In the run-up to this weeks bridging tournament, GM and Ford are indicating their [belated] willingness to axe ailing brands. Now you could look at their most recent sales stats and argue that this description applies to all 11 U.S. car brands under The Big Two’s umbrella, but we speak here of the Swedish contingent: Volvo and Saab. The former lost $458m in the last quarter alone. The latter, well, who knows? GM doesn’t break-out Saab’s red ink. (The brand hasn’t made a profit since The General bought it in 1989.) Anway, The Financial Times reports “Ford and GM will both tell the US Congress they have long-term plans to dispose of the brands this week when they present detailed business and financial plans to support their request for $25bn of emergency funding.” “Long-term” being the operative word; the automakers can no more cut the Swedish brands loose without C11 than you can eliminate credit card debt by scissoring your plastic. But don’t worry, the suits have a way to avoid the thorny issue of using U.S. bailout bucks to protect Swedish (German?) jobs: they’ll ask Sweden for money.
In fact, they already have. “Stephen Odell, Volvo’s chief executive, and Saab’s managing director Jan-Ake Jonsson have separately spoken to Maud Olofsson, Sweden’s industry minister, and other officials about securing funds, according to several people familiar with the discussions.” And here’s the weird part: Sweden seems up for it.
“Sweden’s government has considered devoting about SKr2bn ($248m) to Saab and Volvo in direct aid or loan guarantees, although ‘the discussion is open’, said Matts Carlsson, auto industry analyst at the Gothenburg Management Institute. ‘The car industry in Sweden is of importance for the country as a whole, and they are open to the idea,’ Mr Carlsson said. Spokespeople for Sweden’s industry ministry, Saab and Volvo could not be reached yesterday.”
Hang on; $248m? How do you say chicken feed in Swedish?
I doubt the Swedes will by and allow their entire auto industry to go bust.
Combine Saab & Volvo into sort of Swedish Leyland perhaps?
Yeah, if GM and Ford dump them, I would expect the Swedish gov’t to make an attempt at running them or sell them to the Chinese. Even then, I don’t see how they survive long-term. The “near luxury” segment is going to take a beating as it doesn’t have the image to draw in the moneyed, and nobody else can get the credit to afford the premium price.
I hope the Swedes buy them back and return these cars to their former glory. Before being assimilated into Ford and GM, these were not near luxury cars but practical niche vehicles.
I’d maintain an open mind about the Swedes making a go of it. Right now Volvo and Saab’s situation is strongly influenced by bad brand management. If they are combined under one independent roof then there is the opportunity to reposition the brands so that they are more viable.
I don’t buy the argument that Volvo/Saab would be too small to survive. Economies of scale can be achieved with partnerships. The most crucial variable is the quality of management. Look at Subaru: It has done quite well when focused on carving out unusual niches.
Prepackaged CH11 w/ Federal loan guarantee – please.
One less buyer: I read somewhere that Volvo Truck doesn’t want to buy back Volvo Car. Can’t blame them, take the $6.4 billion and run.
Robert: You are right on with your “German” note. I wouldn’t be surprised if the German and Swedish governments are already talking. In Germany, people pretty much assume that Opel shall be liberated soon, they aren’t talking “if” anymore, they are talking when and how. A Volvo/Saab/Opel would be attractive.
As for the Swedish money: I think they’ll string them along just like the Germans do. The deal gets cheaper by the day.
I think Fiat should buy them out, allowing European car buyers to realize the dream of owning a production Alfaab.
GM seems to be too big to succeed and craftsmen built cars like Jaguar and Rolls Royce were too small to keep up with technology until they were bought by bigger companies.
Is there a sweet spot where a car company can be small enough to make something different, keep up with technology, and sell enough cars to earn a profit?
Were Volvo and Saab profitable before they were swallowed, blended in, and lost their uniqueness?
Yeah…get rid of Volvo and Saab, the somewhat stylish, safe cars with the small turbodiesel and gas cars most of the world demands. That is about the last 2% of Detroits “problem” handled right there.
Detroits North American problem is too many dealers selling basically the same unexportable mediocre cars with too many lame V6s+ built by UAW workers with wages, job banks, pensions and healthcare benefits that make their cars uncompetitive and UNPROFITABLE.
THE only future for Detroit is C11, breaking franchise and labor contracts, splitting from their somewhat profitable foreign operations. We all(taxpayers) are going to be left holding whats left for many years regardless. Merry Christmas!
Here is how it’s going to go down:
The new S60 is going to be fantastic. A G35 for Volvo that vaults the company’s profile forward and draws in new buyers. Ford will debut the S60 in January (they’ve already started the trickle of pictures to grow interest) and people will be wowed by its looks, by its surprisingly non-volvo like performance. It will be targeted to USA only at launch; unlike every other volvo, only one oddly powerful engine.
The S60 will get excited previews in C&D and Motortrend and anywhere else. The exterior, the interior, the performance — who knew Volvo could do this?
And that is when Ford will sell Volvo; just like they did Jaguar, they will take some time to prime the pump. The S60 will be the XF.
The fact is, that if Volvo is right now being a loss for Ford, you can’t blame Ford’s management of Volvo. The company, the cars, look better and offer more than they ever have. Under Ford, Volvo has grown from a two-model company (sedan or wagon, sir?) to a full-line near luxury/luxury make.
As far as Saab… Saab has a brand name to sell. That is it. But right now, they don’t have a future. The 9-3 is, simply put, over priced and lacks the quality needed to compete in the segment. The 9-7 is dead. The 9-5 is ancient, and again, lacks the quality to play against what it pretends to. GM simply hasn’t put the investment into Saab to make it palatable to a purchaser. Maybe 5 years ago, when the economy was up, buying a luxury make would’ve been appealing to some companies; not right now, however.
If you were Hyundai, would you prefer to adopt Saab and its dealers, or just start from scratch?
Volvo’s problem is advertising, as in I hardly see any. Every time I watch TV, I am blasted by GM, Audi, VW, BMW, Hyundai etc. Hardly ever do I see Volvo commercials, and I only see them now for their Year-end event.
Saab’s problem is that they have no interesting products. They may be “born from jets” but they were adopted by GM and converted to crap.
Buying a car is more than the vehicle itself — its the sales experience, service, and when something breaks, the response from the dealer and the manufacturer should I need it.
I’ve owned multiple Saabs — enjoyable vehicles for sure, but its more than that. From “Saab” (dealer and manufacturer) I get the kind of service, attention, loaner cars both during and after warrantee, etc — that I never had with Nissan or Mazda. (or Dodge, etc). I enjoyed my various Maximas and a couple of 6’s — but the overall experience didn’t come close to Saab.
So — who would buy Saab? (or perhaps Volvo?) — I would think an Asian manufacturer, that wants to move upscale, has a strong dealer reputation, and at least can leverage things like safety, style, performance, etc (even if those are not large differentiators anymore).
Hyundai would be a prime candidate, since they likely want to emulate Toyota/Lexus, Nissan/Infiniti — and getting either Saab or Volvo would be a heck of a lot easier than starting from scratch. Renault? Maybe — if they decided the Renault brand was too far gone to ever use in the US again. Perhaps Fiat or Alfa?
I’m also a SAAB lover, but I don’t think they’re salvagable. As has been pointed out above, what do they have to sell right now but advertising rights to the name?
Factories are not particularly new; the Swedish workforce is expensive; current products aren’t selling. The only places you’d find leather in an old Saab would be where it was used because it wouldn’t break in cold weather like plastics. Now, they’re another another wannabe-luxury name in a crowded field. What distinguishes them from the competition?
They used to be the European Subaru equivalent – Solid cars for snow country. Maybe there’s still a niche there – SAAB, the skier’s car. But who is going to put up the money to build the cars AND build the new (rebuild the old) image? Nobody.
Volvo, I think, is a more likely survivor. Ford has been good for them,they have decent products now, and new product is on the way. They can still beat the drum for their old image as ‘the safety car’ and they can rebuild their image as the 11-year car. I think that if Ford can’t keep them, they’ll find a buyer.
Saab died with the 9000. When it was introduced it had all sorts of fit/finnishfinish and transmission problems. They paid so little on warranty that everyone pretty much shined the customers on “they all do that Sir”
Parts never in stock and a huge time waste, no money in educating parts people for techs on flat rate.
The result was rationing appointments and keeping the cars for weeks without even looking at them to minimize wage loss and hoping customers decided to go somewhere else.
In that sense they were Detroit even then.
Can’t imagine Volvo being that different.
Maybe they can get unemployed UAW workers to fix this shit for a couple tenths on flat rate now. LOL.
Shouldn’t this be a “buywatch”? It seems pretty unlikely that Volvo is dead. Volvo. Means. Something. That something is/was safety. Followed by some notion of clean, understated Scandavian design. It is sellable. I can’t speak for Saab. No dis, I just don’t know.
I see Saab/Volvo being acquired by the Swedish government. Probably the best outcome for both companies, but expensive for the Swedes to resurrect. GM should give Saab away for $1, Ford might get a bit more for Volvo but not a huge payday.
Disclaimer – My personal car is the Saab 9-3 2.0T. It may bias my opinion on this subject – I think it’s a great car and would buy another in a heartbeat.
The problem is that there may be a case of bailout backlash in Sweden too. Yes, the Swedish government has a history of being buttfucked by GM and Ford, they have paid, but the companies hasn’t delivered. I remember a couple of years ago, GM forced the state to build a two-lane highway from Gothenburg to Trollhättan, and if not, they were going to pull out of Sweden entirely. Because, obviously, the loss of a highway was the biggest root of their evils. In the end, they let Trollhättan build a couple of hundred of Cadillac BLSs a year, but will move production of the 9-3 out of Sweden and to Germany eventually. Thank you, Sir. And may I have another?
Another problem is the constant downsizing and outsourcing of the Swedish industrial base the last twenty years. I don’t believe Sweden would sustain the capability of producing cars for two, or even only one carmaker on its own. The problem with outsourcing is the loss of making your own decisions. The workforce just aren’t there anymore. Research and develop another platform? Show me the people… GM and Ford effectively killed the Swedish car industry on its own. Volvos are still produced in Gothenburg, and some r&d are going on. But Saab is more or less a paper company, robbed of its assets. They could move the factory to Singapore and nobody would notice.
“Saab’s problem is that they have no interesting products. They may be “born from jets” but they were adopted by GM and converted to crap”.
You are right!!! I can truly tell Saab and Volvo have been “Americanized”….. Almost as if someone has “designers block” on the drawing board.
Volab?
Salvo (Saalvo)?
“The fact is, that if Volvo is right now being a loss for Ford, you can’t blame Ford’s management of Volvo. The company, the cars, look better and offer more than they ever have. Under Ford, Volvo has grown from a two-model company (sedan or wagon, sir?) to a full-line near luxury/luxury make.”
That’s not entirely true. As I get it, When Ford acquired Volvo, Volvo had some interesting cars in the pipeline. That whole flexible-platform bit. They were out with the first gen S80, and were soon to be out with the first gen V70 and S60, and the XC90 layed further ahead. But the point is, those vechicles were in the pipeline when Ford bought Volvo, and probably one of the causes Volvo was sold as such a high price. Ford have bent over backwards to get their money back on that flexible platform, and have used it in half its own lineup as well.
folkdancer:
December 1st, 2008 at 11:07 am
Were Volvo and Saab profitable before they were swallowed, blended in, and lost their uniqueness?
===
The Saab auto division of Saab-Scania was only intermittently profitable before it was put up
for sale. More important was its low return on capital which was a drag on the whole company. Saab needed capital investment to expand its 2-car lineup to be competitive with bigger companies; its new half billion dollar Malmo plant was proving to be unuseable; it had 3 plants to make just 100,000 cars a year; it was a small player in an industry that was consolidating into fewer and bigger companies. Scania decided the capital and management attention Saab needed amounted to risking the whole company on a weak division. Hence the decision to sell in 1989.
I don’t know as much about Volvo cars but I believe similar logic applied.
It would be a bit of a shame if both of those previously solid engineering and industrial cultures went by the wayside. With the kind of global overcapacity in autos, I wouldn’t bet on them surviving intact, though.
“The fact is, that if Volvo is right now being a loss for Ford, you can’t blame Ford’s management of Volvo. The company, the cars, look better and offer more than they ever have. Under Ford, Volvo has grown from a two-model company (sedan or wagon, sir?) to a full-line near luxury/luxury make.”
This is THE fallacy of the entire industry: That more is more. When the market expands, sure, everyone is interesting in the next newest, best thing.
But these are not magazine subscriptions or music CD’s. Serving a niche audience in the auto industry is crazy and expensive and works only if you are nimble and focused (and a bit lucky).
What is wrong with two or three or four models of cars if they all work? Who needs a “full line”? If Volvo makes the safest coupe/sedan/wagon in black/forest green/or white on earth, bar none, doesn’t that have a certain kitsch? People are interested in buying safe cars (last I checked, few went out of their way to buy an unsafe one).
So, bottom line, Volvo has Americanized. By which I mean the usual: It’s overweight, has diluted its original purpose, and may not care about either of those things if it can take a government-sponsored Zoloft.