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New Owner Says Saab Has Profitable Future, GM ‘Safety Net’

The brand retains a “safety net” in the form of technology licenses with GM. The 9-5’s Epsilon II architecture can be used through two complete lifecycles.

TROLLHATTAN, Sweden – Facing bankruptcy and a crushing global economic meltdown in January 2009, the former General Motors Corp. announced it would shed half its U.S. brands, including Saab Automobile AB. A month later, Saab entered the Swedish version of Chapter 11.

That summer, tiny exotic sports-car maker Koenigsegg Group AB agreed to purchase the company, but the deal soon fell apart. The bid was withdrawn on Nov. 24, and GM announced on Dec. 18 it would shutdown Saab for good. The once-proud, “Born from Jets” Swedish auto maker entered liquidation on Jan. 8, 2010.

But just 18 days later, Dutch entrepreneur Victor Muller, CEO of Spyker Cars N.V., another tiny exotic sports-car maker, stepped in with a purchase agreement. With financing through the Swedish government and European investment banks, Spyker bought the company (valued by some at more than $1 billion) for the equivalent of $74 million.

On Feb. 23, the Swedish auto maker exited liquidation, resumed operations and everyone in Saab’s hometown of Trollhattan exhaled.

“It has been a ride,” says Muller. “It’s unbelievable the company managed to overcome all those perils and lived to tell about it. That says something about the resilience of this brand and its people and the sheer impressive power that (CEO) Jan Ake Jonsson and his team have put forward. Saab is the company that wouldn’t die.”

Muller says the new stand-alone Saab has a profitable future, partly because the perfect storm that caused GM and Chrysler LLC to go through receivership has brought home the message to every auto maker there is only one way forward: Brace for future downturns by bringing down your breakeven point.

“One way to do that is sharing technology with others,” he says. “It is not coincidence that we are seeing a massive musical chairs whereby large and smaller manufacturers are starting to cooperate and share technologies on an unprecedented scale.”

Saab’s new owner also does not believe the auto maker needs sales in the millions to survive. In fact, he’s convinced that with the right technology partners, Saab can be very profitable selling just 125,000 vehicles a year.

“It is a very good opportunity for brands like ours, with a clear identity and a fantastic infrastructure, to come to a profitable stand-alone future,” Muller says. “We assume that by 2012 we will be back where we were in 2007 (in volume) with the widest and most modern product portfolio in the history of the company.

“It’s not crazy to assume we will be able to bring 125,000 cars (with 20,000-25,000 exported to North America) back into the factory. If we do, we will be very profitable.”

Even so, Saab intends to lower its breakeven volume further from about 105,000 units today to 80,000 or 85,000 by 2012.

In early June, the recently restarted Trollhattan production line slowly was assembling 9-3s and all-new luxury 9-5s, both based on versions of the GM Epsilon global architecture that underpins GM vehicles such as the Opel Insignia, Chevy Malibu and Buick LaCrosse and Regal.

Following a year of uncertainty and a 7-week shutdown (that put some suppliers in jeopardy), production restarted at just 220 units per day. That soon increased to 304 daily and will climb again by fall, Saab says.

The auto maker also is evolving its engineering and design staffs to that of a stand-alone company, although it will keep many ties to GM for some time.

Several years ago, GM integrated most of its disparate engineering staffs into one organization and distributed work throughout all the company’s engineering resources. But Saab still maintained its own engineering organization, even though it performed tasks for other GM projects and other engineering centers did work for Saab.

“When GM decided to sell Saab, all Saab work flowed back here,” says Jonsson.

“We released non-Saab work back to GM, and we have basically the same unit and staffing as before.”

One area Saab continues to do engineering work for is GM powertrain, including turbocharging, renewable fuels, hybrid-electric vehicles and dual-clutch transmissions.

Jonsson says Saab retains a “safety net” in the form of technology licenses with GM. The 9-5’s Epsilon II architecture, for example, can be used through two complete lifecycles.

All the powertrains, including GM/Fiat Automobile SpA diesels but excluding automatic transmissions and some other components, also can be sourced from GM for years to come, Jonsson says.

Additionally, Saab has service agreements with GM, where it pays the auto maker for work performed in various areas that are transitioning back to Saab control.

“We’ve hired about 50 people and will need about 150 more in finance, sales and marketing and aftersales,” Jonsson says. “And when we add people, we reduce the cost vs. those transitional service agreements.”

Saab will continue to emphasize relatively small turbocharged gasoline and diesel engines. The North American 9-5 will offer a 220-hp 2.0L turbocharged I-4 and a 300-hp 2.8L turbo V-6. The I-4 will be front-wheel drive with a choice of 6-speed manual or automatic. The V-6 will be all-wheel drive with an automatic transmission.

Both cars have excellent driving dynamics and are more than adequately powered.

The sleek 9-5, which debuts in U.S. showrooms in July with a $50,000 sticker price, has a handsome exterior and boasts the distinctive wrap-around windshield of the 1980s’ Saab 900 and the striking Aero-X concept unveiled in 2006. The interior is as fine as any luxury car in its class. Mike Colleran, president-Saab Cars North America, calls the car “a fresh, alternative choice to the premium-sedan segment.” The I-4 turbo will be introduced shortly after as an ’11 model, priced about $40,000. “We are going to take our heritage into the future but will have to be a little more daring, unique and provocative,” says Jonsson of Saab’s design direction. The current 9-3 is nice, but too generic looking, he says.

“The new 9-5 has a more progressive and sporty look, which is a good start. When the next-generation 9-3 comes, it has to deliver more, so you’ll see a more provocative design.”

Design Chief Simon Padian agrees. “We’ve got the biggest product range we’ve ever had coming in the next couple of years, which means we can stretch the Saab identity with much bolder form language.”

Jonsson and his team have high hopes for Saab’s future: “We have a fully funded business plan, new cars around the corner and a safety net in our agreements with GM,” he says. “Yet, being on our own means we pick the technology and decide whom to work with, which gives us enormous freedom to focus on what’s good for Saab.”

Nevertheless, Jonsson acknowledges the road back to profitability will not be easy, and the auto maker’s recent turmoil may cause some customer hesitation.

“The new 9-5 is one step,” he says. “Better sales results will be another. The next new car will be another. It’s going to take a little time.”

Despite some attrition, Jonsson points out Saab’s U.S. dealer network is almost intact, with a little more than 200 stores.

Muller also understands Saab’s biggest short-term challenge will be restoring confidence in the brand, but he exudes optimism.

“Two-to-three years down the line, when people look back at little Spyker buying Saab, they will say that we had great foresight and knew this was the right time to buy,” he says. “I’m absolutely convinced that we bought at exactly the right time.”

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