Why GM’s Reinvention of Saab Failed
Believe it or not, Saab still exists. The once-proud automaker with its reputation for building some of the most unique and innovative cars in the world now lies in a state of bureaucratic life support, a victim of half a decade’s worth of money woes, failed ownerships and a succession of bankruptcy proceedings. It’s not currently making cars, nor is it really a Swedish company anymore. It was owned by an investment group called National Electric Vehicle Sweden — a Hong Kong-based company registered in the British Virgin Islands, which itself is going through bankruptcy proceedings — and has recently sold its intellectual property to, of all entities, the country of Turkey. A car hasn’t rolled off Saab’s Trollhättan, Sweden assembly lines since early 2014, and with each passing day, it seems less likely that they ever will again.
Like a good noir film, the beginning of the end for Saab can be traced back long before its final day. In 1989, General Motors bought a 50% stake in the newly-formed Saab Automobile AB for $600 million. At the time, the deal looked like a can’t-miss success for both companies. General Motors gained a foothold into the competitive European luxury car market, and Saab benefitted from GM’s massive global dealer and supply chain. Included in the contract was an option for GM to buy the remaining 50% from parent company Saab AB for $125 million after 10 years, which they exercised in 2000, turning Saab into a wholly-owned GM subsidiary. By the time GM jettisoned Saab during their bankruptcy proceedings in 2010, the company had gone from one of the most exciting and unique automakers in the world to a husk of its former self.
Saab’s “Born From Jets” ad campaigns had more than a grain of truth to them. The company formed in 1937 as a builder of planes for the Swedish Air Force. In 1945, they began designing a small car that could handle Sweden’s harsh weather and rugged terrain. An automotive wing was officially created in 1947, and the company launched the Saab 92 in 1949. The car was powered by a two-cylinder two stroke engine, and its streamlined, aerodynamic body made it one of the most aerodynamic cars ever produced. By 1960, the tear-drop shaped car had evolved into the iconic Saab 96, which sold over 500,000 cars during its 20 year production run. The 96 was a the first Saab to find success in America, where it developed a cult following for its distinctive looks and engineering quirks.
In 1969, Saab introduced the 99, a groundbreaking car that transformed the company and established the styling language that would define every Saab model that followed it. While the 96 still carried much of the original 92’s engineering from the 1940s, the 99 was a thoroughly modern car. With features like a steep wraparound windshield, ignition mounted on the transmission tunnel and “back to front” mounted engine, it highlighted the company’s outside-the-box approach to engineering, and its slab-sided yet aerodynamic wedge shape was one of the most unique designs of the era.
The 99 was a strong success for the company well into the 1970s. With the introduction of the groundbreaking 99 Turbo model in 1977, Saab became one of the first companies to use a turbocharger for increased performance on mass-market cars. The Turbo established Saab as a builder of left-field sporty alternatives to cars like the BMW 3-series, and helped to increase sales in the American market. The new 900 followed in 1978, looking like an updated 99, but featured an upgraded interior, revised engines and all-new modern independent suspension that made it one of the best handling cars of its day. Like its predecessors, the 900 had an incredibly long production run, and with nearly 1 million cars sold, it became the most popular Saab of all-time.
By the 1980s, the European luxury car market was booming, and Saab’s quirky engineering easily differentiated the brand from its more conservative German competitors. From 1982-1986, Saab was the fastest-growing luxury brand in the U.S. market. In 1986, it introduced the full-size 9000 luxury sedan to better compete with the BMW 5-Series, Audi 5000, and Mercedes Benz 300E. That year, Saab had its best American sales year of all-time, selling 48,181 cars.
By the end of the decade the small automaker was already struggling to compete against its much larger competitors. At the same time, American automakers sought to take on the strong selling European imports by buying them out. General Motors was desperate to acquire a European brand after unsuccessfully trying to buy Jaguar, and Saab AB was willing to divest its automotive operations and focus on its successful aerospace programs. By 1989, a deal was worked out, and suddenly the proudly Swedish company was American-owned.
It became clear almost from the beginning that GM was ill-equipped to handle Saab’s idiosyncratic approach to car building. For a corporation that defined a top-down management style, Saab bristled against GM’s orders from Detroit, and struggled to make cars the way it always had. Instead of treating Saab like a separate entity, GM pressured the company to begin badge-engineering already existing European GM cars for future models. Much like the crossover between Buick/Pontiac/Oldsmobile models in the American market, GM wanted future Saabs to be little more than rebadged German Opels.
Saab eventually relented, and disappointed brand loyalists and the auto press when it released the “next-generation” Saab 900 in 1993. The car was heavily based on the sedate Opel Vectra sedan, and while it paid lip service to Saab’s design hallmarks, the car lacked the company’s unique personality, over-engineering, and superlative handling characteristics. The new 900 was beset with terrible reliability issues, and its trim pieces from Opel’s parts bin lacked the level of refinement that it needed to stay competitive in the luxury market. The replacement for the 9000 was delayed until 1997, when they released the Opel-based 9-5 sedan to little fanfare. When GM bought the rest of the automaker from Saab AB in 2000, the company had already exhausted nearly all of its sporty-outsider prestige.
By 2002, Saab’s Opel-based cars were a global sales disaster, and the company was losing over $500,000 a year. Even though Saab kept its headquarters in Trollhättan, it wasn’t immune to GM’s woes in Detroit. Unlike the long-lasting success of the older cars, the GM-based models were poorly engineered and unreliable, and GM was reluctant to invest money into the development of new models. Adding insult to injury, the last models introduced under GM’s ownership were the 9-4X and 9-7X, two American SUVs built in Sweden. To many purists, it was the epitome of bad badge engineering and a slap in the face to Saab’s rich heritage. By the time the global financial crisis hit, Saabs had already developed a reputation for being outdated, unreliable, and uncompetitive cars in the hard-hit global luxury segment, and the company was on the chopping block.
During GM’s bankruptcy proceedings it announced that the corporation would be downsizing by shuttering the Pontiac and Hummer brands — and selling off Saab. Almost immediately, this looked like good news for Saab as the Dutch supercar company Spyker was eager to buy and revive the brand. Unfortunately, it soon became clear that the boutique company was ill-equipped to handle a major automotive brand. Despite ambitious plans for an all-new lineup, Spyker was beset with money and supply chain problems, and quickly tried to sell the company before going bankrupt in 2014. Despite finding a willing Chinese buyer, GM stepped in and prevented the sale, successfully arguing that Saab’s sale to a Chinese company would compromise GM-patented engineering. With that, the Saab name was put up for sale, and the NEVS holding company bought the assets in 2013.
From the start, it became clear that NEVS had little idea of what to do with the company. It originally planned to build all-electric versions of the 9-3 sedan (which had been barely updated since 2002) for the Swedish and Chinese markets. The company soon suffered the fate of Saab’s previous owners and went bankrupt after building only a few hundred cars — losing the rights to use the Saab name in the process. While NEVS is fighting to retain the rights to the Saab name in court, Indian tractor manufacturer Mahindra is in talks to buy NEVS, potentially providing the company with enough cash to restart Saab’s long-dormant production lines. If the sale goes through, it will be Saab’s fourth owner from a different country in five years.
While a revived and successful Saab is an enticing fantasy for any car enthusiast, the possibility of Saab returning to the marketplace as a competitive builder of mass-produced cars dwindles each time the moribund brand is dragged through court. The GM-Saab agreement is a high-profile example of an established small company losing its brand identity within an indifferent corporate structure. GM’s mismanagement of Saab is also emblematic of the internal turmoil within the corporation in the 20 years leading to its bankruptcy. Its mishandling of engineering resources and refusal to react to changes in the marketplace led to the overall decline of its products and eventually brought it to the brink of collapse. For decades, Saab was the strange, fun-to-drive alternative to the mass-produced cars. After 20 years of mismanagement, and another five of protracted court battles, it may be time to let Saab rest in peace.
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