Volvo, Saab: Diverging Future Paths
By Michelle Krebs January 23, 2009Detroit automakers General Motors and Ford have both put up for strategic review their
Swedish brands, but the companies appear to be taking different paths for disposing of the marques.
Saab is in negotiations with owner GM and the Swedish government to reestablish itself as an independent company, according to a report in Europe's Autocar magazine.
Ford will begin taking bids for Volvo next month and expects some of those bidders to be Chinese automakers, Bloomberg News reports.
An Independent Saab?
Last fall, GM, in its effort to obtain loans from the U.S. government to stay afloat, promised to restructure its operations. As part of that, GM put unprofitable Saab up for strategic review.
Now word is that GM and the Swedish government are trying to concoct a plan that will make Saab an independent company again, reports AutoCar. Some time ago, the Swedish government said it was prepared to provide financial help to its domestic auto industry.
A critical element of the negotiations is moving Saab car production back to its Swedish Trollhattan headquarters; some Saabs are now built by GM's Opel facilities in Germany, AutoCar reports.
Other Swedish press reports say an untangling of new product development work and reestablishment of Saab's own research and development operations are also in the works. Among the entanglements is next-generation Saab 9-5, which is to ride on GM's global Epsilon II platform that also is used by the award-winning Opel Insignia in Europe and the upcoming Buick LaCrosse in the U.S.
Media reports say up to $100 million is still needed to finish the car's engineering work and pay for its launch and global marketing costs. Some reports suggest future products, like the Saab 9-4X crossover, which was to be built at a GM plant in Mexico, would be purchased directly from GM.
What's not clear is Saab's financial viable. Saab's plant in Sweden is running at about half capacity; it would need to run full out for breakeven to even begin to be possible. Plus more stringent regulations globally on fuel economy and emissions require massive amounts of R&D dollars.
Saab was not profitable under GM's umbrella and it is hard to imagine how it could turn a profit on its own.
Volvo on the Block
Ford will begin seeing buyers for Volvo next month and expects to draw bids from Chinese carmakers, reports Bloomberg News, quoting unnamed sources familiar with Ford's plan. Sales documents will be sent to prospective buyers mid-February.
Chinese bidders could include SAIC Motor Corp., China's largest carmaker which partners with General Motors and Volkswagen; Chery Automobile Co., which had a deal with Chrysler that is now defunct; and Guangzhou Automobile Group Co., which builds cars for Honda and Toyota in Japan.
Analysts say Volvo's global network of dealers and development capability could be attractive to suitors, especially those from China looking to expand globally.
Ford bought Volvo for $6.4 billion in 1999 and had been part of the now-defunct Premier Automotive Group of luxury brands collected when Jac Nasser was Ford CEO. It's not clear how much Ford could get for Volvo; it sold Jaguar and Land Rover to India's Tata last year for $2.3 billion -- before the bottom fell out of the market.
Volvo's global sales in 2008 totaled 458,323, 14 percent more than its first year of Ford ownership. In 2007, Volvo set sales records in important developing markets such as Russia and China. However, it is in a slump in the U.S., with sales falling to about 73,000 vehicles, well off the 2004 peak of 140,000 and 40,000 less than 1999.
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