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Will the Saab Story Have a Happy Ending?

Rescued at the brink of oblivion by a Dutch upstart, the quirky Swedish car that was “born of jets” looks to a better life after another restructuring
Paul A. Eisenstein
From the Print Edition:
Jim Nantz, May/June 2011

An eerie stillness pervades the massive factory. That's not the way it's supposed to be. Assembly plants are normally exercises in carefully controlled cacophony that operate one step short of chaos. Where is the whine of the ratchet drivers, the thump of stamping presses and the beeping horns?

"It's going to take some time before we're back to normal," admitted Victor Muller, when he surveyed the sprawling factory he has just purchased on the outskirts of the small Swedish town of Trollhätten last spring. One of the newer and most modern assembly plants in the auto industry, it was designed to produce as many as 200,000 vehicles annually, but for the moment it struggles to produce just a couple dozen cars a day. "But at least we're back in business," the lawyer-turned-auto-magnate said at the time.

Just a few months earlier, it had looked as if this factory and the company that operated it were doomed to become another sob story, the tale of a once-promising brand that had been serially mismanaged, only to wind up tossed onto the industry's overflowing rust heap. But with his purchase, Muller insisted, this was going to be one Saab story with a happy ending.
 
From fighters to four wheels

As the Swedish maker is fond of saying, Saab really was "born of jets." The name is an acronym for Svenska Aeroplan Aktiebolaget—Swedish Airplane Limited, in English—the company that was created in 1937 to build the military aircraft needed to enforce neutrality at a time when world war seemed likely. When the combat was over and demand for fighters had  diminished, the ever-resourceful Swedes went looking for additional business. They found it in the form of the Saab 92. Decidedly ahead of its time, with the most aero-efficient shape of its era, the curiously curvaceous little sedan made its debut in 1949 and remained in production until 1955.

From the start, Saab earned a reputation for being, well, quirky. It wasn't just the jellybean shape of models like the 92 and subsequent 93. The ignition keyhole was mounted on the center console and the often-underpowered two-stroke engine required routine additions of oil to the fuel tank to keep the pistons properly lubricated. Saab was different—and proud of it.

Saab owners proved an equally proud and loyal bunch, but alas not a group large enough to nudge the forever struggling company into financial health. By 1989, the automotive side of what was by then Saab-Scania had become a burden the company desperately needed to jettison. Restructured and renamed Saab Automobile AB, a 50-percent stake was sold to General Motors for $600 million. The other half was acquired by Investor AB, the financial arm of Sweden's most powerful family, the Wallenbergs.
 
As part of the deal, GM was given the right to buy—some would say it was put on the hook for—the other half of the automaker. Perhaps buoyed by Saab's rare and unexpected profit, in 1995, the Swedes' first in seven years, GM eventually agreed to buy out its partner. The move cost the U.S. giant another $125 million, but the bills were only beginning to pile up.
 
In the years to follow, General Motors would spend countless millions in a fruitless effort to turn things around—modernizing the Trollhätten plant, for one thing. It updated the 9-3 sedan, and it added new offerings, such as the little 9-2 and the 9-7X sport-utility vehicle. GM tried emphasizing Saab's quirkiness and, when that failed to move the needle, it attempted to market the brand as something more mainstream. But the losses grew while sales stagnated.

"It's not easy, when you're a company that makes millions of cars a year, to figure out how to steward a company that makes 130,000," acknowledged Steve Shannon, one of a procession of GM managers who were assigned to try to turn things around at Saab.
 
To skeptics, GM just took too many shortcuts. The 9-7X was little more than a gussied-up version of the Chevy TrailBlazer, the 9-2 an only slightly modified version of the sporty Subaru WRX, built by Fuji Heavy Industries, with which GM had another short-lived and unhappy relationship. Meanwhile, the 9-5 flagship was allowed to rot, going 13 years without an update.

As the end of the new millennium's first decade approached, some caught a glimmer of hope that things might turn around as a new 9-5 was ready for market. But, by then, Saab's parent was in failing health itself.
 
GM augers in

With its own losses climbing into the tens of billions, General Motors was like an elderly patient; the next blow could readily take it down. And it came with the Lehman Bros. fiasco that not only shattered the financial markets, but sent U.S. auto sales plunging to their lowest levels since the Great Depression. Within months, Rick Wagoner, who was then GM's CEO, would be begging Washington for a handout.

After George W. Bush offered only temporary assistance, the newly inaugurated President Barack Obama agreed to boost the aid to $50 billion—but only if Wagoner were fired. In May 2009, the 100-year-old GM was placed into Chapter 11.


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