Saab goes it alone

Word came through on Friday of last week that Swedish carmaker Saab has been cut loose from the financial morass that is General Motors. Rather than finding a buyer, GM has requested a 'reorganisation' of the company, as a separate corporate entity before the Swedish law.

The Vänersborg District Court in Sweden has accepted that supporting Saab through the Swedish Company Reorganisation Act is a viable option. This reorganisation effectively frees GM of Saab and vice versa, with a presumption that within the three-month timeframe set by the court, a three-person team comprising the company's managing director, Jan Åke Jonsson; a court-appointed administrator, Guy Lofalk; and reorganisation expert, Stephen Taylor; can stabilise the company. For those three months, the Swedish government will assist the team to find new investors and reimburse existing creditors.

Along with those tasks, the management team is committed to launching three new products, the 9-5, the 9-3X (more here) and the 9-4X (more here).

"Today is the beginning of a new chapter in Saab's history," Jan Åke Jonsson rejoiced. "We are now recreating Saab Automobile as an independent unit.

"We explored and will continue to explore all available options for funding and/or selling Saab and it was determined a formal reorganisation would be the best way to create a truly independent entity that is ready for investment.

"With an all new 9-5, 9-3X and 9-4X all ready for launch over the next year and a half, Saab has an excellent foundation for strong growth, assuming we can get the funding to complete engineering, tooling and manage launch costs. Reorganisation will give us the time and means that help get these products to market while minimizing the liquidity impact of Saab on GM."

With Saab now clear of the stricken GM, the prospects are better for a return to profitability. The Swedish carmaker has gone from bust to boom to bust again in Australia. It came from nowhere in the mid-80s, but has not weathered the current economic situation well.

Currently, Saab is distributed in Australia by GM Premium Brands, a Holden-supported distribution network which also distributes the Hummer marque locally. The multi-brand distributor has been on the receiving end of bad news in recent times.

Holden's CEO Mark Reuss made the decision not to introduce the Cadillac brand, which would have been supported in Australia by GM Premium Brands and the respective dealers (more here), just weeks ahead of its scheduled launch date.

That decision is rumoured to have been a consequence of the combined poor sales performance by Saab and Hummer, plus GM's confirmation that it has sought to sell both companies, and a marketing-based perception that consumer confidence in the local market wasn't strong enough to introduce an altogether new brand without damaging that brand before it even had a chance to find its own feet.

Saab's global sales have been shrinking and it's been no different here in Australia. For 2008, Saab sold 1158 units, over 700 fewer than the tally of 1862 in 2007. Other companies fared worse in percentage terms, but Saab's 2007 sales base was not all that high from the start.

Rebecca Clout, the Communications Manager for GM Premium Brands in Australia, spoke with the Carsales Network earlier today in respect of these issues.

"Here in Australia, we're very focused on what we're doing and believe that this reorganisation is a very positive thing for Saab -- have someone come in, look at it, make it an independent company that would be attractive for investment with other public or private groups. I think it's a very positive thing for Saab," she said.

"We are selling current products, planning for future products that may or may not come here... we just need to look at timing, schedules and things, but it's got nothing to do with this process. We have our product plans in place for the future and we're still adhering to those through this process."

Ending the brand association with GM may in itself be a positive result for Saab, a marque that fosters a fairly loyal following that has been dwindling in recent years. More importantly for the future of the marque in Australia, according to Clout, is the upcoming new product in the pipeline, although that doesn't necessarily include the 9-4X, she says.

"We've actually never confirmed whether we'll see it in Australia or not," she said. "In terms of it as a vehicle, we think it's a fantastic car and would be a wonderful addition to our line-up, but we have not actually confirmed it entering our market as of yet."

The 9-4X (more here) is one vehicle potentially on the outer as a consequence of the company's reorganisation, a legal gambit that would focus Saab's research and development very much in Sweden -- and the 9-4X is Swedish in name only. It's based on the same platform as the Cadillac SRX (more here).

If the 9-4X were to reach the local market, it could expand Saab's sales reach considerably, being markedly different from any other model historically or currently sold by the company in Australia. Note that Saab's two main model streams could be said to have been marketed in Australia both currently AND historically. The 9-5 in particular is overdue for replacement.

Clout feels that the company has been bringing new product to market, citing the different variants that the company has released in recent times -- and certainly that's a game that market champion Audi has been playing to perfection -- but there's a difference between variants of an existing design and an altogether new model range. To that end, the new 9-5 should pick up sales that have fallen away as the current model has aged.

"If you look at what we've done here in Australia recently, you've had the Turbo X limited edition come out. The popularity of that car has been fantastic, the new diesel, the TiD, has all the DNA that we require in the current environment -- in terms of its fuel efficiency numbers -- so [Saab] has had some nice new products coming to market, but of course new products like a new 9-5... could only enhance the brand's reputation and sales here in Australia."

That's going to be pretty important for GM Premium Brands dealers. There'll be no Cadillac sales to bolster the dealers' revenue stream and Hummer's looking increasingly frail, financially.

GM CEO Rick Wagoner admitted last month at the North American International Motor Show in Detroit that Hummer was up for sale and the corporation expected a buyer to be announced before April (more here). This would leave GM Premium Brands potentially distributing two marques, neither of which would be owned by GM.

According to Clout, GM may choose either to sell Hummer in toto, or gradually phase out models as they lose market share to a point where they're no longer viable -- and the Hummer brand will slowly fade away. There is just the one model of Hummer currently sold in Australia, the H3.

Presumably, with the product already sold here and the company committed to supporting it through service and spare parts, there's relatively little added cost in continuing to sell the H3 here -- until such time as GM stops building it in the US, or the South African assembly plant stops building RHD variants for markets like Australia. That assumes, of course, that GM can't find a buyer for the company.

As far as Clout is concerned though, Hummer's future in Australia will rely heavily on which way GM jumps -- and how GM Premium Brand's business model might change is also predicated on Hummer.

"I think [that] will be determined by the Hummer outcome, so as part of the February 17th submission, they've essentially progressed the Hummer discussions to either being sold, if there is a buyer, or that the products would be phased out, if there was no buyer found," she said in response to the proposition that GM Premium Brands could end up selling two non-GM brands in Australia. 

"From our point of view, it's probably a bit early for us to make any comment as to what we see happening until one of those two decisions are made," she added.