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Saab Resuscitated By Spyker of the Netherlands

Marchionne Wants To See More Realism, Less Romance

It would have been ironic if Saab had been allowed to die, because for the first time in years, this iconic but perennial loss-making Swedish company was about to launch revamped models that might well captivate car buyers.

Spyker Cars of the Netherlands must have been tempted by this ready-made parade of new cars poised to enter showrooms, with most of the huge investment already paid for by previous owners General Motors of the U.S.

GM will receive €52.5 million in cash and €230 million in shares in the new Saab-Spyker company when the deal is completed in mid-February.

Saab has been a consistent loss maker for about 20 years, making a profit only in one year. It lost €240 million in 2008 and is expected to create a similar amount of red ink in 2009.

But this might be about to change as the new top-of-the-range 9-5 is poised to go on sale across the world. The new 9-5 features turbo-charged engines, harking back to this Saab specialty. The most remarkable engine in the new range is a tiny 1.6 litre which produces 180 hp, and propels this very large machine from rest to 62 mph in 9.5 seconds, while producing about 37 miles per gallon-7.6 l/kms. Next up is the new 9-4X SUV, followed by the 9-3.

Last year Saab moved to concentrate production at its Swedish plants, and the company reckons it can make good money now at 120,000 cars a year. Under the GM regime, breakeven for Saab was around 130,000 cars a year, but sales slipped to 93,000 in 2008, and are likely to have dribbled down to between 50,000 and 60,000 in 2009. So if good money can be made at a rate of 120,000, presumably break-even is a great deal lower.

Sales in the U.S. last year will have dived to between 8,000 and 9,000 but could be back to about 25,000 in a couple of years. The U.S. was Saab’s biggest market, and could be again. As recently as 2005/2006, sales were close to 50,000 in America.

Not everybody thought Spyker could handle its new charge.

“Although the company (Saab) has a strong positive in the shape of a new product line-up which should be rolled out over the next three years, it faces many challenges, not least stemming the losses and attracting customers back to the brand. It remains to be seen if Spyker can pull this brand transformation off and run the business as a going concern,” said IHS Global Insight analyst Ian Fletcher.

Some cynics had wondered if the American company’s apparent reluctance to sell Saab was because the new 9-5 relies heavily on engineering from GM’s Opel-Vauxhall Insignia, and sales of this big Saab would have undermined higher priced versions of the Insignia, European car of the year in 2009.

Warmly received
Global Insight’s Fletcher likes the look of Saab’s product pipeline.

“Certainly the latest generation 9-5 has been warmly received and should certainly offer gains when it replaces the current 12-year old model,” Fletcher said.

Fiat CEO Sergio Marchionne, who says the European car industry needs to slash production to survive, had this to say, ominously, about Saab.

“Marginal players will continue to be marginalised. We cannot build on hopes and dreams,” Marchionne said.

Neil Winton – January 30, 2010

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