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Saab Automobile AB

Saab Automobile AB

Trollhättan, S-461 80
Sweden
Telephone: (
+ 46) 520 85000
Fax: (
+ 46) 520 35016
Web site: http://www.saab.com

Wholly Owned Subsidiary of General Motors Corporation
Founded:
1937 as Svenska Aeroplan Aktiebolaget
Incorporated: 1990
Employees: 5,503
NAIC: 336111 Automobile Manufacturing; 421110 Automobile and Other Motor Vehicle Wholesalers; 421120 Motor Vehicle Supplies and New Part Wholesalers; 522291 Consumer Lending; 532112 Passenger Cars Leasing

Part of the European operations of General Motors Corporation (GM), Saab Automobile AB is a Swedish maker of passenger automobiles in the premium sector of the market. The company makes two main lines of cars: the 9-3, which comes in four-door sedan, sport wagon, and convertible models; and the 9-5, which includes luxury sedan and station wagon models. In the United States, Saab also offers the 9-7X, a midsize sport-utility vehicle, and the brand's first SUV. Considered a small automaker in the globalized auto industry of the early 21st century, Saab produces about 125,000 cars each year, with most built at its factory in Trollhättan, Sweden, where the company is also headquartered. Production is gradually being shifted elsewhere, however, with the 9-7X built in the United States. Saab automobiles are sold in more than 60 countries around the world, but more than 80,000 are sold in Europe each year and nearly 40,000 in the United States. The largest market outside these core areas is Australia.

Saab began as an aircraft manufacturer, then launched automotive production in 1949. Its automobile operations became a division of Saab-Scania AB following the 1969 merger of Saab AB and Scania-Vabis AB, a maker of trucks, buses, and diesel engines. Saab Automobile AB was officially formed in 1990 when General Motors purchased 50 percent of Saab-Scania's passenger car business. The following year Investor AB gained the other 50 percent interest following Investor's leveraged buyout of Saab-Scania. In 2000 GM bought out Investor's interest in Saab, making the company a wholly owned GM subsidiary.

FROM AIRPLANES TO
AUTOMOBILES: 193768

With the threat of another war in Europe building in the 1930s, it became imperative for Sweden to improve its defenses. Not least important was the need for a domestic aircraft industry large enough to supply the Swedish forces with military aircraft. This led to the formation in April 1937 of the Svenska Aeroplan Aktiebolaget (Swedish Aircraft Company Limited), abbreviated SAAB. Two years later, SAAB, with headquarters in Trollhättan, took over the aircraft division of the Aktiebolaget Svenska Jarnvagsverkstaderna, or Swedish Railroad Works, located in Linköping. SAAB subsequently transferred its corporate headquarters and construction and design departments to Linköping.

Construction was accelerated at both the Linköping and Trollhättan plants, which were building aircraft designed by Bristol, Junkers, and Northrop. During this period work proceeded on the first SAAB aircraft, the Svenska B-17 dive bomber, which made its first flight in 1940. When war came to Europe, however, Sweden declared itself neutral. As a result the country was spared from occupation by Nazi troops, which had taken control of its Scandinavian neighbors Norway and Denmark.

Plans for car production at the SAAB plant at Troll-hättan started evolving as World War II neared an end, and management sought to widen the production program to meet an expected decline in military aircraft requirements. The success of small European cars in the Swedish market just prior to the war provided management with confidence that cars of the same type would also prove popular in the future, and that demand would be steady enough to ensure the success of a SAAB automobile.

A talented aircraft engineer named Gunnar Ljungström was placed in charge of the development of the SAAB auto, the first prototype of which, the 92.001, was ready by the summer of 1946. The body design, however, was neither practical nor aesthetically pleasing. A new prototype was developed with an improved external design and was designated the 92.002. First unveiled in 1947, actual production began two years later. The design of this model, which was known as the SAAB 92 and was initially available only in moss green, was to characterize SAAB automobiles for the next 30 years. Streamlining helped to reduce fuel consumption and engine wear, and enabled the car to reach speeds of 60 miles per hour. Despite a number of minor shortcomings, the car's road performance was excellent, and its appearance was stylish and popular.

Improved versions of Ljungström's original design appeared throughout the 1950s, with the SAAB 93 replacing the 92 in 1955, and by 1955 SAAB automobiles had become the most popular in Sweden; one car left the assembly line every 27 minutes. In order to meet anticipated demand, more plant space was required, and a new factory was established at Göteborg to manufacture engines and gearboxes. New models were also developed, with the 92 model replaced in 1955 by the SAAB 93, followed by the SAAB 95 station wagon in 1959 and one year later by the SAAB 96, which went on to be the mainstay of the company's sales throughout most of the 1960s.

SAAB continued to develop a variety of aircraft, particularly military fighter jets. The first of these was introduced in 1949, and production in various forms was maintained throughout the 1950s. The SAAB aircraft division also held licenses to manufacture foreign-designed aircraft and produce aircraft components for foreign manufacturers.

As early as 1953 SAAB management started exploring the possibility of selling cars in the United States, but hesitated to enter that market until 1956, when a more promising atmosphere had developed. Using New York City as a base of operations, a U.S. subsidiary called SAAB Motors Inc. was created to import SAAB automobiles, and a depot was established near Boston to receive cars and store spare parts. It was a modest beginning for a small foreign company in the world's largest automobile market, and growth was difficult and slow.

During the 1960s the scope of SAAB's operations expanded from automobiles and aircraft into satellites, missiles, and energy systems. On May 19, 1965, as its business continued to grow, the company changed its name to Saab Aktiebolag (the acronym had become so popular as to warrant the elimination of the old name). Over the next four years, officials of Saab and Scania-Vabis began to investigate the viability of operating as a single corporation. In the meantime, Saab introduced its first completely new model since the 92 when it began production of the larger Saab 99 in the fall of 1968.

COMPANY PERSPECTIVES

Saab Brand Mission: We offer modern individualists an alternative premium experience, embodied in progressive, sporty and surprisingly practical cars.

SAAB-SCANIA ERA: 196989

Saab and Scania-Vabis merged their operations during 1969 and absorbed two other military contractors, Malmo Flygindustri and Nordarmatur. All automotive operations of the new Saab-Scania AB were centered at the facility in Södertälje, with production continuing in Trollhättan, while the aircraft division headquarters, which produced the JAS-35 Draken and JAS-37 Viggen fighter jets, remained at Linköping. Also in 1969, Saab-Scania, in cooperation with the Finnish company Valmet Oy, established an automobile factory at Uusikaupunki, Finland. In 1972 Saab-Scania's automotive division was divided into the Saab Car Division, which concentrated on passenger cars, and the Scania Division, focused on trucks. That year the Saab 99 was named Car of the Year in Sweden. By this time the 99 offered several innovative features, including headlight wipers and washers, electrically heated driver's seat, self-repairing five-m.p.h. bumpers, and side-impact door beams.

Saab decided to focus its efforts on competing for a significantly larger share of the U.S. automobile market, the main goal being to define its cars as a better choice than those offered by BMW, Mercedes-Benz, and Volvo. These cars had been highly successful with more affluent American consumers. The expanded marketing campaign produced few results over the first half of the decade, but by 1978 began to pay off handsomely. The company's sales increased by 19 percent in the United States and by 17 percent in Scandinavia. That year saw the launch of the upscale Saab 900, which was based on the 99 platform but featured a longer wheelbase, a longer body, a new front, and an all-new interior. Offered initially in three-and five-door hatchback models, a four-door sedan version was introduced in 1980. Innovations with the 900 series included a cabin ventilation air filter (1978), asbestos-free brakes (1982), and the first turbocharged engine featuring 16 valves, four per cylinder (1984). Production of the Saab 96 ended in January 1980, concluding the 30-year history of the 92-93-95-96 family, with overall production of more than 730,000 cars. The Saab 99 remained in production until 1984, at which point nearly 590,000 of the model had been built.

The Saab 9000, built on a new large-car platform, was introduced in 1984 and was only the third all-new model in Saab history. The car had a luxury four-door sedan profile but offered the practicality of a hatchback. The 9000 proved to be popular but problems related to retooling production plants thwarted a planned expansion of production capacity by 10 percent during 1985. Arriving on the scene in 1986 was the Saab 900 convertible. Driver's side airbags were introduced in 1988.

In the late 1980s, Georg Karnsund, Saab-Scania's president, placed greater emphasis on marketing programs in Europe, particularly in France and Italy, as well as in Australia and Japan. Karnsund believed that Saab's ability to develop advanced technology would give its cars a distinct advantage in increasingly competitive international markets.

KEY DATES

1937:
Svenska Aeroplan Aktiebolaget (SAAB) is formed to build military aircraft.
1939:
Company acquires aircraft division of the Swedish Railroad Works, stationed in Linköping, where the company's headquarters are relocated.
1949:
Production begins on the company's first car model, the SAAB 92.
1956:
SAAB Motors Inc. is formed as a U.S. sales subsidiary.
1965:
Company changes its name to Saab Aktiebolag.
1968:
Production of the Saab 99 begins.
1969:
Saab merges with Scania-Vabis to form Saab-Scania AB.
1978:
Production of the Saab 900 begins.
1984:
Production of the larger format Saab 9000 starts.
1990:
General Motors Corporation (GM) purchases 50 percent interest in Saab car division, which is reorganized as Saab Automobile AB, a 50-50 joint venture of GM and Saab-Scania.
1991:
Investor AB completes leveraged buyout of Saab-Scania, thereby becoming a joint owner of Saab Automobile.
1993:
All-new Saab 900 is launched.
1996:
Robert W. Hendry, a top GM executive, is named president and CEO of Saab.
1997:
The Saab 9-5 series is launched with a sedan model.
1998:
The Saab 9-3 series debuts with two-door, five-door, and convertible models; the Saab 9-5 station wagon makes its debut.
2000:
General Motors acquires full control of Saab.
2005:
GM centralizes the engineering and manufacturing of its European brands, including Saab, in its European headquarters in Zurich.

1990S: THE JOINT VENTURE
DECADE

The 1990s began with the conclusion of a pivotal deal whereby Saab-Scania ceded half of its Saab automobile division to General Motors Corporation. Prior to the consummation of the 50-50 joint venture with Saab-Scania, General Motors (GM) had sought to acquire Jaguar Cars Ltd., a British manufacturer of luxury cars, but in November 1989 the U.S. car maker was beaten to the prize by rival Ford Motor Company. Still in the mood to acquire, and seeking to increase its presence in the European luxury car market, GM announced its joint venture with Saab-Scania the following month. The deal was completed in early 1990, with GM paying $600 million to gain 50 percent interest in the prestigious yet troubled car maker, which was reorganized as Saab Automobile AB.

By the late 1980s, the Saab division had become a perennial financial loser, crippled by declining sales in the United States, the company's largest single market for car sales. The affiliation with General Motors was expected to ameliorate Saab's position overseas, but at home, larger, more formidable obstacles faced the company and its enormously powerful part-owner, Peter Wallenberg. In addition to holding a controlling interest in Saab-Scania, Wallenberg maintained sizable investments in many other large Swedish companies, including appliance maker Electrolux Corporation and L.M. Ericsson, Sweden's largest communications company. Wallenberg's empire accounted for a third of Sweden's $165 billion economy, a much coveted portfolio when the country's economy was robust, but a financial nightmare when economic conditions soured as they did entering the 1990s. To make Wallenberg's position more precarious, by 1990 Sweden was prepared to join the European Community, which would force the country to drop its protective economic barriers. These barriers had insulated Wallenberg against foreign corporate raiders and thus enabled him to control companies that represented $55 billion in market value with only $5 billion in equity.

Fearing a hostile takeover, Wallenberg increased his ownership of Saab-Scania in 1990 from 36 percent to 58 percent, then initiated the largest leveraged buyout in Swedish history the following year, purchasing through holding company Investor AB all of Saab-Scania for $2.3 billion, after learning that outside investors were planning to acquire 10 percent of the company's stock. Saab Automobile thereby became 50-50 owned by Investor and GM. Against the backdrop of Wallenberg's strategic maneuvers, Saab Automobile continued to lose money, recording a loss of $848 million in 1990, which translated into an alarming $9,200 loss for each car sold. Meantime, Saab's history of innovation continued, when it became the first automaker to offer CFC-free air conditioning systems in 1991.

By 1992, it appeared that Saab Automobile was destined for a more profitable future, thanks in large part to the assistance of General Motors' management, who greatly improved the segment's manufacturing efficiency. When GM management arrived at Saab in 1990, it took 100 hours to produce a single car, but by 1992 the hours required per car had been whittled down to 50 or 60 hours, cutting in half the production quota required to generate a profit. Although Investor and General Motors needed to effect further improvements to spark a complete resurgence of Saab automobiles, progress was being made. The introduction of an all new Saab 900 in mid-1993 fueled hopes for a recovery of Saab's U.S. sales, a necessary ingredient in Saab's revitalization. Available first in a five-door sedan, then in three-door coupe and convertible models, the 900 helped Saab Automobile post in 1994 its first profit of its joint venture era. Production of the 900 nearly doubled between 1993 and 1996, with units built increasing from about 33,600 to more than 62,400. Sales of the 900 suffered, however, because of early quality problems and negative press coverage.

Saab began backsliding into the red in 1995 and 1996 buffeted by high marketing and product development costs as well as downward pressure on prices. In August 1996 GM sent one of its top executives, Robert W. Hendry, to Sweden to take on the position of president and CEO of Saab. Two months earlier GM and Investor agreed to pump another SKr 3.48 billion ($524 million) into the troubled automaker to help it through a five-year recovery period. During this time, Saab planned to replace the 9000 and 900 models with two new lines. It also needed to sell a higher volume of the new modelsoverall sales of 150,000 cars per yearto return to profitability, and to do so it needed to move its image more into the mainstream. Saab was almost invariably referred to as a "quirky" carmaker and it had long aimed its advertising at "driving enthusiasts." With its new models, Saab aimed to emphasize the uniqueness and quality of its products rather than the eccentricity of its customers.

The Saab 9-5, the larger of the two new lines and a replacement for the 9000, debuted in 1997 with a luxury sedan model. A 9-5 station wagon followed the next year. Also in 1998 came the debut of the Saab 9-3 series, which replaced the 900 series and included two-door, five-door hatchback, and convertible models. The new models were slowly increasing Saab's overall sales, with 98,036 cars sold in 1996, 100,275 the following year, and 118,581 in 1998, but losses deepened to SKr 1.91 billion ($240.8 million) in 1997 before improving to SKr 620 million ($76.5 million) in 1998. Sales increased another 11 percent in 1999, reaching 131,500 cars, but Saab continued to operate in the red, posting a loss of SKr 467.8 million ($55 million).

WHOLLY OWNED BY GM

It was estimated that GM's investment in Saab had cost the auto giant $2.5 billion during the 1990s, including the original purchase price, additional investments, and the almost yearly losses. In January 2000 General Motors exercised its option to buy the remaining 50 percent of Saab Automobile held by Investor but had to cough up a mere $50 million to do so. Peter Augustsson, who had been chief operating officer, was promoted to president and CEO of Saab, replacing Hendry. Augustsson was named chairman as well in January 2002.

As a full member of the GM family, Saab was positioned to take complete advantage of the auto giant's strategy of shared global platforms and its worldwide purchasing network. The first signal of a new approach came in September 2002 when sales of an all new 9-3 sedan commenced. The new 9-3 was based on GM's Epsilon platform, which also spawned the Opel/Vauxhall Vectra (Opel and Vauxhall being, respectively, the German and U.K. sister companies of Saab within the GM Europe division). Saab followed up by introducing a convertible version of the 9-3 in 2003. The new models helped propel Saab's global sales to more than 131,700 units, while the U.S. total of nearly 48,000 cars sold set an all-time record.

Unfortunately, the red ink only grew, despite the higher sales. Losses for 2002 alone totaled SKr 4.5 billion ($517.5 million). Late that year Saab announced it would cut more than 1,300 staff in Sweden, or 17 percent of its workforce, as part of a cost-cutting effort. Its entire European operation struggling, General Motors turned to centralization to spark a turnaround. Late in 2003 the company announced that it would integrate the sales, marketing, and after-sales operations of its European brands, including Saab, Opel, and Vauxhall. Then in June 2005 a major overhaul of GM's European operations was launched that further reduced the autonomy of Saab, Opel, and Vauxhall, shifting responsibility for engineering and manufacturing to the regional headquarters in Zurich. This was part of a larger effort to centralize global product development, cutting overlapping engineering projects and reducing costs worldwide.

In a further blow to Swedish pride, Saab's factory in Trollhättan lost its bid to produce the next-generation Saab 9-3 and Opel Vectra. GM announced in the spring of 2005 that Opel's factory in Rüsselsheim would handle these models, the production of which was expected to begin in mid-2008. Augustsson, a staunch defender of Saab's "Swedishness," not surprisingly stepped down around the time that this news was released. Carl-Peter Forster, the president of GM Europe, took over the Saab chairmanship, while Jan-Åke Jonsson, who had been with the Swedish carmaker since 1973, was named chief executive. There was much speculation in the press about whether the Trollhättan plant would eventually be mothballed. GM was committed to keeping it open at least through 2010: Production of the 9-3 and 9-5 continued, and GM also began using the factory to produce non-Saab models, such as the Cadillac BLS, which began rolling off the Trollhättan assembly line in early 2006. In the meantime, the four millionth Saab to be built exited the Trollhättan production line in June 2005.

On the new model front, the Saab 9-3 Sport Combi, a premium, midsize wagon, debuted in September 2005. GM also began taking a new approach to the U.S. market, rolling out U.S.-only models made outside Sweden. The year 2004 saw the debut of the made-in-Japan Saab 9-2X, a rebadged and slightly reworked version of the sporty Subaru WRX wagon. The 9-2X stemmed from GM's alliance with Fuji Heavy Industries Ltd., owner of the Subaru brand. In 2005 Saab began selling the 9-7X, the first Saab sport-utility vehicle. The 9-7X, a midsize SUV, was based on the Chevrolet Trail-Blazer and built in Moraine, Ohio. This approach suffered a setback in October 2005 when General Motors ended its partnership with Fuji Heavy Industries. This led to the phase out of the 9-2X and the cancellation of a planned 9-6X "crossover" vehicle (a carlike SUV) that was to be based on the Subaru B9 Tribeca.

Backing up Saab's U.S. efforts was a new marketing campaign that attempted to create a stronger brand image by linking the performance of its vehicles with the firm's aircraft heritage. The "Born from Jets" campaign appeared to pay dividends in higher U.S. sales. Saab seemed to be rebounding on a wider basis as well, as sales hit record levels on both a global and European basis in the first quarter of 2006. Aiding Saab at this time, particularly on the image front, was a push into eco-friendly vehicles, such as the 9-5 BioPower, a so-called flex-fuel vehicle able to run on either gasoline or E85 fuel, a blend of 85 percent ethanol and 15 percent gasoline. Saab sold 4,000 of these cars in Sweden during 2005 after a July debut. In March 2006 the company unveiled what it called the world's first fossil-free hybrid vehicle, a 9-3 convertible powered by a combination of battery power and E100 fuel made of 100 percent ethanol.

These new models created some excitement around the Saab brand at a time when Kirk Kerkorian, a major GM shareholder and new board seat holder, was pressuring General Motors to pull the plug on the Swedish carmaker. The parent company's commitment to turning Saab around was evident, however, in March 2006 when GM approved plans for a Saab crossover vehicle. With a replacement for the 9-5 also in the works, it seemed that Saab might soon possess a wide enough product lineup, and the higher sales that were expected to follow, for a long anticipated return to profitability.

Jeffrey L. Covell

Updated, David E. Salamie

PRINCIPAL SUBSIDIARIES

GM Credit AB; GM Europe Treasury Company, AB; GM Worldwide Purchasing Sweden AB; Saab Automobile Investering AB; Saab Opel Sverige AB; Saab Automobile Australia Pty Ltd; Saab Deutschland GmbH (Germany); Saab France S.A.; Saab Automobili Italia S.r.l. (Italy); Saab Great Britain Ltd.; Saab Cars USA, Inc.

PRINCIPAL COMPETITORS

Bayerische Motoren Werke AG; DaimlerChrysler AG; Ford Motor Company; Toyota Motor Corporation; Volkswagen AB; Nissan Motor Co., Ltd.; Honda Motor Co., Ltd.; Suzuki Motor Corporation; Mazda Motor Corporation; Hyundai Motor Company; Mitsubishi Motors Corporation; Fiat S.p.A.; Dr. Ing. h.c. F. Porsche AG; Kia Motors Corporation.

FURTHER READING

Birch, Stuart, " And in the Beginning," Automotive Engineering, September 1, 1997, p. 14.

Boudette, Neal E., and Gregory L. White, "GM Hopes Bigger Saab Lineup Will Help Fill Up Showrooms," Wall Street Journal, April 9, 2003, p. B3.

, "GM's Saab Unit Is Planning Restructuring As Losses Mount," Wall Street Journal Europe, November 19, 2002, p. A4.

Burt, Tim, "Hope for GM's Saab Saga: Board Says Swedish Car Maker Will Report Profit in 1999 After Years of Painful Restructuring," Financial Times, September 14, 1998, p. 26.

, "Saab Eyes Common Platform," Financial Times, December 21, 1998, p. 21.

, "Saab Set for Further SKr1bn Investment," Financial Times, May 22, 1998, p. 27.

Carnegy, Hugh, "Battles for Survival Continue: Volvo and Saab See Sales Dip As Development Costs Continue to Rise," Financial Times, March 6, 1997.

Chon, Gina, "Ailing Saab Seeks Turnaround by Touting Aviation Roots," Wall Street Journal, October 21, 2005, p. B1.

Dawley, Heidi, "Saab: Why GM Sent in Its Ace Mechanic," Business Week, September 2, 1996, p. 55.

Dymock, Eric, Saab: Half a Century of Achievement, 19471997, Newbury Park, Calif.: Haynes North America, 1997, 192 p.

Feast, Richard, "Jaguar and Saab: Bullish on America; Ford and GM Patiently Groom Their Latest European Acquisitions for the Long Haul," Automotive Industries, May 1991, p. 14.

Flint, Jerry, "Europe to the Rescue," Forbes, February 3, 1992, p. 19.

Gardner, Greg, "Will GM 'Saternize' Saab?," Ward's Auto World, August 1996, p. 37.

George, Nicholas, and James Mackintosh, "Saab Tries to Escape a Cul-de-Sac," Financial Times, March 11, 2004, p. 14.

Guilford, Dave, "GM OKs Saab Crossover," Automotive News, March 6, 2006, p. 8.

, "Opel, Saab Trade Autonomy for Low Costs," Automotive News, March 15, 2004, p. 4.

Henry, Jim, "Saab Scrambling to Meet Lofty Sales Goals," Automotive News, November 11, 1996, p. 6.

Hökerberg, Jan, Spelet om Saab: en biltillverkares uppgång, fall och väg tillbaka, [Stockholm]: Bonnier Alba, 1992, 353 p.

Johnson, Richard, "Europeans Pinched, but Most Are Profitable in Market Dip," Automotive News, May 27, 1991, p. 2.

Kapstein, Jonathan, "Fortress Wallenberg Is Showing Some Cracks," Business Week, December 10, 1990, p. 45.

, "Wallenberg's New Walls," Business Week, March 11, 1991, p. 46.

Kurylko, Diana T., "GM Global Platform Is Key to Saab's Future Products," Automotive News, November 8, 1999, p. 24L.

, "New Saab Boss Focuses on Europe," Automotive News, November 8, 1999, p. 24L.

, "Profit in Sweden on the Horizon," Automotive News, May 16, 1994.

Lewis, Anthony, "GM's 'Purest Global Brand' Sets Sights High," Automotive Industries, August 2002, p. 13.

Miller, Scott, "Saab Has Plans to Widen Its Model Line and Double Output Within Five Years," Wall Street Journal, November 18, 1999, p. A21.

Phelan, Mark, "Saab Stakes Its Long-Term Health on Collection of New Models," Detroit Free Press, July 15, 2005.

Reiter, Chris, and Louise Nordstrom, "Saab Chief Quits," Wall Street Journal, March 10, 2005, p. A14.

"Saab Rallied Round a Mountain to Earn Attention in U.S.," Automotive News, April 24, 1996, p. 70.

"Saab Taking a Gamble with 9-5 Saloon," Financial Times, August 7, 1997, p. 26.

Sandell, Kaj, and Bo Streiffert, Scania, 100 Years: A Century of Industrial and Automotive Progress, 18911991, translated by Tom Byrne, Södertälje, Sweden: Saab-Scania, Scania Division, 1990, 264 p.

Sjögren, Gunnar A., The Saab Way: The First 35 Years of Saab Cars, 19491984, Nyköping, Sweden: Österbergs, 1984, 101 p.

Templeman, John, "Saab: Halfway Through a U-Turn," Business Week, April 27, 1992, p. 121.

Washington, Frank S., "Saab Counts on Image Make-Over to Attract Older, Luxury Buyers," Automotive News, March 10, 1997, p. 23.

Welch, David, "Can Stolid Old Saab Become Sexy New Saab?" Business Week, May 13, 2002, pp. 102, 104.

White, Gregory L., "GM Plans to Buy Remaining 50% of Sweden's Saab," Wall Street Journal, January 11, 2000, p. A8.

Wielgat, Andrea, "Future Still Uncertain but Looking Up for Saab," Ward's Auto World, October 1999, p. 45.

Wright, Chris, "Saab Looks for Boost from 9-5 Station Wagon," Automotive News Europe, December 7, 1998, p. 18.

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Saab Automobile AB

Saab Automobile AB

SE-461 80 Trollhätten
Sweden
Telephone: (0520) 850 00
Fax: (0520) 815 38
Web site: http://www.saab.com

50-50 Joint Venture of General Motors Corporation and Investor AB
Incorporated:
1990
Employees: 9,974
Sales: SKr 22.59 billion (US$3.51 billion) (1998)
NAIC: 336111 Automobile Manufacturing; 421110 Automobile and Other Motor Vehicle Wholesalers; 421120 Motor Vehicle Supplies and New Part Wholesalers; 522291 Consumer Lending; 532112 Passenger Cars Leasing

Saab Automobile AB is a Swedish maker of passenger automobiles in the premium sector of the market. The company makes two lines of cars: the 9-3, which comes in two-door, five-door hatchback, and convertible models; and the 9-5, which includes luxury sedan and station wagon models. Considered a small automaker in the globalized auto industry of the late 20th century, Saab produces about 125,000 cars each year, with most built at its factory in Trollhätten, Sweden, where the company is also headquartered. The largest markets for Saab automobiles are the United States, Western Europe, Australia, Japan, Canada, and Taiwan. Saab began as an aircraft manufacturer, then launched automotive production in 1949. Its automobile operations became a division of Saab-Scania AB following the 1969 merger of Saab AB and Scania-Vabis AB, a maker of trucks, buses, and diesel engines. Saab Automobile AB was officially formed in 1990 when General Motors Corporation purchased 50 percent of Saab-Scanias passenger car business. The following year Investor AB gained the other 50 percent interest following Investors leveraged buyout of Saab-Scania.

From Airplanes to Automobiles: 193768

With the threat of another war in Europe building in the 1930s, it became imperative for Sweden to improve its defenses. Not least important was the need for a domestic aircraft industry large enough to supply the Swedish forces with military aircraft. This led to the formation in April 1937 of the Svenska Aeroplan Aktiebolaget, abbreviated SAAB. Two years later, SAAB, with headquarters in Trollhättan, took over the aircraft division of the Aktiebolaget Svenska Jarnvagsverkstaderna, or Swedish Railroad Works, located in Linköping. SAAB subsequently transferred its corporate headquarters and construction and design departments to Linköping.

Construction was accelerated at both the Linköping and Trollhättan plants, which were building aircraft designed by Bristol, Junkers, and Northrop. During this period work proceeded on the first SAAB aircraft, the Svenska B-17 dive bomber, which made its first flight in 1940. When war came to Europe, however, Sweden declared itself neutral. As a result the country was spared from occupation by Nazi troops which had already taken control of its Scandinavian neighbors Norway and Denmark.

Plans for car production at the SAAB plant at Trollhättan started evolving as World War II neared an end, and management sought to widen the production program to meet an expected decline in military aircraft requirements. The success of small European cars in the Swedish market just prior to the war provided management with confidence that cars of the same type would also prove popular in the future, and that demand would be steady enough to ensure the success of a SAAB automobile.

A talented aircraft engineer named Gunnar Ljungström was placed in charge of the development of the SAAB auto, the first prototype of which, the 92.001, was ready by the summer of 1946. The body design, however, was neither practical nor aesthetically pleasing. A new prototype was developed with an improved external design and was designated the 92.002. First unveiled in 1947, actual production began two years later. The design of this modelwhich was known as the SAAB 92 and was initially available only in moss greenwas to characterize SAAB automobiles for the next 30 years. Streamlining helped to reduce fuel consumption and engine wear, and enabled the car to reach speeds of 60 miles per hour. Despite a number of minor shortcomings, the cars road performance was excellent, and its appearance was stylish and popular.

Improved versions of Ljungströms original design appeared throughout the 1950swith the SAAB 93 replacing the 92 in 1955and by 1955 SAAB automobiles had become the most popular in Sweden; one car left the assembly line every 27 minutes. In order to meet anticipated demand, more plant space was required, and a new factory was established at Göteborg to manufacture engines and gearboxes. New models were also developed, with the 92 model replaced in 1955 by the SAAB 93, followed by the SAAB 95 station wagon in 1959 and one year later by the SAAB 96, which went on to be the mainstay of the companys sales throughout most of the 1960s.

SAAB continued to develop a variety of aircraft, particularly military fighter jets. The first of these was introduced in 1949, and production in various forms was maintained throughout the 1950s. The SAAB aircraft division also held licenses to manufacture foreign-designed aircraft and produce aircraft components for foreign manufacturers.

As early as 1953 SAAB management started exploring the possibility of selling cars in the United States, but hesitated to enter that market until 1956, when a more promising atmosphere had developed. Using New York City as a base of operations, a U.S. subsidiary called SAAB Motors Inc. was created to import SAAB automobiles, and a depot was established near Boston to receive cars and store spare parts. It was a modest beginning for a small foreign company in the worlds largest automobile market, and growth was difficult and slow.

During the 1960s the scope of SAABs operations expanded from automobiles and aircraft into satellites, missiles, and energy systems. On May 19, 1965, as its business continued to grow, the company changed its name to Saab Aktiebolag (the acronym had become so popular as to warrant the elimination of the old name). Over the next four years, officials of Saab and Scania-Vabis began to investigate the viability of operating as a single corporation. In the meantime, Saab introduced its first completely new model since the 92 when it began production of the larger Saab 99 in the fall of 1968.

Saab-Scania Era: 196989

Saab and Scania-Vabis merged their operations during 1969, and absorbed two other military contractors, Malmo Flygindustri and Nordarmatur. All automotive operations of the new Saab-Scania AB were centered at the facility in Södertälje, with production continuing in Trollhätten, while the aircraft division headquarters, which produced the JAS-35 Draken and JAS-37 Viggen fighter jets, remained at Linköping. Also in 1969, SaabScania, in cooperation with the Finnish company Valmet Oy, established an automobile factory at Uusikaupunki, Finland. In 1972 Saab-Scanias automotive division was divided into the Saab Car Division, which concentrated on passenger cars, and the Scania Division, focused on trucks. That year the Saab 99 was named Car of the Year in Sweden. By this time the 99 offered several innovative features, including headlight wipers and washers, electrically heated drivers seat, self-repairing five-m.p.h. bumpers, and side-impact door beams.

Saab decided to focus its efforts on competing for a significantly larger share of the U.S. automobile market, the main goal being to define its cars as a better choice than those offered by BMW, Mercedes-Benz, and Volvo. These cars had been highly successful with more affluent American consumers. The expanded marketing campaign produced few results over the first half of the decade, but by 1978 began to pay off handsomely. The companys sales increased by 19 percent in the United States and by 17 percent in Scandinavia. That year saw the launch of the upscale Saab 900, which was based on the 99 platform but featured a longer wheelbase, a longer body, a new front, and an all-new interior. Offered initially in three- and five-door hatchback models, a four-door sedan version was introduced in 1980. Innovations with the 900 series included a cabin ventilation air filter (1978), asbestos-free brakes (1982), and the first turbocharged engine featuring 16 valvesfour per cylinder (1984). Production of the Saab 96 ended in January 1980, concluding the 30-year history of the 92-93-95-96 familywith overall production of more than 730,000 cars. The Saab 99 remained in production until 1984, at which point nearly 590,000 of the model had been built.

The Saab 9000, built on a new large-car platform, was introduced in 1984 and was only the third all-new model in Saab history. The car had a luxury four-door sedan profile but offered the practicality of a hatchback. The 9000 proved to be popular but problems related to retooling production plants thwarted a planned expansion of production capacity by ten percent during 1985. Arriving on the scene in 1986 was the Saab 900 convertible. Drivers side airbags were introduced in 1988.

Company Perspectives:

Saab Automobile is an international automobile company with its traditions firmly established in Sweden. Our background as an aircraft manufacturer has given us the broad-based foundation of technical expertise and innovative concepts which characterise the company just as much now as they did when it was originally established more than 50 years ago. This is precisely what typifies us in our role as car manufacturerswe never follow traditions simply for the sake of it but always search for methods and approaches in which we can believe. New approaches to develop our cars and our organisation, by leaving plenty of scope for our employees creative ability. The results speak for themselves. Saab Automobile has always been at the leading edge when it comes to design, performance and safety. Our history is full of technical innovations which are now standard in the majority of carsand we are planning to continue along the same lines.

Saab Automobile is a dynamic company which always makes human beings the focus of attention. This applies to everything from the way we design our cars to how we take care of our staff and deal with our customers. It is one of the reasons why the Saab will always be far more than an exclusive car. A Saab will also be synonymous with a powerful personality.

In the late 1980s, Georg Karnsund, Saab-Scanias president, placed greater emphasis on marketing programs in Europe, particularly in France and Italy, as well as in Australia and Japan. Karnsund believed that Saabs ability to develop advanced technology would give its cars a distinct advantage in increasingly competitive international markets.

1990s: The Joint Venture Decade

The 1990s began with the conclusion of a pivotal deal whereby Saab-Scania ceded half of its Saab automobile division to General Motors Corporation. Prior to the consummation of the 50-50 joint venture with Saab-Scania, General Motors (GM) had sought to acquire Jaguar Cars Ltd., a British manufacturer of luxury cars, but in November 1989 the U.S. car maker was beaten to the prize by rival Ford Motor Company. Still in the mood to acquire, and seeking to increase its presence in the European luxury car market, GM announced its joint venture with Saab-Scania the following month. The deal was completed in early 1990, with GM paying US$600 million to gain 50 percent interest in the prestigious yet troubled car maker, which was reorganized as Saab Automobile AB.

By the late 1980s, the Saab division had become a perennial financial loser, crippled by declining sales in the United States, the companys largest single market for car sales. The affiliation with General Motors was expected to ameliorate Saabs position overseas, but at home, larger, more formidable obstacles faced the company and its enormously powerful part-owner, Peter Wallenberg. In addition to holding a controlling interest in Saab-Scania, Wallenberg maintained sizable investments in many other large Swedish companies, including appliance maker Electrolux Corporation and L.M. Ericsson, Swedens largest communications company. Wallenbergs empire accounted for a third of Swedens US$165 billion economya much-coveted portfolio when the countrys economy was robust, but a financial nightmare when economic conditions soured as they did entering the 1990s. To make Wallenbergs position more precarious, by 1990 Sweden was prepared to join the European Community, which would force the country to drop its protective economic barriers. These barriers had insulated Wallenberg against foreign corporate raiders and thus enabled him to control companies that represented US$55 billion in market value with only US$5 billion in equity.

Fearing a hostile takeover, Wallenberg increased his ownership of Saab-Scania in 1990 from 36 percent to 58 percent, then initiated the largest leveraged buyout in Swedish history the following yearpurchasing, through his holding company Investor AB, all of Saab-Scania for US$2.3 billionafter learning that outside investors were planning to acquire ten percent of the companys stock. Saab Automobile thereby became 50-50 owned by Investor and GM. Against the backdrop of Wallenbergs strategic maneuvers, Saab Automobile continued to lose money, recording a loss of US$848 million in 1990, which translated into an alarming US$9,200 loss for each car sold. Meantime, Saabs history of innovation continued, when it became the first automaker to offer CFC-free air conditioning systems in 1991.

By 1992, it appeared that Saab Automobile was destined for a more profitable future, thanks in large part to the assistance of General Motors management, who greatly improved the segments manufacturing efficiency. When GM management arrived at Saab in 1990, it took 100 hours to produce a single car, but by 1992 the hours required per car had been whittled down to 50 or 60 hours, cutting in half the production quota required to generate a profit. Although Investor and General Motors needed to effect further improvements to spark a complete resurgence of Saab automobiles, progress was being made. The introduction of an all-new Saab 900 in mid-1993 fueled hopes for a recovery of Saabs U.S. sales, a necessary ingredient in Saabs revitalization. Available first in a five-door sedan, then in three-door coupe and convertible models, the 900 helped Saab Automobile post in 1994 its first profit of its joint venture era. Production of the 900 nearly doubled between 1993 and 1996, with units built increasing from about 33,600 to more than 62,400. Sales of the 900 suffered, however, because of early quality problems and negative press coverage.

Key Dates:

1937:
Svenska Aeroplan Aktiebolaget (SAAB) is formed to build military aircraft.
1939:
Company acquires aircraft division of the Swedish Railroad Works, located in Linköping, where the companys headquarters are relocated.
1949:
Production begins on the companys first car model, the SAAB 92.
1956:
SAAB Motors Inc. is formed as a U.S. sales subsidiary.
1965:
Company changes its name to Saab Aktiebolag.
1968:
Production of the Saab 99 begins.
1969:
Saab merges with Scania-Vabis to form Saab-Scania AB.
1978:
Production of the Saab 900 begins.
1984:
Production of the larger format Saab 9000 starts.
1990:
General Motors purchases 50 percent interest in Saab car division, which is reorganized as Saab Automobile AB, a 50-50 joint venture of GM and Saab-S cania.
1991:
Investor AB completes leveraged buyout of Saab-Scania, thereby becoming a joint owner of Saab Automobile.
1993:
All-new Saab 900 is launched.
1996:
Robert W. Hendry, a top GM executive, is named president and CEO of Saab.
1997:
The Saab 9-5 series is launched with a sedan model.
1998:
The Saab 9-3 series debuts with two-door, five-door, and convertible models; the Saab 9-5 station wagon makes its debut.

Saab began backsliding into the red in 1995 and 1996 buffeted by high marketing and product development costs as well as downward pressure on prices. In August 1996 GM sent one of its top executives, Robert W. Hendry, to Sweden to take on the position of president and CEO of Saab. Two months earlier GM and Investor agreed to pump another SKr 3.48 billion (US$524 million) into the troubled automaker to help it through a five-year recovery period. During this time, Saab planned to replace the 9000 and 900 models with two new lines. It also needed to sell a higher volume of the new modelsoverall sales of 150,000 cars per yearto return to profitability, and to do so it needed to move its image more into the mainstream. Saab was almost invariably referred to as a quirky carmaker and it had long aimed its advertising at driving enthusiasts. With its new models, Saab aimed to emphasize the uniqueness and quality of its products rather than the eccentricity of its customers.

The Saab 9-5, the larger of the two new lines and a replacement for the 9000, debuted in 1997 with a luxury sedan model. A 9-5 station wagon followed the next year. Also in 1998 came the debut of the Saab 9-3 series, which replaced the 900 series and included two-door, five-door hatchback, and convertible models. The new models were slowly increasing Saabs overall sales, with 98,036 cars sold in 1996, 100,275 the following year, and 118,581 in 1998, but losses deepened to SKr 1.91 billion (US$240.8 million) in 1997 before improving to SKr 620 million (US$76.5 million) in 1998.

The year 1999 had the makings of a turnaround year for Saab Automobile as the company was projecting a return to profitability, a further increase in worldwide sales to between 130,000 and 140,000 units, and expected sales in the United States (the companys largest market) of about 40,000, a substantial increase over the 28,253 of 1996. Further ownership changes were also a looming possibility in late 1999 or early 2000. General Motors had an option to acquire Investors stake in Saab and make the Swedish carmaker a wholly owned GM subsidiary. Should GM not exercise this option, Investor had the right to force GM to buy half of its 50 percent stake in the spring of 2000. It seemed likely that General Motors would in fact acquire Saab outright. Saab retained a solid brand reputation, and as a member of the GM family would be positioned to take full advantage of the auto giants strategy of shared global platforms and its worldwide purchasing network. GM would also be able to help Saab develop the wider product line it needed to further boost sales; plans were already being laid for the replacement of the 9-3 series in 2002 or 2003 and a Saab sport-utility vehicle was also under consideration.

Principal Subsidiaries

Saab Opel Sverige AB; Saab Cars Holdings Corp. (U.S.A.); Saab Great Britain Ltd.; Saab Deutschland GmbH (Germany); Saab Norge A/S (Norway); Saab Automobile Australia Pty Ltd; Saab France S.A.; Saab-Ana Finans AB; Saab Denmark A/S; Saab Japan Inc; Saab Canada Inc.; Saab Automobile In-vestering AB; Saab Automobile Schweiz AG (Switzerland); Saab Korea.

Principal Competitors

Bayerische Motoren Werke AG; DaimlerChrysler AG; Fiat S.p.A.; Ford Motor Company; Honda Motor Co., Ltd.; Hyundai Motor Company; Mazda Motor Corporation; Mitsubishi Motors Corporation; Nissan Motor Co., Ltd.; PSA Peugeot Citroen S.A.; Renault S.A.; Toyota Motor Corporation; Volkswagen AB.

Further Reading

Birch, Stuart, ... And in the Beginning, Automotive Engineering, September 1, 1997, p. 14.

Burt, Tim, Hope for GMs Saab Saga: Board Says Swedish Car Maker Will Report Profit in 1999 After Years of Painful Restructuring, Financial Times, September 14, 1998, p. 26.

,Saab Eyes Common Platform, Financial Times, December 21, 1998, p. 21.

, Saab Set for Further SKrlbn Investment, Financial Times, May 22, 1998, p. 27.

Carnegy, Hugh, Battles for Survival Continue: Volvo and Saab See Sales Dip As Development Costs Continue to Rise, Financial Times, March 6, 1997.

Dawley, Heidi, Saab: Why GM Sent in Its Ace Mechanic, Business Week, September 2, 1996, p. 55.

Dymock, Eric, Saab: Half a Century of Achievement, 19471997, Newbury Park, Calif.: Haynes North America, 1997, 192 p.

Feast, Richard, Jaguar and Saab: Bullish on America; Ford and GM Patiently Groom Their Latest European Acquisitions for the Long Haul, Automotive Industries, May 1991, p. 14.

Flint, Jerry, Europe to the Rescue, Forbes, February 3, 1992, p. 19.

Gardner, Greg, Will GM Saternize Saab?, Wards Auto World, August 1996, p. 37.

Henry, Jim, Saab Scrambling to Meet Lofty Sales Goals, Automotive News, November 11, 1996, p. 6.

Hökerberg, Jan, Spelet om Saab: en biltillverkares uppgång, fall och väg tillbaka, [Stockholm]: Bonnier Alba, 1992, 353 p.

Johnson, Richard, Europeans Pinched, but Most Are Profitable in Market Dip, Automotive News, May 27, 1991, p. 2.

Kapstein, Jonathan, Fortress Wallenberg Is Showing Some Cracks, Business Week, December 10, 1990, p. 45.

, Wallenburgs New Walls, Business Week, March 11, 1991, p. 46.

Kurylko, Diana T., GM Global Platform Is Key to Saabs Future Products, Automotive News, November 8, 1999, p. 24L.

, New Saab Boss Focuses on Europe, Automotive News, November 8, 1999, p. 24L.

, Profit in Sweden on the Horizon, Automotive News, May 16, 1994.

Miller, Scott, Saab Has Plans to Widen Its Model Line and Double Output Within Five Years, Wall Street Journal, November 18, 1999, p. A21.

Saab Rallied Round a Mountain to Earn Attention in U.S., Automotive News, April 24, 1996, p. 70.

Saab Taking a Gamble with 9-5 Saloon, Financial Times, August 7, 1997, p. 26.

Sandell, Kaj, and Bo Streiffert, Scania 100 år, 18911991: ett sekel industri- och fordonshistoria, Södertälje: Saab-Scania, Scaniadivisionen, 1990, 264 p.

Templeman, John, Saab: Halfway Through a U-Turn, Business Week, April 27, 1992, p. 121.

Washington, Frank S., Saab Counts on Image Make-Over to Attract Older, Luxury Buyers, Automotive News, March 10, 1997, p. 23.

Wielgat, Andrea, Future Still Uncertain but Looking Up for Saab, Wards Auto World, October 1999, p. 45.

Wright, Chris, Saab Looks for Boost from 9-5 Station Wagon, Automotive News Europe, December 7, 1998, p. 18.

Jeffrey L. Covell

updated by David E. Salamie

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Saab Automobile AB

Saab Automobile AB

founded: incorporated in 1947



Contact Information:

headquarters: s-46180 trollhattan, sweden phone: (46)520-85000 fax: (46)520-35016 url: http://www.saab.com

OVERVIEW

Saab Automobile AB celebrated its 50th anniversary of automobile production in 1997, facing enormous challenges in an increasingly competitive import luxury car market. Founded by SAAB (Svenska Aeroplan Aktiebolaget), one of the oldest automotive and aeronautics manufacturers in the world, Saab Automobile began design and production of automobiles in 1947 with marked success. From the start the company concentrated on high performance, technological innovation, and a distinctive appearance. With the entry of new upscale European cars on the market in the mid-1980s, Saab began losing money. In 1990 General Motors Corporation (GM) purchased half of the floundering Saab Automobile for approximately $500 million; the other half of the company was owned by Swedish holding company Investor AB.

To survive in the highly competitive upscale import car market, Saab began to implement new strategies including improving factory productivity and quality, updating classic car models and developing new models, reviving its image through improved marketing and innovative advertising, and rebuilding its crumbling dealer network. Saab Automobile hoped these efforts would return it to earlier days of prosperity when it had earned a highly distinguished reputation.




COMPANY FINANCES

Saab Automobile sells its cars to young, well-educated, well-paid professionals. A typical Saab consumer is 45 years old (younger than the average purchaser of any other luxury automobile) and, on average, earns $100,000 a year. Eighty-two percent of Saab customers are college-educated and more than 50 percent have at least a master's degree.

In 1996 Saab's sales totaled almost $3 billion, an increase of 1.4 percent over the previous year, and Saab's net income reached $35.4 million. European sales accounted for 64 percent of Saab's total sales that year, while American sales reached 29 percent. Saab sold fewer than 100,000 cars in 1996—just 95,406 worldwide, down from 97,437 in 1995. For all of 1996, Saab lost $154 million, which the company blamed largely on marketing costs. More than 28,000 of the automobiles Saab sold that year were sold in the United States, an increase of 11 percent from 1995. For the first half of 1997, Saab had a pretax loss of $74.5 million, down further from a loss of $53.0 million for the same period the previous year. The United States is Saab Automobile's largest single retail sales market. In the United States, the company sold 28,450 cars, about 28 percent of its worldwide total, in 1997. Saab Automobile spokesman Olle Axellson said Saab expected sales "to exceed 100,000 cars in 1997" and, indeed, that year Saab sold 100,300 automobiles worldwide. By the year 2000 Saab aims to increase worldwide sales 50 percent, to 150,000 cars.



ANALYSTS' OPINIONS

Many critics have noted that without GM's backing, Saab Automobile would likely have gone under. Even with its introduction of the 9-5 model, one of the two models in its new 9-series that will eventually replace the 900 and 9000 models, skeptics have claimed that Saab still won't have much product to sell, given its current phasing out of the 9000. Analysts have agreed that Saab needs more than two models to be truly competitive. Nigel Griffiths, European auto analyst at DRI/McGraw-Hill, has claimed that reaching the number of retail sales necessary for Saab to make a profit is "just not going to happen with a two-line range." While some have taken an even dimmer view, referring to Saab Automobile as GM's "pig in the poke," Karl Ludvigsen, chairman of London-based Ludvigsen Associates Ltd., has stated that "for the money, GM acquired a valuable property." Most agree that the success of Saab's 9-5 luxury sedan, the model intended to replace the 9000, could be critical to the future of Saab Automobile. GM executive vice president and president of International Operations Louis R. Hughes has claimed that if the 9-5 model were to fail "then the future of the company is really dark indeed. But if it is successful, it completely turns the company around." For this reason, Den Danske Bank analyst Hans Westerberg has said, "I am surprised that [Saab is] not making more of the introduction." Still, within a few days of its launch of the 9-5 in September 1997, Saab claimed it received orders for 15,000 9-5 cars, which made this the company's most successful launch ever.

FAST FACTS: About Saab Automobile AB


Ownership: Saab Automobile AB is a joint venture owned equally by Swedish holding company Investor AB and General Motors Corporation.

Officers: Robert W. Hendry, Pres. & CEO, 54; Joel K. Manby, Pres. & CEO, Saab Cars USA, 39; Frederick Stickel, VP Finance & Legal, 53

Employees: 8,549

Principal Subsidiary Companies: Saab Automobile AB's subsidiaries include: Saab Opel Sverige AB; Saab Cars Holdings Corp. (USA); Saab Great Britain Ltd.; Saab Deutschland GmbH (Germany); Saab Norge A/S (Norway); Saab France S.A.; and Saab-Ana Finans AB.

Chief Competitors: Saab Automobile competes with other sporty and luxury import car manufacturers, especially those promoting safety, fine engineering, and excellent quality in their models. Noteworthy among these are: AB Volvo; Bayerische Motoren Werke AG, maker of BMW automobiles; Honda Motor Company Ltd., manufacturer of Acura automobiles; Nissan Motor Company Ltd., maker of Infiniti automobiles; Toyota Motor Corporation, producer of Lexus automobiles; and Volkswagen Group, majority owner of Audi AG, manufacturer of Audi automobiles.




HISTORY

Saab Automobile AB descended from a line of judicious mergers. Its original parent company was SaabScania AB, born in 1969 as a merger of Saab Aktiebolag and Scania-Vabis, the latter of these a 1911 merger of early Swedish automobile company Scania and railroad car and automobile maker Vabis. Saab Aktiebolag began as "SAAB," an acronym for "Svenska Aeroplan AktieBolaget," Swedish for "Swedish Aircraft Company." This was 1937 and as the threat of another European war loomed large, Sweden found itself lacking defenses to protect its neutral status and in need of a domestic aircraft industry that could supply its forces with military planes and so, in April of that year, SAAB was formed. With plants in Linkoping and Trollhattan, SAAB began working on the Svenska B-17 dive bomber, which had its first flight in 1940. As World War II and, consequently, Sweden's need for military aircraft neared an end, SAAB began to develop plans to manufacture commercial automobiles. Just prior to World War II, small European cars had enjoyed a popularity in Sweden that SAAB now hoped to capitalize on. After a prototype of the first SAAB automobile was shelved in 1947, the company introduced a stylish, streamlined, high-performance model, the 92002, designed to reflect the aerodynamic shape of an airplane wing. This design model would characterize SAAB automobiles for the next 30 years. During this time, SAAB continued making airplanes, introducing its first military fighter jet in 1949.

In 1950 SAAB entered its model 92002 automobile in the Swedish National Trophy Rally and it took first place in both the men's and women's classes. Throughout the decade SAAB continued improving its original automobile design, replacing the two-cylinder, two-stroke, 25-horse power engine with a three cylinder, two-stroke engine with an output of 33-horse power. By 1955 SAAB had become the most popular car in Sweden. The following year SAAB created an American subsidiary, later called Saab Cars USA, Inc., to introduce SAAB automobiles to the world's largest automobile market. Also in 1956 SAAB entered three model 93 automobiles in the Great American Road Rally, a 1,500-mile race over snow-covered roads in the northeastern United States, and one of the SAABs finished as the overall winner. Because it was a small, foreign competitor in the enormous U.S. market, in spite of the attention generated by this win, SAAB's sales were initially slow. At the end of the 1950s SAAB introduced its model 95 station wagon featuring a new four-speed transmission. (Early ads depicted the model as "a car that doubles as a bed.") During the 1960s SAAB models continued to win Swedish and international road rallies, including two consecutive Monte Carlo rallies, and in 1966 SAAB introduced its elegant two-seater sports car, the Sonnett II. This model was an updated version of the 1956 SAAB Sonnett Super Sport, an uncomfortable, noisy, rough-riding roadster originally planned as a rally competitor. Through the 1960s SAAB extended its concerns beyond cars and aircraft into the areas of satellites, missiles, and training and energy systems. In mid-1965 SAAB changed its name to Saab Aktiebolag ("SAAB" was no longer treated as an acronym), and it began discussing a merger with automotive company Scania-Vabis.

Scania-Vabis began in 1911 as a merger of the Scania and Vabis companies, two early Swedish vehicle manufacturers. Scania could trace its roots to the English bicycle manufacturer Humber who built a factory in Malmo, Sweden, in the early 1890s. Within the decade, Swedish interests purchased the plant, called it "Masinfabriks AB Scania," and initially used it to produce vacuum cleaners, paper machines, and bicycles, including a motorized bicycle with a gasoline-powered engine. In 1900 Scania incorporated and the following year, it began to focus on manufacturing automobiles. By 1903 Scania produced three models of cars considered extremely advanced for their time. In 1911 Scania merged with Vagnfabriks Aktie Bolaget in Sodertalje, known as "Vabis." Established in 1891 as a railroad car manufacturer, in 1897 Vabis built the first Swedish automobile, an experimental kerosine-powered, 9-horse power model. Scania-Vabis, as the new company was called, began concentrating on manufacturing buses and large trucks, and by 1925 it ceased making automobiles entirely. In 1936 Scania-Vabis introduced its first diesel engine, and for the next three decades, it continued making heavy vehicles.

CHRONOLOGY: Key Dates for Saab Automobile AB


1937:

Svenska Aeroplan AktieBolaget (SAAB) is established

1947:

The first SAAB prototype car is shelved, and the company focuses on stylish high-performance cars

1956:

SAAB opens a subsidiary in the United States

1965:

Svenska Aeroplan becomes Saab AktieBolaget

1969:

Saab and Scania-Vabis merge to form SaabScania AB

1980:

Saab-Scania develops a line of Scania trucks for the American market

1986:

U.S. sales of Saab cars hits its peak

1989:

General Motors buys 50 percent of Saab's automobile division

1990:

Saab Automobile becomes a private company with no ties to Saab-Scania

1995:

Saab launches its first U.S. national ad campaign




In 1969 in one of the largest commercial deals ever negotiated in Sweden, Saab Aktiebolag and Scania-Vabis merged to form Saab-Scania Aktiebolag, otherwise known as "Saab-Scania AB," officially registered in June 1970. During the 1970s, in an effort to gain more of the U.S. automobile market, the company expanded its marketing campaign and attempted to distinguish itself from foreign cars already successful with prosperous Americans, like those made by BMW, Mercedes-Benz, and Volvo. By the end of the decade Saab-Scania's U.S. automobile sales had increased by 19 percent. In 1980, using an innovative method of modular construction, SaabScania developed and produced a line of Scania trucks that became exceedingly popular in the United States. In 1984 Saab produced a redesigned line of cars in its 9000 series, which also became very popular.

In 1987 Saab-Scania's public relations department sent small Saab-shaped boxes of 48 Godiva chocolates to journalists to commemorate 48 consecutive months of Saab's U.S. sales increases. It would turn out that Saab's U.S. sales peaked in 1986 at 48,181; within seven years, sales would sink to a low of 18,783. With a narrow product line; limited research, development, and marketing funds; and uneven product quality, Saab-Scania's automobile division was establishing itself as a chronic loser, and by the end of the decade, it was in deep trouble. Meanwhile, in the late 1980s automobile giant General Motors Corporation (GM) was seeking to purchase British carmaker Jaguar Cars Ltd. but was outbid by rival Ford Motor Company in 1989. By year's end, GM won the right to purchase 50 percent of Saab-Scania's automobile division and, in 1990 it paid about $500 million for it. The other half of that joint venture was held by Investor AB, Sweden's largest holding company. Thus, in 1990 Saab Automobile AB became a privately owned company, completely independent of SaabScania AB, although it would continue to use the SaabScania badge. With much support from GM by way of strategy, leadership, and financial investment—including GM's tremendous purchasing power—Saab Automobile faced the end of the century with great hope of making a comeback in the European luxury automobile market.




STRATEGY

Early on, as distinct companies, SAAB and Scania both stood out as innovators, introducing original and advanced designs and technologies. For example, Scania's 1903 automobiles were remarkably modern, featuring track-rod steering systems and central chassis lubrication (the rear seat of Scania's Model A could even be converted into a loading platform). In 1947, many years before the technology came in style, SAAB's first automobiles featured front-wheel drive and a transverse mounted engine. From the start the SAAB 92 was designed for easy conversion into a "sleeper," comfortably accommodating two adults. (About 10 years later the SAAB 95 would also be distinguished by this unusual design feature.) In 1951 Scania-Vabis introduced a turbo-charged diesel engine. After the companies merged in 1969, Saab-Scania continued developing innovative technologies, including headlight washer/wipers in 1970; impact-absorbing, self-repairing bumpers and electrically heated seats in 1971; side-impact door beams in 1972; and a variable-boost turbocharger, the first integrated into a mass-produced family-type car, in 1976. In the 1980s Saab-Scania's President Georg Karsund focused marketing and sales efforts on Europe, Australia, and Japan, while continuing to emphasize Saab's ability to develop advanced technology, believing this enduring trait would give its automobiles a real advantage in the increasingly competitive international markets. The Saab automobile has often been called the "car for iconoclasts" and Saab owners are famous for their love of the car's quirkiness, down to its unusual on-the-floor-and-in-between-the-seats ignition placement.

Saab Automobile has capitalized on its car's image with a series of unusual marketing strategies: in the spring of 1997, the year of the carmaker's fiftieth anniversary, Saab offered a flight for two to Europe for any 1997 Saab purchased through Saab's European Delivery program. (The offer was again in effect in 1998.) In July 1997, Saab hosted a long weekend trip to Sweden for 200 of its U.S. customers. Saab's fiftieth anniversary year was also a perfect time for the company to introduce a model from its new 9-series, the 9-5 (pronounced "nine five" not "ninety five"), a luxury sedan intended to replace the 9000 hatchback model. Unveiled in Europe in September 1997, the Saab 9-5 would not be introduced to the United States until early 1998.

NO SAABING IN THEIR BEER

Intent on proving the reliability of their cars, Saab sent six of its Saab 900s rocketing around the Talladega, Alabama, speedway for eight days in October 1996. Other than safety modifications and sealing the engines and transmissions to ensure the integrity of the tests, all of the cars were completely standard, and the test was supervised by American NASCAR officials. The cars were driven by 120 journalists from all over the world, with some Saab employees taking their turn around the track as well. By the time the test was over, the Saabs had covered over 25,000 miles at an average speed of over 120 mph. Aside from stopping for things like oil changes, the cars had no mechanical problems, and within the first 24 hours some 33 international records for standard production cars had been broken.




Finally, Saab turned its attention to its ailing dealership network. In 1997 all but 20 percent of Saab's 285 U.S. dealerships were paired with other nameplates. Saab wanted to increase the stand-alone figure to 80 percent by the end of the decade since stand-alone dealerships sold more cars than those selling Saab alongside other brands. It planned to do so by cutting the number of dealerships by 15 percent and giving each remaining dealer a larger geographic area, thereby easing competition between retailers, cutting distribution costs, and increasing profits. For example, in early 1998 Saab acquired and turned over to a single dealer the three Saab franchises that served Orange County and Long Beach in California. Moreover, Saab planned to utilize a more personal touch with customers. The company was considering adopting Saturn's "no-haggle" pricing, establishing "Vision Teams" that would focus on each key encounter between a prospective client and a Saab employee, and implementing a test drive program of the kind used by Lexus in which low-pressure representatives would meet prospective clients at a location of their choosing to introduce the client to the car.




INFLUENCES

As the luxury car market grew during the 1980s, Saab-Scania's automobile division became crippled by diminishing sales in the United States, the largest market for its cars. At the end of the decade, when General Motors acquired 50 percent of Saab Automobile AB, it brought hope for resuscitation to the ailing car company. There was much to recover from: the early 1990s saw the Swedish kronor falling against the German mark, forcing Saab Automobile to pay more for its German parts, while the U.S. dollar fell against the Swedish kronor. In 1987 a dollar was worth more than nine Swedish kronor. By 1992, the dollar bought just six kronor, which would translate directly into a 50 percent U.S. sticker-price increase on Saab automobiles in five years. In 1989, to make a profit, Saab Automobile would have had to produce 200,000 cars a year, which it did not do. In 1990, Saab recorded a loss of $848 million, a staggering $9,200 lost on each car sold. Moreover, Saab's 20-year-old 900 series seemed narrow and outdated and, in 1991, it took 98 hours to build just one of them.

General Motors assumed responsibility for Saab Automobile's management immediately and began addressing these concerns by trimming costs and investing much money and energy into its new company. From 1990 to 1996 Saab closed two factories, sold two others, and cut its workforce in half to 8,000. By 1991 Saab's pretax losses were reduced to $370 million, down from $770 million in 1990, and Saab was now in the position of being able to make a profit producing only 100,000 cars a year, half of what it needed just prior to General Motors' purchase. Still, the company continued to lose money. In July of 1993, Saab introduced a new, updated 900 model, something it would not have been able to do without GM backing. While retaining elements of its distinctive exterior, the new 900 shared its mechanical insides with the Opel Calibra, sold by GM's German subsidiary, which allowed Saab to keep its costs down and, in 1994, to record its first full-year profit since 1988. By 1995, it took just 35 hours to produce a Saab automobile. Finally, Saab began a serious attempt to market its cars against those of large, more wealthy luxury cars, like Acura, BMW, Infiniti, and Volvo.




CURRENT TRENDS

Although Saab Automobile reported profits in both 1994 (just $80 million) and 1995 (a mere $5 million), in 1996, it began slipping back into the red, reporting a $53 million loss for the first half of the year. By year's end, Saab would see a loss of $154 million, erasing the only profits GM earned from Saab since acquiring half of it in 1990. Saab executives now reported that sales would have to rise to 150,000 vehicles annually to cover new model investments. In early June 1996, Joel Manby, a Midwest regional manager for General Motor's Saturn division, was named president and chief executive officer of Saab Automobile's U.S. division, Saab Cars USA, Inc. GM's Saturn subsidiary had become known for its personal and pampering service, which generated a cult-like enthusiasm among its customers, and Manby was one of the key marketing strategists behind this formula. General Motors then appointed another former Saturn executive, John Orth, as vice president of Sales and Marketing for Saab's U.S. division. A week after the Manby appointment, General Motors announced that Robert Hendry, a GM vice president and one of the most powerful executives in GM's North American automotive unit, would replace Keith Butler-Wheelhouse as Saab Automobile's chief executive officer. Before the end of June, Investor AB made two concessions to GM: first, it agreed to join GM in investing $262 million, for a joint total of $524 million, into Saab Automobile; second, it gave GM the option to buy the remaining shares of Saab by the year 2000.

With its new Saturn-influenced U.S. management, Saab continued to concentrate on advertising and marketing, attempting to clearly define itself for American consumers as the exhilarating and fun car for individualists—or what Manby called "a synthesis of performance and safety." Saab's first real national U.S. advertising campaign, called "Find Your Own Road," was begun in 1995 and featured an animated series by artist Jean Phillippe Delhomme. Saab more than doubled its advertising budget that year, increasing it to about $32 million and then further increasing it to $62 million in 1996. This outlay would still seem puny compared with the lavish expenditures of its luxury import competitors, which routinely top $100 million. The initial results of the campaign seemed impressive, though, with Saab gaining 30 percent in brand awareness. Still, in 1996 Saab lost $154 million and, for the first half of 1997, Saab reported a loss of $74.5 million. Manby attributed the loss to unfavorable exchange rates and increased investment expenditures and claimed, "If you subtracted the investment money, we'd be at break-even and not far from profitability." Manby also stated that he regarded 1997 and 1998 as investment years during which time the company could anticipate further loss.



PRODUCTS

Saab introduced the first in its new 9-series, the 9-5, in 1997 at the IAA Frankfurt Motor Show in Germany. The 9-5 is a luxury/sports sedan featuring a new safety design: it is fitted with an active head restraint that unfolds in a crash to minimize whiplash, similar to a catcher's mitt cushioning the impact of a baseball. GM kept production costs of the new model down by using the Opel Vectra platform, the same one its Saturn division would use to launch its 1999 Innovate sedan. In early 1998 Saab unveiled its 9-3 design in the United States. The 9-3 line, which includes a coupe, a five-door, and a convertible design, went on sale in the United States on May 1, 1998. In the long-run, Saab hopes to accelerate its product cycle, bringing out new models every 6 years, instead of every 15 to 20 years, which has been its pattern in the past.



GLOBAL PRESENCE

In 1996 worldwide retail sales for passenger cars totaled 36 million. Saab Automobile's worldwide sales reached just 95,406 cars. The company's biggest market by far is the United States, which accounted for about 29 percent of its total sales in 1996. The United Kingdom and Sweden typically vie for second and third place, each providing about 18 percent of Saab's annual sales. Although in the 1980s Saab focused much effort on trying to capture foreign markets like Japan and Australia, other luxury car makers were becoming much more competitive, securing greater shares of the U.S. luxury import car market. The Japanese automakers Toyota, Honda, and Nissan have won much of the U.S. luxury import market with their Lexus, Acura, and Infiniti models. By the late 1990s Volvo was hurrying to broaden its model range and BMW and Mercedes-Benz were developing aggressive new-product plans. Meantime, the Japanese car-makers were becoming much more cost competitive. In 1997 Saab automobile sales accounted for only 0.2 percent of the U.S. market. All of this suggests that Saab Automobile's chances for successfully winning the share of the U.S. market necessary for its survival are dim.




SOURCES OF INFORMATION

Bibliography

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For an annual report:

write: saab cars usa, inc., corporate communications, 4405-a saab dr., po box 9000, norcross, ga 30091

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. saab automobile ab's primary sics are:

3711 motor vehicles and car bodies

3714 motor vehicle parts and accessories

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