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Friday, 15 April 2011

Saab: Saving the “Swedish Airplane company” morphs into castle in the air for Saab / Spyker senior executive Victor Müller.

Try to catch a deluge in a paper cup
There's a battle ahead 
many battles are lost
But you'll never see the end of the road
While you're traveling with me
Crowded House – Don’t dream it’s over

“Sometimes it is not so nice to be right: dreaming makes so much more fun! “

These words came into my mind during the last weeks as I read the continuing news about Saab , the eccentric car builder from Sweden that originated from an aeroplane factory:
·     Saab suffers from production stops: secondary suppliers stopped delivery of car parts until late payments were settled.
·     Saab sends workers home for a number of days
·     Spyker asks Swedish government for permission to sell real estate Saab
·     Swedish government hesitate about rescue plan Saab.

Already in my SMS from Ernst (8) from a few weeks ago I expressed my doubts about the viability of the Spyker-SAAB combination:

For the bulls in The Netherlands and abroad, the take-over of the Swedish car brand Saab by the small Dutch manufacturer of luxury sportscars Spyker was like a fairytail come true. The bearish people see it just like something that is too good to be true. 
Victor Muller, the Dutch entrepreneur that co-founded Spyker, is a real entrepreneur in the sense that he likes to take risks and wants to achieve the impossible. Most of the time that is a true quality. 
In case of his take-over of Saab, however, you should notice three things:
-     Spyker never made a profit and never managed to reach the quality standards of real supercar brands like Ferrarri, Lamborghini or Noble.
-     Saab is already hopeless for many years. In the eighties the brand was as good as dead, before it was taken over by GM. In 1995 it made a real profit on the production and sales of cars after 7 years of losses, but since then the results are often terrible.
-     The demand for more loans (among others) from Vladimir Antonov, a Russian venture capitalist of doubtful repute, sounds a lot like throwing good money at bad money. 
It seems like the blind is leading the blind and we know where that usually ends. The net loss of €218 mln seems like a bad omen for the future of Saab.

Since I wrote this article then, the conditions for Saab deteriorated and all actions of Victor Müller, the senior-executive of the Saab-Spyker combination seem in vain to prevent the inevitable decline of the brand Saab:
·     Looking for the “don’t ask, don’t tell”-dollars of Russian tycoon Vladimir Antonov
·     Looking for other wealthy private investors: Antonov’s loan could convince them to supply a loan too
·     Trying to convince the Swedish government into releasing Saab’s commercial real estate as collateral for a sell-and-lease back construction that might supply €100 mln.
·     Trying to squeeze every Euro out of the €400 mln loan that the European Investment Bank (EIB) supplied to Saab, with the Swedish government as the guarantor.
·     Trying to smooth-talk secondary suppliers into delivering car parts for “a promise, a firm handshake and a smile”.

My predictions are:
·     In the current tempo Saab will default within 3 months, unless a miracle happens.
·     Victor Müller will even have to do his very best to stay out of trouble, as the Swedish government might want to have his head after the default of Saab
·     Spyker, the Dutch sportscar brand co-founded by Victor Müller will also cease to exist
·     The €400 mln from the EIB will be vanished to the last cent without a trace.

But what is it with factories like Saab that makes it so hard to survive in the international car business, while even more expensive premium brands like Audi, BMW and Mercedes thrive, even in these trying times.

Saabs are cars that actually have much of an aeroplane built in (like f.e. having the starting key positioned between the front seats and the true cockpit-like look and feel inside). Besides that these cars were built around the Swedish ideas of safety and comfort: excellent crumple zones and safety cage, heated front-seats and a heating system that could withstand the coldest Swedish night, a cozy compartment in warm colors and built-up using the best materials. In that way it were truly excellent cars.

In the seventies and eighties in The Netherlands, these cars very popular with pipe-smoking and beard-wearing people in free and alternative professions: notaries, medical professionals, real estate brokers and teachers. That was Saab's strength, but also its weakness:

Although Saab was considered a premium brand, it had during its lifecycle a considerable number of years without profit. The cars were too expensive or too eccentric for the mainstream car owner and the production quality has not always been without flaws. Before the mid-eighties, the brand produced only two truly new models since car production began in 1948: the 92 and the 99. All other models (900) and types were revisions of especially the 99.

When the factory developed the 9000 model in 1985, in close cooperation with the Fiat – Alfa group, the model was not special enough for the Saab-lover and still too eccentric for the normal driver. The Saab 9000 became a failure, also due to the growing pains that this new model had. In the meantime the other models 90 and 900 became so outdated that Saab didn’t have a profit anymore for seven years until it was taken over by GM.

GM renewed the brand and introduced some truly new models (9-3 and 9-5), but except for a number of dead-cat-bounces, the brand never became structurally profitable: too mainstream to be a niche brand, too niche to be a mainstream brand.

Especially during the IT-boom in the nineties and after, Saab failed to step succesfully into the lucrative car lease market, where the German, French and Japanese (premium) brands did. Result: very high lease rates and almost no drivers who wanted to pay the extra bucks.

Saab turned into a brand with a few diehard fans, until GM sold it to Spyker.

And now, in the hands of Victor Müller, the dream of reviving the brand will certainly morph into a castle in the air. That is sad, but not a reason to invest more tax euro’s in this doomed brand.

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