Saab – the inevitable end

While many will be casting around for somebody to blame for the slide of Saab into receivership, it is important to consider whether this outcome was inevitable, or at what point it became so. What must surely be apparent after the turmoil of the last few years at Saab (and indeed at the parent GM …

While many will be casting around for somebody to blame for the slide of Saab into receivership, it is important to consider whether this outcome was inevitable, or at what point it became so.

What must surely be apparent after the turmoil of the last few years at Saab (and indeed at the parent GM Europe) is that in the automotive industry there are very few simple resolutions to all of the challenges faced by a company in crisis. The core problem at Saab has long been one of scale: too big to be a premium-priced specialist, and yet too small to gain real economies of scale across the model range. Perhaps under the wing of a different parent company Saab could have been more of a Maserati, offering discrete luxury and surprising performance. Perhaps Saab could have been more of an Audi, with sufficient engineering differentiation to justify premium pricing despite the platform underpinnings.

Given that the company was neither of these, any ‘new beginning’ would have to take account of two crucial decisions: what sort of car company was Saab supposed to be; and how was it going to make the transition to that company from its current starting point?

The core problem at Saab has long been one of scale: too big to be a premium-priced specialist, and yet too small to gain real economies of scale across the model range.

No matter which way these two questions have been addressed by the various interested parties, it would appear that none were able to come up with a viable answer to either question – let alone both together.

Moreover, while within the GM group Saab obviously benefited from that wider expertise in management functions including purchasing, design, distribution, marketing and so forth. An inevitable consequence is the relative atrophy of those functions within the business. Hence, Saab faced the prospect of a dramatic business transition bereft of managerial depth, with a brand of uncertain character, starved of financial resources, and chronically short of time.

The best prospect for the company was always going to be one where the whole business was sold to another vehicle manufacturer, one with the depth to protect the brand during transition and to invest sufficiently to create the new Saab. Realistically, this is at least a ten-year project with outcomes sufficiently unpredictable to deter all the major OEMs.

It is too easy just to point the finger of blame at GM, when in all honesty the declines at Saab preceded and indeed necessitated the GM era.

That left rather more marginal contenders seeking to offer more radical changes of strategy, but which clearly foundered on the details. Whether anything can be rescued from the ashes now is to be doubted. Not least, consumer and dealerships will start treating the brand as a pariah – nothing destroys residual value as surely as company failure.

The logic of the market is often cruel, but for the system to function it is absolutely necessary for capital to be withdrawn from under-performing companies, and to be invested in those with profitable growth potential.

Was the failure of Saab inevitable? Probably not. But perhaps in these straightened economic times Saab was a luxury that could no longer be afforded. It is too easy just to point the finger of blame at GM, when in all honesty the declines at Saab preceded and indeed necessitated the GM era.

Dr Peter Wells is a Reader at Cardiff Business School, where he is a Co-Director of the Centre for Automotive Industry Research and leads the automotive industry research programme within BRASS, also in Cardiff University. Dr Wells is also a director of AutomotiveWorld.com’s sister website AWPresenter.com. He can be contacted on wellspe@cardiff.ac.uk.

The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.

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