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Saab eyes low-volume future

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Saab eyes low-volume future

By Jorn Madslien

Business reporter, BBC News, Frankfurt motor show

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Dark and powerful, the new Turbo X stands proud at Saab's stand in Frankfurt, shoulder to shoulder with an original "Black Turbo" from the Swedish car maker's heyday more than a quarter of a century ago.

Much has happened since.

Saab has been swallowed up by the American car giant General Motors (GM), much of the production has been shifted to Germany, and GM's efforts to pitch the marque as a luxurious rival to the leading German car makers have failed miserably - particularly in Europe.

These days, Saab's formerly distinct models are often described as bland and only marginally different versions of its Opel/Vauxhall sister marques, and profits have turned to losses.http://news.bbc.co.uk/2/hi/business/6992369.stm

Last year, sales slipped to just 133,000 cars - well behind Audi, BMW and Mercedes, which all turn out a million or more per year.

This was a far cry even from fellow Swedish car maker Volvo's performance: it sold some 600,000 cars last year.

"We at Saab have been very inconsistent in our approach," acknowledges Saab's chief executive, Jan-Ake Jonsson, who is himself spearheading the carmaker's latest initiative - which, yet again, is markedly different from the last one.

Low-volume structure

Having tried, tried and tried again, Saab has taken its eye off lofty sales targets of 250,000 cars per year.

During the last couple of years, we've been really trying to focus the brand

Jan-Ake Jonsson, Saab chief executive

Going forward, Saab should instead offer models that are distinct from its much larger rivals, and the carmaker will no longer strive to become a "better BMW than BMW", explains Mr Jonsson.

"During the last couple of years, we've been really trying to focus the brand," he says and as part of that exercise it has also come to accept that its sales could stay low for years to come.

That is not necessarily a problem, as long as there is a cost structure in place that enables it to make money, he explains.

"We've created a structure where we can get returns at 150,000," he adds.

"If we can get 175,000 units, I'll be very happy."

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Turbo heritage

Saab's new low-volume cost structure relies heavily on factory and parts-sharing with other GM marques, a strategy that will do little on its own to support Saab's efforts to build its brand as a distinct entity.

This is where the Turbo X comes in.

The turbocharged car comes with a 2.8 litre 280 bhp engine, and unlike conventional Saab's it comes with four-wheel-drive.

"This is a newly developed all-wheel-drive system," Mr Jonsson says. "It gives you the option of having more performance. We will see it also in future vehicles."

Mr Jonsson sees the four-wheel-drive option almost as "a bit of a qualifier in the premium segment, even if it is an option with a penetration of just 10-15%".

But the Turbo X is also there to "make a statement about our heritage" and to "communicate that the turbo is and will be important for Saab".

Smaller engines

There are strong reasons for this, beyond nostalgia.

Saab has made a name for itself in the world of biofuels, essentially because its Biopower models are more powerful when they run on E85 - a mixture of 85% ethanol made from plants and 15% petrol - then when they run on conventional petrol.

"The turbo can utilise the higher octane rate of E85 in a better way, so it adds 25-30 bhp," Mr Jonsson explains.

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Saab is strongly supportive of the growth of ethanol powered cars

In the long-run, this interaction between the turbo and the fuel could enable Saab to offer cars delivering 150 bhp from small one-litre engines.

Current models typically deliver 150 bhp only if they are equipped with two-litre engines.

"It really shows the potential to downsize the engine," he says.

Part of the solution

Good engineering does not equate to sensible use of resources, though.

Hence, although bioethanol could help reduce emissions from cars, when compared with cars running on fossil fuels, there are clearly not enough plants in the world to produce the volume of ethanol required to displace petrol and diesel.

Already, critics point to how demand from ethanol producers has pushed up corn prices in the US, and many worry about the ethics of using plants for fuel rather than for food in a world where people are starving.

Bioethanol to me is not an issue of starvation versus cars

Jan-Ake Jonsson

Mr Jonsson is largely dismissive of such criticism.

"Bioethanol to me is not an issue of starvation versus cars," he says.

"If you look at the availability of bioethanol today, that is not an issue. There is enough land and crop available today to supply current demand."

And crucially, "we're at the first generation of using ethanol", he adds.

So whereas "you can say using corn to produce ethanol in the US is very inefficient", second-generation biofuels made from celluloid - that is wood or waste from crops - should prove more efficient, he predicts.

"The growth of ethanol is tremendous," he adds.

True, it is not the silver bullet that is going to slash pollution from cars in the near future, but Mr Jonsson is convinced "bioethanol will be one piece of the solution".

source:

http://news.bbc.co.uk/2/hi/business/6992369.stm

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"Saab eyes low-volume future". Good, it will have continuity with its low-volume past. At least they have finally realized that they are not a BMW competitor. If they could get their act together, I could see them competing against Audi as well as Volvo and Acura. I think BMW and Mercedes (as well as Lexus and Infiniti) are a little out of their league.

I still think that GM should sell this brand off to another company that has the resources to restore it back to its quirky Swedish glory days. GM has its hands too full with its core brands to babysit and feed products to this under-achiever. I think GM ownership is part of the reason this brand is not as healthy as it should be. By expanding too far beyond its resources, I think GM has inadvertently starved Saab of crucial new products that would convey Saab's uniqueness to the auto market. The rebadged Subaru wagon and GM SUV products sure didn't help. I think an amicable split and sell off would benefit both GM and Saab. I would like to see GM use their resources to strengthen Chevrolet, Pontiac, Saturn, Buick, and Cadillac and I would like to see another company return Saab to its distinctive quirky Swedish roots.

I heard BMW was considering a purchase of Volvo at one time to leverage the costs of the front wheel drive platform needed for Mini. Why couldn't they do the same thing with Saab. The only thing that worries me is whether Saab would really survive and thrive under BMW ownership; Rover/MG sure didn't fare too well under their ownership. The major difference is that I don't believe Saab is currently in as bad a shape as Rover/MG was when purchased by BMW. Maybe BMW would be more successful with Saab since it seems to be in better condition than that damaged British company.

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"Saab eyes low-volume future". Good, it will have continuity with its low-volume past. At least they have finally realized that they are not a BMW competitor. If they could get their act together, I could see them competing against Audi as well as Volvo and Acura. I think BMW and Mercedes (as well as Lexus and Infiniti) are a little out of their league.

I think that being fully integrated with GM Europe might actually help Saab (spreads fixed costs with Opel, lowering both breakeven point and the variability of the brand's bottom line), as long as people in GM learn to appreciate Saab's uniqueness. Hopefully they have.

Where I disagree with you is that I'd like to see Saab stay in GM.

Edited by ZL-1
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