is targeting college-educated “progressives,” people of means and with children.

“Those are the people interested in this small Swedish brand,” says Magnus Hansson, Saab's manager-global product.

He says the 9-5 is going up against other Euro-brand competitors, including Audi, BMW and Mercedes-Benz. But a Mercedes executive dismissively tells Ward's, “We don't consider Saab a competitor.”

Compared with major auto makers that produce millions of vehicles a year at factories around the world, Saab is a relatively minor player.

Still, to Muller, low-volume Spyker buying Saab is a case of “a small car company acquiring a big car company.” It is sort of like a tailor buying a major clothing chain.

Can something like that work in the complicated automotive world? And can Saab recover after sales dropped 60% during the stretch of uncertainty and general global recession?

Yes, says Robert Elder, president of the Elder Automotive Group, a multi-franchise dealership organization. Its Michigan and Florida holdings include three Saab stores.

“Victor has a passion and a refuse-to-lose attitude,” Elder says. “He is an amazing person. You have to know Victor Muller if you are considering whether Saab has a future. It does.”

Elder knew Muller before he bought Saab. Elder operates a Spyker outlet from within a Jaguar store in Tampa. He started selling Spyker after a customer asked to buy one two years ago. So far, he's sold six, a sales performance indicative of the brand's exclusivity, low demand or both.

Muller's business plan is to downsize Saab and sell 120,000 units a year even though the factory is capable of producing 190,000. It is a thoroughly modern plant. Muller thanks GM for that.

“A lot of bad things have been said about GM regarding its Saab ownership,” he says. “I happen to disagree with a lot of the criticism. GM left us with a manufacturing facility that is one of the most efficient in Europe.”

Part of Muller's Saab strategy is to both sell and buy auto technology.

“This is the age of shared technology,” he says. “Everything is for sale, meaning you can have your core competency, but you don't have to develop everything from scratch. You won't see a lot of automotive mergers, but you will see a lot of technology sharing.”

Released of GM ownership, Saab is now free to buy whatever technology it wants from whomever it wants, Muller says. “We will work with partners we want to work with.”

He adds: “We will probably never develop our own engines. We'll buy those. But we'll tune them as Saab engines.”

He anticipates Saab as a seller will provide technology centering on safety and the environment.

Future products include a cross/utility vehicle, a hybrid-electric vehicle, a redone 9-3 and an all-new small car. “Expanding to the small-car segment is vital for us,” Hansson says.

“This business is all about product,” says Mike Colleran, president of Saab North America Inc.

The U.S. remains Saab's biggest market, accounting for up to 25% of sales. There are 202 American dealers.

“I said when we made our offer for Saab that we'd take every U.S. dealer,” Muller says. “That was a key to the solution.”

By the end of the year, 15 to 20 Saab dealers will start selling Spyker models, too, including the upcoming $235,000 C8 Airelon. Spyker's U.S. outlets currently stand at 15.

Allied Financial, the bank that morphed from GMAC, will provide financing to Saab dealers and customers, Colleran says.

An important aspect of the financial-services arrangement is that Saab is leasing cars again. When the credit freeze hit in 2008, GM largely abandoned leasing.

“Re-establishing leasing is significant to us,” Colleran says. “We were out of it for 18 months, even though we had a lease penetration of about 50%.”

The 9-5 performs admirably, both flat out on the race track here and more politely on the public roads outside this town two hours north of New York City.

The 2.8L turbo is responsive and powerful, considering its relatively small size. Three suspension settings include a sporty mode that shows off the car's impressive agility, considering its relatively large size.

In a way, the new 9-5 is a metaphor for the tough little car company that builds it.

“Saab is alive and kicking,” Muller says. “It's a true miracle it has overcome all this adversity.”

Saab Timeline

1937: The company that would become Saab is founded to build aircraft for the Swedish Air Force to protect the nation's neutrality as World War II nears.

1949: With fighter planes no longer a manufacturing priority, Saab starts selling cars.

1989: The company is restructured and renamed Saab Automobile AB, with General Motors Corp. owning 50%

1997: On its 50th anniversary, the company replaces the aging 9000 model with the Saab 9-5.

2000: GM acquires all of Saab for $125 million, making it a wholly-owned subsidiary of the U.S. car company.

2008: In December, as the economy in general and auto industry in particular deteriorates, GM says the Saab brand is “under review” with options including selling or shutting it.

2009: In January, Saab enters bankruptcy. On June 1, GM enters bankruptcy. On June 16, Koenigsegg, a small Swedish car maker, says it will buy Saab. On Nov. 24, the deal falls apart, prompting GM to start winding down Saab, but Spyker, another small car company, steps in and says it is interested in buying the brand.

2010: In January, GM confirms it has reached a deal with Spyker. In February, Spyker buys Saab for $74 million.

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