IHS Global Insight Perspective | |
Significance | Swedish automaker Saab has announced that GM will support it with platforms, components, and other systems in exchange for safety, engine, and chassis technology for at least the next five years in a bid to make Saab more attractive to outside investors. |
Implications | Ford reports that it has begun detailed negotiations with unspecified interested parties regarding a sale of Volvo, with speculation landing on several Chinese automakers as the likely suitors. |
Outlook | Changes in ownership for the Swedish auto industry seem imminent, but will still likely take quite some time to execute. In Ford's case, the final decision has not even truly been made. |
General Motors (GM) and Saab have announced an arrangement between the newly spun-off (and recently bankrupted) Swedish automaker and its former American parent that will see the two maintain a technology transfer program for at least the next five years, according to Automotive News. Saab spokesperson Jan-Willem Vester said that GM has agreed to let Saab use its global platforms, components, and other systems in exchange for Saab's safety, engine, and chassis technology. "[GM COO] Fritz Henderson got a question: 'Would Saab still be allowed to tap into GM's technology?' and he answered positively," Vester said, referring to questioning of the GM executive as part of the 17 February viability plan that it presented to the U.S. Treasury Department. "Don't expect [GM's involvement] to end abruptly anytime soon because Saab is launching several new products and will need to depend on several of GM components and systems," Vester continued. As part of its 17 February viability plan, GM stated that Saab would separate from the company completely by 2010, but acted to do so much quicker, releasing the company last month. GM currently has pledged to support Saab with US$400 million, and the new tech transfer agreement is meant to further shore up that support with an eye towards attracting outside investors interested in acquiring the brand. The Swedish government has declined to take an equity stake in the company. "The Swedish government has said, 'We're not interested in owning Saab,'" Vester said, but allowed that it did make the conditions of providing financial aid contingent upon finding a new owner for the brand.
Over at Ford, which is trying to find a buyer for its own Swedish brand, talks have reportedly entered a detailed phase with several interested parties, according to an email sent from Ford's European director of strategic communications to Volvo employees. "We've had contact with a number of parties who've expressed interest concerning the future of Volvo. Ford's been pleased with the number and quality of those parties," Gardiner said. "We've had preliminary discussions to determine the level of interest in the Volvo business that they have and we're now talking in more detail to those parties about the future for Volvo," he added. Gardiner declined to identify who might be interested in acquiring Volvo, but said no final decision on whether to actually sell the brand had been made, and that negotiations could take "some time." But as for who might be interested in the brand, Swedish business newspaper Dagens Industri has named Chinese carmakers Dongfeng Motor Group and Chongqing Changan Automobile Co, as well as "a European constellation" as potential buyers, citing unnamed sources.
Outlook and Implications
From an American perspective, the divestment of both Volvo and Saab is a necessity that GM and Ford simply may need to do to survive, but the two situations are rather different in their conditions. For GM, Saab is simply not necessary. It is another brand that the company has to maintain, and given the volumes and market share benefits of keeping it compared to putting that money into growing its more established global brands in markets where growth is possible, Saab simply loses out. The challenge may be finding a buyer for it, and GM's intertwined involvement may not be as much of a benefit as the company might hope. An influx of US$400 million may certainly be welcome, but given that nearly all of Saab's vehicles are now derivatives of GM platforms, the company has little in the way of uniqueness to make it appealing to consumers, never mind potential new owners. The current line-up has not been as successful as might be hoped, and Saab purists lament the loss of "quirkiness" that GM's platform engineering brought to the brand (such as a Saab sport utility vehicle (SUV) based on the American GMT360 mid-size SUV platform, or the Saab 9-2x compact based on the Subaru Impreza). This lack of success has been borne out in Saab's sliding numbers: the brand's global sales plummeted to 93,925 vehicles in 2008, down 25.2% from 2007. In the United States, Saab sales plunged to 32,711 vehicles in 2008, down 34.7% from 2007. These are massive declines from a global sales peak of 133,000 in 2006.
Volvo is not faring much better, but unlike GM, Ford's divestment of the Swedish luxury brand is a more precarious situation. Unlike GM, which has begun to try and move Cadillac into its global luxury role (with varying degrees of success, depending on the region), Volvo is Ford's only global luxury brand. The company's Lincoln brand has no presence outside North America, meaning Ford brand would be alone in most of the countries of the world, with no premium brand in Ford's offerings. One of the options for the company was to elevate Volvo to a true premium brand, with offerings as luxurious as Mercedes-Benz or Lexus, but the lack of available investment cash to perform such a feat has effectively halted that idea. The idea of making Lincoln a global luxury brand seems questionable at best, as it would likely require even more investment than Volvo to bring its vehicles and image up to globally competitive levels. Volvo also has a bit more separation from the Ford mothership than Saab has from GM in terms of product and manufacturing sites. While Volvo platforms underpinned many of today's modern Ford vehicles, the current crop of vehicles can be said to be built upon platforms significantly changed enough to be called Ford platforms instead of Volvo or Mazda. Unlike GM, Ford has not yet definitively stated that it plans to sell the brand, however. There is the possibility that the company could decide to keep it, if it cannot find a deal that suits its desires, or if the economy recovers quickly enough that sales begin to increase again.