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Saab Dealers Running Out of Cars as Plant Overhaul Cuts Output

Oracle of Delphi

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By Niklas Magnusson and Ola Kinnander

Nov. 16 (Bloomberg) -- Saab Automobile AB dealers in the U.S. are running out of new cars after the Swedish carmaker cut production to conserve cash and prepare for its first new model in seven years.

“We have about 10 Saabs left, and they won’t last long,” said Ivan Goodwin, sales manager at Jim Ellis Saab in Atlanta. “It’s going to be a big problem, but there is nothing we can do about it.”

Saab, which General Motors Co. is selling to an investor group led by Swedish sports-car maker Koenigsegg Automotive AB, has slowed assembly to retool its Swedish factory to build the new 9-5 sedan starting next year, spokesman Eric Geers said. The company said last week it will eliminate more than a third of its U.S. dealers. Those that have received notice that they will remain open say they may be limited by a lack of inventory.

The time it takes for Saab to deliver the new car and ramp up production of other models is crucial for dealers, whose sales have slumped since GM said in February it would cut ties by the end of 2009 and Saab filed for bankruptcy protection. Saab has also held back assembly as it waits for Koenigsegg to take over and a loan from the European Investment Bank to arrive.

“Our stockpile isn’t very large anymore as we’ve worked hard during the reconstruction to reduce it,” Geers said by telephone from Budapest, where Saab is showing the new model. “When we close the deal and change owners we can start producing again for real as we then will have financing.”

Sales Slump

Saab is struggling in the U.S., which it has identified as one of its four most important markets, announcing last week plans to close 81 of 218 U.S. dealerships. Saab sold 21,368 cars in the U.S. in 2008, or 23 percent of all deliveries. The carmaker has yet to identify which dealers will be shut, though the dealers have received letters letting them know their status.

Saab’s 10-month sales slumped 62 percent to 7,441 cars in the U.S., the world’s largest auto market. The automaker sold just 513 cars in the U.S. last month.

“One of the side effects with the transition from being a GM subsidiary to a Swedish group is that Saab has not been able to run the factory at a satisfactory level,” Stephen Pope, chief global market strategist at Cantor Fitzgerald in London, said. “They are disappointing buyers with extended waiting times or just failure to deliver.”

Saab said it will start delivering the 9-5 in early 2010, probably first in Sweden, before shipments elsewhere. At Parkfield Saab in New Jersey, dealer Rick Wehle hopes the new cars come fast enough. He has 30 new Saabs left in stock and expects to run out of new cars within a couple of months, he said. The dealership, which has been notified it will remain open, sold 10 Saabs last month.

Running Out

The carmaker told U.S. dealers on a Nov. 10 conference call dealers would be able to place orders for the new model “soon,” Wehle said.

“It looks to some of us we will not have 2010 models to sell until the spring,” Wehle said. “I sure hope production has started because our 2009s will be long gone by springtime.”

The old 9-5 was first introduced in the late 1990s and is one of Saab’s three existing models. Typically carmakers replace a vehicle every five years or so. Saab has stepped up marketing of the new 9-5, its first new car of any kind in seven years, after showing the sedan for the first time two months ago.

“It looks as if it’s going to be a beautiful car and we should do very well with it,” said Tim Whalen, general manager of International Motors Ltd., a Saab dealer in Falls Church, Virginia, that is staying open. “We obviously would like to have it as soon as possible. We’ll take as many as we can get.”

‘Annoying’ Wait

While concern over access to new cars is most acute in the U.S., Swedish dealers are waiting too. Lars Kopp, who runs a dealership in southwest Sweden, said Saab has extended delivery times, with the longest wait being eight weeks, as Saab’s “stretched liquidity” means the carmaker cannot produce enough autos. He has 20 vehicles in stock and orders for 50 more.

“We’re not worried about our own liquidity, as we’re an old and stable company,” said Kopp, who has sold Saabs for more than two decades. “What is annoying and deplorable is that you don’t generate any money by just sitting here with orders.”

Saab is unable to increase production until the sale to Koenigsegg, which it had expected to close last month, is complete and new financing arrives, Geers said. The deal was postponed after the European Investment Bank delayed a decision on granting Saab a 400 million-euro ($600 million) loan, which it eventually approved Oct. 21. The European Commission must still sign off on the funding, leaving dealers waiting.

“We’ve been in limbo too long,” said Goodwin, the Atlanta dealer, which also received notice it will remain open. “But we’re optimistic. The new 9-5 has got more bells and whistles. It’s the best car they’ve ever made.”

Link: http://www.bloomberg.com/apps/news?pid=20601102&sid=arhlTGtHz9RM

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