Why Saab Is Screwed (And What To Do About It)

Bertel’s provocative piece on SaabUnited’s complex relationship with Saab and Vladimir Antonov has drawn a predictable response from the Saab faithful, who have rushed to defend their beloved but troubled brand as well as its mysterious Russian “savior.” The outburst of anger at TTAC, though harsh to the point of almost blaming TTAC for Saab’s sorry state, is nothing new around these parts: TTAC has long angered the die-hard fans of many auto brands by calling for (or simply covering) the demise of brands that have outlived their usefulness to the market. Even the most basic understanding of TTAC’s history explains away the now-popular (in certain corners) theory that this site has a personal vendetta for Saab. On the other hand, perhaps we’ve been too focused on day-to-day developments to properly make the case for why Saab, sadly, needs to die. Luckily the reasons for Saab’s inevitable demise are not difficult to understand…

Perhaps the first issue to cover in an overview of Saab’s troubled state is the “GM era,” a 20-year period which Saab fans and detractors alike can agree was not the brand’s best. But, while GM is cast as the villain in most accounts of Saab’s recent history, the numbers actually prove that GM’s stewardship was able to turn around some troubling downward momentum in Saab’s global sales volume. As this extended global sales chart for Saab’s entire history (through 2007) proves, GM actually returned Saab to within spitting distance of its all-time sales volume record of 123,112 units, set back in 1987 after arresting its 1987-1993 sales free-fall.

Even more damning are the global sales numbers from 2009 and 2010, when Saab was going through its traumatic divorce from GM and troubled rescue attempt, which included a flirtation with the supercar maker Koenigsegg, as well as the sale of old IP to China’s BAIC and the ultimate sale to Spyker. In 2009, Saab sold 39,827 retail units. Last year Saab produced 32,048 units and sold 31,696, a full 100k units off of its GM-era plateau, when the brand was losing $5,000 per car.

Of course, volume doesn’t tell the whole story. Though GM arguably saved Saab by purchasing 50 percent of its equity back in 1989, Saab’s sojourn in the GM family was not a happy one, in ways that can’t be explained with a sales chart. Though Saab maintained ostensibly independent operations while a GM subsidiary, the transition to shared platforms and mechanicals spelled an end to Saab’s identity as a truly independent manufacturer (a process that had begun pre-GM, with the joint development with Fiat of the “Type Four” platform). I’ll leave a discussion of Saab’s loss of identity under GM for another moment, but needless to say that Saab’s inability to break through its 130k annual unit sales plateau speaks to GM’s willingness to dump the brand. And the fact that this occurred with “nary a tear” from that infamous lover of doomed brands and cool cars, Bob Lutz (who was saddened by the demise of Saturn and Pontiac), says plenty about the kinds of cars Saab was making under GM.

But the problem with Saab, ultimately, is not that it “makes bad cars.” That a vocal number of fans are deeply passionate about Saab vehicles, whether built under Spyker, GM or an independent Saab, indicates that Saab’s are not inherently unlovable or fundamentally flawed vehicles. Unfortunately, automotive history is only too well-stocked with defunct brands and manufacturers who went out of business despite selling cars that could capture the love and loyalty of a vocal minority. The reality, however, is that (though exerting a deeply emotional pull) cars are a business. That GM lost over $5k per Saab built between 2001 and 2009 indicates how flawed a business proposition Saab has been for so long (especially considering that GM brought volume back to the brand’s all-time high while using shared platforms).

Thanks to the deeply emotional connection Saab buyers feel towards the brand, one might even make the argument that Saab is worth investing in and overhauling, despite its long record of losing money and failing to achieve a sustainable business model. Though some might argue that Saab lost enough brand identity in the GM era to make such a proposition laughable on its face, it’s worth looking at the possibility (it certainly is to Messrs. Muller and Antonov).

And luckily we have a worthwhile comparison in Jaguar/Land Rover, another marginal European luxury brand that was sold at nearly the same time by Ford. Though Jaguar is a lower-volume luxury brand than Saab, its turnaround will cost its new owners no less than $8.2b, according to the Financial Times. Without even getting too caught up in the differences between JLR and Saab’s business models, what’s clear is that seriously turning around even a low-volume brand requires the backing of a large parent company and a huge amount of investment. If TTAC has been dismissive of Saab’s recent strategy of securing $30 million here, $30 million there, and a few hundred million in government debt, it’s because of precisely this fact. If a turnaround doesn’t begin with serious funding and a committed backer, it’s doomed to fail.

There’s a (possibly apocryphal) story about Henry Kaiser’s post-WWII announcement that he would spend $100 million ($1.25 billion in inflation-adjusted 2011 dollars) to build a car company to challenge the Detroit titans. At the time (1945), GM’s CEO Alfred P. Sloan supposedly quipped “give the gentleman one chip.” One shudders to think what Mr Sloan would think of Saab’s recent adventures in cash-scrounging (not to mention its odds of survival) were he still alive today.

Of course the Saabelievers will probably protest at this juncture that, as a luxury brand, Jaguar/Land Rover would necessarily need more investment than Saab. But not only does this not mean Saab’s relatively tiny resources are up to the task of a major turnaround, and the re-acquisition of 100k units of lost sales, it also points out yet another reason Saab is doomed to fail, namely its position in the market. Clearly not a volume brand any longer (and, with an all-time annual sales record of fewer than 140k units, it’s never properly been one), Saab is also emphatically not a luxury brand. It’s never been aspirational to anyone who aspires to more than being “different,” and thanks to its GM legacy products, neither does it offer any uniquely aspirational vehicles.

The “entry-luxury” market where Saab plays has been a brutal place to do business in recent years, under pressure from Hyundai’s budget-luxury offensive as well as GM’s huge re-investment in its Buick brand. One has only to look at Acura’s recent woes (its US sales fell in half between 2005 and 2009), for a sense of how tough that segment can be for even a well-established brand. And at the point that Saab’s flagship, the 9-5 Aero with 300 HP and AWD costs thousands more than well-established luxury cars with similar performance, like the Audi S4, clearly the brand’s positioning is problematic.

But the problem doesn’t end there: with a Cadillac XTS coming, based on similar Epsilon II mechanicals, the 9-5 will face even more competition from its erstwhile corporate cousins. Other than being slightly heavier and offering blander styling, the 9-4X is largely indistinguishable from a Cadillac SRX. And with Buick importing lithe, understated Opel Insignias to the US as the Regal, you can now buy subtly-distinctive, European-tuned versions of the Epsilon II chassis for nearly $10,000 less than Saab can offer its cheapest 9-3 at. And with Subaru on a roll in the US, Saab’s recent emphasis on all-wheel-drive is likely to be lost in the shuffle as well.

Which brings us to the “what you can do about this” section. By all means, feel free to loudly support the Muller-Antonov attempt to revivify this dead brand walking, but be aware that Antonov’s motives are still largely unknown, while Muller is clearly profiting by stringing Saab along. In any case, if Muller and Antonov could find the backing they would need to seriously turn Saab around, a task that would conservatively cost at least $2-3b (and still not be assured of success), they would have by now. Hoping against hope is a noble pursuit, but one best understood for what it is.

On a more practical level, my suggestion to Saab’s fans who are struggling with the seven stages of grief as they mourn their dying brand is this: don’t get so hung up on brands. After all, Saab’s connection with its history (on the product level) has, after decades of turmoil and foreign ownership, hardly survived in any meaningful way. Instead of holding on to the emotional attachment of owning a vehicle built in Sweden, I’d suggest identifying the elements of Saab-ishness that you like in your automobiles and look for them elsewhere in a market that has no shortage of brands and vehicles. Want a super-quirky, fun-to-drive turbocharged hatch? Go test a Nissan Juke. Want a refined, subtle, European turbocharged front-driver? Look at the Buick Regal (which many journalists at the launch compared to recent turbo Saabs). Want to fit in with the liberal campus crowd? Get a Prius. Need to buy a brand that offers unique mechanicals, a distinctive engine note and an under-the-radar brand? Snag a Subaru.

My point is this: Saab, as a business proposition is not just dying, it’s been as good as dead for decades. No amount of passion or vocal enthusiasm from Saab’s remaining fans can possibly change that. But the good news is that Saab’s values are not lost to the world of new cars. So rather than “shooting the messenger” and attacking TTAC or any other outlet with the guts to write about Saab’s situation with honesty and clarity, perhaps it would be best if Saab fans worked a little bit harder at identifying what about Saabs it was that attracted them to the brand, and seeking those values among the many viable brands and manufacturers still left in the market.