By on August 7, 2011

Saab is living off charitable donations and newly issued stock to allow its workers to live from paycheck to paycheck while doing nothing. Over at the Blog of Good Hope every little donation to the cause is praised as the Final Deliverance. According of a Blog of Good Hope post, representatives of the Chinese savior Pangda  are in Trollhättan this weekend. One of the questions undoubtedly will be “how long, how much?” Or in the language of venture capitalists “how long until we run out of runway?”

How much does it cost to keep the lights on at Saab? A friend of TTAC (Tack så mycket) pointed us in the direction of an older article in Dagens Industri, which budgets the month running costs of Saab as follows. Being Swedish, Dagens Industri provided a budget in Swedish Kronor, we provided the conversion to dollars, using today’s dollars.

Saab’s Monthly Running Cost

SEK USD
Labor: 250,000,000 $38,586,250
Production and parts: 600,000,000 $92,607,000
Factory Operation: 80,000,000 $12,347,600
Marketing: 80,000,000 $12,347,600
Development: 160,000,000 $24,695,200
Total 1,170,000,000 $180,583,650

Now of course, this assumes that Saab actually makes something, namely cars. Dagens Industri charitably assumed that Trollhättan makes 5,000 cars a month. (Volkswagen in  Wolfsburg does that in two days.) If no cars are made, because there are no parts, then that’s a big savings. No cars to sell, no marketing. While we are at it, save R&D. Nobody will notice. Voila, we have what is called a “Nuclear Winter” calculation in (American, behind the scenes) financial parlance. And this is what we present to you, again using Dagens Industri numbers.

Saab’s Monthly Ruining Cost

SEK USD Nuclear Winter
Labor: 250,000,000 $38,586,250 $38,586,250
Production and parts: 600,000,000 $92,607,000
Factory Operation: 80,000,000 $12,347,600 $12,347,600
Marketing: 80,000,000 $12,347,600
Development: 160,000,000 $24,695,200
Total 1,170,000,000 $180,583,650 $50,933,850

Whether the final number is $35 million or $ 45 million does not matter: A whole lot of money is going down the Swedish Dispose-All while not a single car is made. And knowing my Chinese friends, they absolutely hate it if just a little money is wasted.

Get the latest TTAC e-Newsletter!

Recommended

25 Comments on “Saab: Money Dispose-All, Made In Sweden...”


  • avatar
    Autobraz

    Voila, we have what is called a “Nuclear Winter” calculation in (American, behind the scenes) financial parlance.

    I thought this was called mothballing, but maybe that´s British financial parlance.

    Whoever ends up footing the bill to keep the lights (not the lights on, just keeping the lights!) must have some real appreciation of the brand value of Saab. I am not sure it is worth it and it seems there are few to none whoevers that think differently.

    RIP Saab, it was nice seeing you on Seinfeld episodes.

    • 0 avatar
      whynot

      Someone else can correct me if I am wrong, but I believe a “Nuclear Winter” calculation is a calculation of the cost of running a business in the worse possible business climate (hence the term “nuclear winter”). For a manufacturer like Saab, this would obviously be when you cannot manufacture anything (for whatever reason).

      Mothballing is more of when a company makes a decision (usually voluntarily) to stop using equipment (usually, but not always on a temporary basis) that cost money to operate in order to save money.

  • avatar
    GS650G

    If they switch to CFL bulbs and turn the AC down they might squeeze a few more Kroner out of that budget,

  • avatar
    jpolicke

    The unemployment rate in Sweden is about 7.7%. That’s not good (although Obama would look like a genius if he could get us there), but from the Swedish point of view is it so high that it would be politically unacceptable to shut the zombie that is SAAB down once & for all and add another 3000 or so to the total number?

    What is it about SAAB that generates any Chinese interest at all? They already have all the GM IP from other GM joint ventures. SAABs aren’t all that different from Buicks anymore to make them stand out in the market. If they were they wouldn’t be in their current predicament.

    • 0 avatar
      whynot

      The (2nd tier and below) Chinese companies want Saab primarily for the brand name. No matter how damaged and tarnished the Saab brand is, it is still stronger in the western market than their own.

      • 0 avatar
        jpolicke

        But “Made in China” carries a tarnish all its own. We’re not talking about a place with legendary quality here; if I’m looking at two otherwise equal competing articles, whether they be stereos or snow shovels, and only one is Chinese-made, I’ll go with the other, whether it’s made in Mexico, Singapore, or Bangladesh. The first task of Chinese SAAB will likely be to figure out how to increase the lead-and-other-toxic content of each car. The first year or two of Chinese SAABs will probably be faithful clones of the Swedish design until they figure out how to pull cost out of them, then every man for himself.

        I know China wants to switch its emphasis from low-value-added to higher-value merchandise, but they have yet to demonstrate an ability to maintain a standard of quality for something as basic as drywall.

      • 0 avatar
        whynot

        You’re right, “Made in China” does carries a tarnish all its own. That’s why that want the Saab brand. Its not like as soon as the Chinese get their hands on it they are suddenly going to be proclaiming left and right about the fact it is Chinese owned, and advertise that cars are built in China…they are going to play up the brand’s Swedish roots.

        Its the same with Volvo. How many people who don’t follow the industry actually know that Volvo is owned by Geely, a Chinese company? Where the brand is perceived to be from is more important than where the cars are actually built. Using Volvo as an example again, most people are completely unaware that they build half their cars in Belgium, and not Scandinavia.

      • 0 avatar
        Pig_Iron

        @whynot

        Without a strong Euro partner, I think what you are suggesting is what will happen. I still think VAG is the best bet, but they just don’t seem interested.

    • 0 avatar
      PierreChease

      You are exactly right about non car people not knowing where cars are made. Like in Volvo’s case, there current top sellers (XC60, S60) are not even produced in Sweden. And I bet you would be surprised at the response you get if you go to BMW X5 owners and asked them where their vehicles were built.

      • 0 avatar
        jpolicke

        Eventually it’s going to get out where the cars come from. I’ve never seen a Euro window sticker (I’m assuming here that they even exist outside the US), but I would guess the place of manufacture would be listed. It’s not a secret one can keep for very long. As for Volvo, I would guess that most consumers would feel that Belgium is as good for quality assembly as Sweden (I would), hence the indifference. I wouldn’t bat an eye to hear that SAAB was going to be Belgian owned. The Astra that Saturn was briefly selling here appeared to be decently made and they were assembled in Belgium.

  • avatar
    SilverHawk

    The request to form the joint venture in China will be submitted soon, but to the best of available knowledge, this dose not contain a proposal for the purchase of Saab. Youngman & PangDa have made some initial financial commitments to help Muller, but are restricted from doing anything further until the NDRC has ruled on the JV request. Something, that is clearly out of the ordinary, is going on here to keep Saab out of bankruptcy, though it’s not easy to see who benefits from this course of action. The Chinese would have no problem buying the assets that they deemed useful once bankruptcy was initiated.
    If the monthly financial miracles continue much longer, maybe we will begin to see the method in all this madness, but at the present time, it’s hard to see how Saab can generate substantial funds in their present condition, unless Youngman has tied it’s future in the Chinese auto industry to the successful application of Saab technology. Certainly a “role of the dice”.

    • 0 avatar
      jpolicke

      So why are the Chinese wasting money on the pretext of keeping SAAB alive? Why not step back, let nature take its course, and pick over the bones?

      • 0 avatar
        skwdenyer

        Because Saab is the last available European brand, and because the brand is owned AFAIK by Saab AB (the aerospace, defence and space company). If Saab Automobile go bust, the brand – I believe – reverts to Saab AB, who are unlikely to licence it to the Chinese.

        This is the same as the Rover situation; NAC (and subsequently SAIC) got ‘MG’, but not ‘Rover’, because ‘Rover’ was owned by BMW who had a contract requiring them to offer it first to Ford (who owned Land Rover). Ford, unsurprisingly, jumped at the chance to prevent anybody else from diluting the Land Rover name.

        So the only play that gets the brand is to keep the company on life support. Since VM holds the keys to the castle, he can – try to, at least – play the best hand he can. Since he seems to genuinely wish Saab well, he gets to deal on the basis of keeping the Swedish factory open, developing the new 9-3, and so on.

        Right now it is – just about – working. It isn’t working well, but it is certainly working. If the Chinese – or anybody else – want a leg-up in brand terms beyond starting from scratch, they have to buy Saab.

      • 0 avatar

        That sure would make sense- with our mindset. A Saab would sell better than a Youngman car in the U.S. or EU . even if made in China.

        But the strange part of this „we need to keep Saab as a going concern to save the brand“ plot is that the Chinese love brands, but they don’t want to pay for them and they usually don’t know how to create them. Also, the marching orders by the Chinese government are to buy technology, but not to waste money for useless brands.
        – HUMMER was shot down because it was mostly brand and little if any technology.
        – BAIC is happy with the last gen Saab tooling and is on record that they don’t want the brand.
        – China insists on creating new brands like BaoYun, Venucia etc.
        – A brand only deal will never make it through the NDRC.
        – “Saab in China? Never heard of it!”

  • avatar
    Robert.Walter

    Or in the language of venture capitalists: “What is our altitude, and is our glide-path yet vertical?”

  • avatar

    “Volkswagen in Wolfsburg does that in two days”. Whopdy fing do. The world would be a better place if Trollhatten were Wolfsburg, Ja?

    • 0 avatar
      Hildy Johnson

      Ja. Or at least, Trollhaettan would be a better place.

      • 0 avatar
        Hockey Bum

        Chevy sold 125 Volts last month (down from 281 in February) and they’re ramping up production to 5,000/month. As long as they’re burning money maybe they could work out a deal with the Swedes. A Saab variant has to be worth, say, another 125 units?

  • avatar
    saabista63

    @jpolick:
    Good question! Why don’t they?
    Why are these Chineses companies interested in SAAB? Don’t they read the press? Do they only read “saabsunited”, not TTAC?
    The answer is simple and easy: We don’t know!
    Maybe they are waiting for SAAB to die and to pick up the bones.
    Maybe they have other plans.
    Maybe they don’t have any plans at all.

    I’m quite sure they have plans – and maybe, we’ll see what they’re up to.
    In the meantime, there will be some opportunities to speculate.

    I’ll be back to read another Bertel Schmitt post, soon.

  • avatar
    mpresley

    Everyone’s portfolio just sank 5% last week (unless you are heavy into gold). The last thing the world needs or wants in these precarious economic times is a Saab. This entire sad affair should have been put to rest, like Ted Nugent’s dog, a long long time ago.

  • avatar
    makuribu

    Saab died in 1989.

    And how many proud owners of Chrysler products have Italian (or German) flags on their bumpers?

  • avatar
    saabista63

    @Bryce, Makuribu et alii:
    Whether the story of SAAB is a sad affair or not will be determined by the end of the story.
    Whatever you read – and I’ve read about dead corpses and/or Zombies so often that I can’t even remember – one thing is crystal clear: the end of the story may be near or not, but it certainly has not come yet.
    Before we know the ending, we can’t say if it’s sad or happy or whatever.
    The rest is speculation – some of it on a very, very professional level (thanks to Bertel Schmitt), some of it on a repeating-a-bad-joke-untll-not-even-the-one-who-tells-it-thinks-it’s-funny-anymore-level.

    Admittedly, speculation can be fun, and it can be fun to be proved right by the facts.
    Some people make a living on that – at the races.

  • avatar
    NorthwestT

    If you had been to Wolfsburg, you wouldn’t think it was anything to envy.

Read all comments

Back to TopLeave a Reply

You must be logged in to post a comment.

Recent Comments

  • Old_WRX: @Lie2me, “I have no idea what that is” That, I believe. Figuring out the point is left as an...
  • lstanley: I love anecdotes because they prove nothing, but the only guy at the c-store this morning not wearing a...
  • deanst: For some reason their look reminds me of Hans and Franz from SNL.
  • slavuta: Cheapos. Couldn’t they price Mexican-made sedan just under 20K????
  • Art Vandelay: I’ll not have you sullying Beavis and Butt-Head with this nonsense. (Incidentally, they are...

New Car Research

Get a Free Dealer Quote

Who We Are

  • Matthew Guy
  • Timothy Cain
  • Adam Tonge
  • Bozi Tatarevic
  • Chris Tonn
  • Corey Lewis
  • Mark Baruth
  • Ronnie Schreiber