GM’s troubles signal end of the road for Saab

Following speculation that troubled US carmaker General Motors is poised to axe its Saab marque in a bid to cut costs, it emerged this week that GM had approached the Swedish government for financial help to prop up the Saab brand.

GM is hoping to replicate the success it has had in Germany where it has secured 800m from the German government to keep its Opel brand afloat. Swedish industry minister Maud Olofsson has said the government will consider bailing out Saab and Volvo, after the latter’s owner Ford made a similar approach.

But critics argue that GM must cut somewhere and there is broad agreement that the company has too many brands, underlining the problem of oversupply in the motor industry.

Corporate Edge chairman Chris Wood says: “GM, like everyone else, has massive oversupply. Something will need to be cut and it may as well be a peripheral marque like Saab.”

So unless a rescue bid can be mounted, Saab – which built its first car in 1949 – may go. Wood says: “Saab’s great strength used to be that it was, relatively speaking, a more quirky individualistic brand with an unusual Scandinavian heritage.” But he wonders whether “quirky, premium and different” are now values that are a luxury rather than a necessity.

Despite car companies being seen as strategic industries that are often supported by their respective national governments, the global financial crisis has brought to a head a situation for GM that was bound to happen anyway, say observers.

Wood points out that cars used to be replaced on a two or three-year cycle because that was when they started to “go wrong”. Today, cars will easily go for 250,00 miles with few problems.

Status symbol
Also gone are the days when a new car was a status symbol. Now, thrifty thinking and eco-friendliness are seen as savvy and trendy. Add to this the decline in the UK of the company car system, driven by changes in tax structure and the list of once compelling reasons to buy a new car is greatly diminished.

The downturn has also hit car financing, where much of the profit in the manufacturers’ business models has come from.

Saab itself hit the height of its popularity in the 1980s. A pioneer in turbo charging technology, the 900 Turbo was sought after by young professionals in Europe and the US. GM bought half of Saab’s automotive division in 1990, just after production peaked at 134,000 cars in 1987. In 2000, GM bought the remainder of the company.

Though GM’s production target for Saab was 250,000 units, it struggled to get beyond half that figure. At the time, Japanese companies Honda, Toyota and Nissan were launching their own luxury divisions. Wood says: “Those more modern and fit-for-purpose companies have been consistently overhauling the likes of GM, which is stuck in outmoded structures.”

If the Swedish government does decide to bail out Saab – which is, after all, a significant business for the Scandinavian nation – it will still not address the fundamental problems the US car industry has, claim experts.

Grey London managing director Chris Hirst says: “Successive management teams have failed to address the legacy issues of their companies’ social security issues.”

Hirst, a recent Harvard graduate, adds: “With or without a downturn, they were in big trouble. There is an oversupply, the US market has tanked and developing markets can rarely take up the slack and when they do they will want totally different products.”

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