Before we compare GM’s handling of Saab to Ford’s handling of Volvo, we must first understand the dynamics of the partnership between the General and the Swedes.
When General Motors originally made a deal with SAAB-Scania in 1989, it agreed to purchase 50 percent of the newly formed Saab Automobile AB company for $500 million, in addition to a commitment of $100 million which would cover immediate operating costs. The contract also stipulated that GM had the option to purchase the other 50 percent of Saab after 10 years. GM agreed to the partnership despite the fact that Saab had lost $188 million during the first eight months of the year.
Why would GM take on such a risky deal? Well, the company needed to grow its European presence, and it needed products that could compete with the Euro elites, like BMW and Mercedes-Benz. GM figured that it was a win-win situation: Saab would get the funding it needed, and GM didn’t have to spend the time and resources on developing another entire product line.
Prior to the agreement, a struggling Saab brand had spend months searching for a new partnership. Saab reportedly turned down an offer made by Ford, and circulating rumors hinted at a potential partnership between Saab and Fiat. Saab eventually approached GM a short time after Ford outbid the General for the ownership of Jaguar P.L.C, which Ford bought for $2.38 billion.
So, in the beginning, GM was akin to a caped hero swooping in to save the day. But the honeymoon period wouldn’t last long. In the words of James D. Sapienza of CheatSheet.com:
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… GM wanted future Saabs to be little more than rebadged German Opels.
When the original deal was made back in ’89, market analysts agreed that GM would take a hit financially. The disagreement was in whether or not the sacrifice would be worth having more manufacturing plants in Europe, as the purchasing of Saab included three more sites. Some argued that Opel already made vehicles that were a lot like the ones Saab made, while others argued that GM could make Saab profitable within the first two years if “the currency situation is favorable, if “component costs are saved, and if costs at Saab’s plants are cut.”
Kai Hammerich, an executive vice president with Saab-Scania in Sweden at the time of the agreement, told reporters that, “With a strong partner, we can get the resources to expand our business,” Mr. Hammerich said, adding that Saab expected to increase production and broaden its product line.” From the get-go there was a tension between GM’s expectation, which was to reform Saab’s operations in order to make money, and Saab’s expectation, which was to receive funding in order to maintain its operations as they were.
Brand loyalists were bitterly disappointed when the second-generation Saab 900, or 900NG, hit the scene in 1993, as it seemed to have lost some of it’s Swedish flare, and was perceived as being a spruced up Opel Vectra. This is despite the fact that Saab hadn’t rolled over without a fight, and ended up modifying two-thirds of the 900. For those who might not know, the 900NG would eventually be renamed the 9-3 for the US market in 1999.
The same tension arose when the 9-3 was released, as GM wanted the 9-3 to have the same dimensions as the Chevrolet Cobalt, which rides on the Delta platform. Instead, the 9-3 utilizes the Epsilon platform, which underpinned the Saab 9-5 and Chevy Malibu. [Edit: at the time, the 9-5 actually did NOT utilize the Epsilon platform, but the 2010+ 9-5 did use the Epislon II platform.] You can read more about the similarities and differences here, but to drive home the point, when a GM accountant traveled to Sweden to investigate why Saab was spending so much money, he found that it had developed its own navigation system rather than using one from the GM parts bin.
During the first four years of the partnership, Saab cut its number of employees by 50 percent, and its sales dipped so low that it became a liability rather than an asset, with total units sold per year fell from 130,000 to 80,0001. During the sales slump, North American leaders of Saab requested that they offer a six-cylinder model, which GM provided. Product planners also wanted convertible options, brighter colors, quirky wheel designs, a better sound system, and, of course, cup holders, to which the Swedes begrudgingly obliged. For the record: Saab went on to develop one of the greatest cup-holders of all time, which you can see a demo of in the video shown below.
Now that we’ve taken a deeper look at the relationship between GM and Saab, we can move on to answering our original question: could GM have found a symbiotic solution to dissolving Saab? Next time around we’ll take a look at the Swedish government’s response to GM back in 2009, and GM’s pattern of using employment and economic wellness as leverage against governments around the world. We’ll also examine the differences and similarities between the GM-Saab and Ford-Volvo partnership’s, and finally determine (at least for ourselves) if GM did in fact act with malice when it blocked the sale of Saab to Zhejiang Youngman Lotus Automobile Co. For a better understanding of what ultimately happened to Saab Automobile AB, click here.
1 – Source: New York Times