The need for Saab to communicate

There’s a blog entry at a site called Tools and Garage Talk that talks about the perceived condition of Saab. It follows on from Spyker’s Q3 report last week and the financial losses reported therein. I believe it also uses some material from The Truth About Cars (indeed, the first paragraph is from TTAC – unreferenced – and the rest seems to be the authors own).

Here’s the full entry, which I’ll talk more about below:

Saab is one sick puppy. Third quarter results are out for the Dutch-Swedish automaker, and they’re not good: the firm has lost $70m on an operating basis last quarter, and has burnt through $160m in the the first nine months of 2010. Wholesale and retail sales in the first three quarters were down by 10 percent and 45 percent respectively compared to the first nine months of 2009, and Saab has cut its 2010 sales projections from 45,000 units to 30,000 units, or half of the 60k projection Saab started 2010 with. Improbably, the company still believes it will sell 80,000 Saabs next year, and 120,000 in 2012. And though Saab-Spyker has a negative equity of about $234m, the company says it does not need to recapitalize.

Is it a curse? Or just the results of a socialist governments meddling in the companies operations. They need an 96 or another standout car to break back into the auto world.

Can Stryker continue to throw money into the historically failure prone Saab? Or will they take what they can of the underlying designs and sell it off?

First things, first.

I don’t know if Tools and Garage Talk is read by a large audience, or if it’s read by the author and his mother. TTAC is widely read. But what I do know is that both are available to all comers via the internet. Right or wrong, I also know that they’re not alone in thinking Saab’s in trouble.

This entry lacks context, it’s erroneous in several areas and it’s as frustrating as can be for a Saab enthusiast to see it out there.

But it’s out there.

And that means Saab has to push back in order to set the market straight on where they’re at and most crucially, the big question – are Saab still going to be around in X years?

Let’s put some meat on the entry’s bones.

Third quarter results are out for the Dutch-Swedish automaker, and they’re not good: the firm has lost $70m on an operating basis last quarter, and has burnt through $160m in the the first nine months of 2010.

No-one’s expecting Spyker(Saab) to make a profit straight away. They have a business plan which is fully funded for the next few years. It’s a plan that was subject to endless stress-tests and scrutiny by people (allegedly 🙂 )smarter than you and I, people that have lent a lot of money to Saab and have a vested interest in seeing the money repaid – the European Investment Bank and the Swedish Government (who guaranteed the loan).

Saab’s losses in the first nine months of this year have to be seen in light of the fact that for the first quarter (and a bit) of this year, they weren’t actually building anything to sell. They incurred a huge amount of expense in terms of getting an idle factory re-started after GM called in a liquidator to start breaking up the company. The liquidator’s work was paused and Saab were sold, but getting a car factory moving again is not as simple as flicking a switch. In fact, it took the best part of seven weeks.

Now, you go and pay a workforce’s wages for 7 weeks without actually producing anything substantial and see how your profitability fares.

Wholesale and retail sales in the first three quarters were down by 10 percent and 45 percent respectively compared to the first nine months of 2009

Sales in the earliest parts of 2009 were actually quite reasonable compared to times thereafter. In early 2009, it had only just been announced that GM would sell Saab. Stocks were still reasonable in key markets and deals were there to be had.

From mid-2009 to September 2009, the climate was much more hostile. The sale saga dragged on as Koenigsegg were named as the preferred buyer just after mid-year, eventually pulling out of the deal in November.

Contrast that Jan-Sep 2009 scenario with the first parts of 2010.

For most of January and February, Saab’s CEO was removed and they were under the control of an administrator and weren’t producing. Until the contracts were signed on February 23, it wasn’t certain that Saab would have any future at all.

How many cars are you reastically going to sell under those conditions?

Even after the sale was done, there was the start up period and the lingering belief amongst many consumers that Saab were dead. Dealers in key markets didn’t have any stock and there hadn’t been any Saab marketing or advertising for the best part of nine months.

Comparisons between 2009 and 2010 have to be viewed in the context of what was happening at the time.

Saab has cut its 2010 sales projections from 45,000 units to 30,000 units, or half of the 60k projection Saab started 2010 with. Improbably, the company still believes it will sell 80,000 Saabs next year, and 120,000 in 2012. And though Saab-Spyker has a negative equity of about $234m, the company says it does not need to recapitalize.

Again, try starting an operation as big as a car factory from scratch. Jan-Ake Jonsson’s spoken recently about this, citing the need to get 850 suppliers underway once again to feed the factory.

Ever tried to make 850 calls? Co-ordinate 850 operations from a single start point and get them all on the same page? Talk about herding cats.

Saab’s explanation is that things took longer than expected and given the gargantuan nature of the task, I take them at their word. Production and sales for this year will be down as a result.

As to predictions for the future – any assessment of these that doesn’t take into account the new vehicles that Saab will be introducing in the future is an unjust assessment.

  • Saab’s low-emissions diesels for the 9-3 range are just rolling out to European dealers now.
  • Saab have only just expanded the US engine range for the 9-5 in MY2011 and those vehicles are only just reaching US shores now.
  • Saab’s 9-4x will be released for sale in 2011
  • There will be a refreshing of the Saab 9-3 for the second half of MY2011
  • The Saab 9-5 wagon will come out in 2011
  • More markets will be added for Saab to reach in 2011-12

It’s not my place to give a guarantee that Saab are going to be around in five years time or beyond, but I firmly believe that they will. Anytime a manufacturer has a good product, a loyal and interested customer base, and a ton of NEW product to introduce – they’ve got what I’d call a pretty good recipe for success.

Is it a curse? Or just the results of a socialist governments meddling in the companies operations. They need an 96 or another standout car to break back into the auto world.

Can Stryker continue to throw money into the historically failure prone Saab? Or will they take what they can of the underlying designs and sell it off?

Seriously?

OK. Quickly.

  • The Swedish government actually intervened with Saab a whole lot less than the US government did with GM and Chrysler. They didn’t bail them out. They would have let them die if Spyker didn’t come in with a deal to buy Saab. So when it comes to government meddling in car company operations, the US government were a whole bunch more ‘socialist’ than the Swedes in this instance.
  • Everyone can do with another breakout car. No arguments there.
  • It’s Spyker, not Stryker.
  • The ‘failure prone’ description most probably refers to the commonly held belief that Saab were perpetual loss-makers under GM’s ownership. The full truth of that assertion will never be known. Saab have struggled for all of their 60+ years as an automaker, but GM would also have been severly tempted to dump losses into its Swedish brand’s accounts. There were years – and quite recently, too – when Saab sold well over 100,000 vehicles and wold have been quite profitable if they didn’t have a whole bunch of legacy costs to deal with (hello, Cadillac BLS).

Done.

——

People are thinking some negative things about Saab without considering the whole picture.

Yes, the road ahead for Saab will be a tough one, but there are reasons for that. More importantly, there are plans and new models ahead that will do the hard yards in overcoming Saab’s tough situation.

You’ve got to look at the whole picture.

Saab has to get the whole picture out there.

wpDiscuz