Unstable Atom: GM Sells Saab

[CSpec]

Unstable atom

Jun 18th 2009

From The Economist print edition

Does the troubled Swedish firm have a future?

AFPKoenigsegg attempts fusion

THE fact that bankrupt General Motors appears to have flogged three of its unwanted brands—Saturn to a car dealer, Hummer to a Chinese maker of heavy-duty trucks and now Saab to a tiny sports car company—lends substance to the idea that there’s one born every minute. The buyers may not be paying much, but at a time when the car industry should be consolidating rather than atomising, they are taking on an awful lot of risk.

Of the three, only the fate of Saab will be of any concern to car lovers: Saturns were sold to people who were looking for smiley-faced service rather than a good drive; Hummers were bought by men who were insecure about their masculinity and by Arnold Schwarzenegger. But Saabs, with their rally-winning heritage and powerful turbo-charged engines, appealed to discerning buyers who valued understated Swedish design and innovative technology.

Sadly, under GM those qualities were steadily diluted in an ill-judged attempt to stanch the losses that Saab made in all but one of the American firm’s 20 years of stewardship. Short-sighted cost-cutting and the imposition of stodgy GM engineering resulted in Saabs that were no longer special. As the onslaught from German premium carmakers, especially BMW and Audi, intensified in the 1990s, Saab ended up in the uncomfortable position of making around 120,000 not-quite-premium cars a year.

At least Koenigsegg, the Swedish supercar-maker that this week signed a memorandum of understanding to acquire Saab from GM, is run by people who should understand the unique quirkiness of Saab’s appeal. That apart, Saab has little in common with a firm that makes fewer than 20 cars a year, at a price of more than $1.2m apiece, and has a workforce of 45—about 1% of Saab’s.

Koenigsegg, named after its founder Christian von Koenigsegg (pictured), a former whizz-kid financier, will get a $600m loan from the European Investment Bank guaranteed by the Swedish government, and a dowry from GM in the form of platforms, powertrains and about $500m in cash and other assets. To succeed, Koenigsegg must find a profitable niche for Saab that will generate around 50,000 more sales each year than the 93,000 cars sold in 2008. Not impossible, but a pretty tall order.