Saab Won't Be Saved. Not Even By This Man

The dwindling and demoralized ranks of Saab flagwavers had a bad week. No cash in the kitty, bankruptcy looms, their savior Vladimir Antonov is rebuffed by the European Investment Bank, dirty laundry about funds seeping away to hot islands is being aired. Their hopes now cling to a sheet of paper. Today, Christer Gerlach wrote an op-ed piece in Sweden’s Dagens Nyheter in which he makes the case that Saab should not be written off just yet. He is asking the Swedish government for help . A translation is printed at Saabsunited.

Christer Gerlach is a famous autowriter. The 66 year old Swede became notorious in 1972 by crossing the Sahara in a Citroen 2CV. In 1988, he entered the Guinness Book of World records in a solo trip around the world – in a Toyota Corolla. If you want the impossible on four wheels, Gerlach is the man to call. I would not call him to restructure a moribund car company.

His proposal is based on two assumptions: Small car companies can flourish. Government aid to car companies is normal. So please, Swedish government, help Saab.

Says Gerlach:

“There are several small or medium-sized auto plants that are successful: Mini, Suzuki, Dacia, Rolls Royce, Bentley, Lamborghini, Subaru.”

Bad mistake number one. All of these except one belong to a huge company. And the only exception is neither small nor medium-sized. Mini and Rolls belong to BMW, Dacia to Renault, Bentley and Lamborghini to Volkswagen, Subaru to Fuji Heavy, in partnership with Toyota.

The only independent, Suzuki, is the world’s 9th largest automaker with 2.9 million cars made in 2010. And even Suzuki needed a little help from Volkswagen, to the tune of $2.4 billion.

His list proves just the opposite: There is no room for an independent small or medium-sized automaker in this world.

Gerlach points to the successes of Volvo and JLR:

“When Ford sold Volvo it also sold British Jaguar / Land Rover. Indian mega-firm Tata bought Jaguar / Land Rover, which then together produced about 250,000 cars a year. Far fewer than the Volvo. Jaguar alone produced around 50,000 cars – about half as many as Saab in a “normal” year.”

Again, Gerlach proves the point that Saab is too small to survive. When Ford sold Volvo, Volvo made 336,000 cars per year and lost money hand over fist. When JLR was bought by Tata it had made 261,000 units in 2008. JLR “produced just 167,000 vehicles and recorded $460 million in losses” in the first 10 months after the takeover, writes the Independent in India.

Both brands brought serious volume, know-how, and brand cachet to their buyers. Volvo was bought by Geely which had made 330,000 units in 2009. JLR was bought by Tata which had 537,000 units to its name in 2008.

For Ford, JLR and Volvo were money sinks. For emerging market producers Geely and Tata, the units, bought on the cheap, had strategic value – when combined with existing operations.

Saab made 20,000 cars in 2009 and 32,000 in 2010. In 2011, next to none so far. What volume does it contribute? What know-how? Most of Saab’s IP is owned by GM.

Saab isn’t even big enough to create rapid eye movement at a serious Chinese carmaker. Auto dealer Pang Da and busmaker Youngman are bit players in China.

Lars Holmqvist, head of the European supplier association CLEPA, was one of the few who realize that the emperor has no clothes when he said:

“This is not a matter where a Scrooge McDuck goes in with a lot of money. The basic problem is that Saab does not sell cars. They sold 28,600 cars last year. One cannot survive on that in our industry.”

This industry is all about scale. If you can’t survive on 330,000 Volvos from how much delusion does one need to suffer to think that 30,000 are just divvy? Running a car company is one of the most complex undertakings in this world today. Shooting a rocket into space is child’s play compared to that. This is no place for amateurs or dreamers – unless they are rich amateurs who want to be poor when they wake up.

Lastly, Gerlach makes the case that the U.S. government owned 60 percent of GM, that the German state of Lower Saxony owns 13 percent of Volkswagen, and that France owns 15 percent of Renault. Therefore, says Gerlach:

“A temporary state involvement in the Saab would dramatically increase chances for Saab to survive and increase confidence among foreign investors.”

Gerlach forgets that the Swedish government already is more involved in Saab than it wants. The Swedish government guaranteed the $350 million loaned by the EIB to Saab. To pass EU scrutiny, the loan had to be structured as an investment into research and development of green technologies and safety. It wasn’t meant to pay salaries and suppliers. Sweden buying equity in Saab is not in the cards. The commissars of Brussels would be all over it. What’s more, threatening lawsuits against the government and hoping that they invest shows a certain degree of outerworldly thinking.

Lastly, a state investment into Saab does not make political sense. The sad truth is that “saving jobs” is code for “buying votes.” Sweden does not need any votes at the moment. Trollhättan is no Michigan. The Saab workers are no UAW. 3,500 votes more or less do not change the Swedish political landscape.

The next elections are in 2014. Saab will not be a topic at these elections.