Saab Struggles for Sales Foothold as Sales Boss Bolts, Production Cut

Saab Struggles for Sales Foothold as Sales Boss Bolts, Production Cut

By Bill Visnic October 29, 2010

Saab Automobile AB formally cut its sales ties with longtime owner General Motors Co. just four months ago, with Saab executives and the CEO of new parent company Spyker Cars NV admitting that as the company tries to reconnect with customers, its recovery will be slow.

And thanks to much-reduced overheads and its pending new crossover, the 9-4X, coming virtually for free after its split with GM, Saab's breakeven point is said to be just 85,000 sales globally. 

But the hard payback for the decade-long spell of neglect from GM and vanishing from the market for more than a year now seems to be hitting home, as sales in the U.S. - the brand's most important market - are barely measurable and Spyker this week announced yet another cut in Saab production targets. 

Saab executives, Victor Muller, Spyker's consistently sanquine CEO and the nation of Sweden, guarantor of a European Investment Bank loan to Saab of $547 million, might be at least starting to get nervous as Saab sales in the U.S. have yet to show even a faint pulse and the European market on which Saab also depends is not being kind even to brands on the firmest footing.

Production Cut When It Should Be Increasing

So it was particularly telling news about Saab's current state of affairs when Spyker stock this week plunged some 28 percent when the company announced a third-quarter net loss of almost 40 million euros, nearly 10 times the loss from the same period last year. 

Spyker doubled down on the bad news by cutting Saab production targets to 30,000-35,000 for the year, after in late summer paring back its original goal of making 50,000-60,000 cars to 45,000.

In the course of just a few months, Saab has halved its original production target for this year, while most analysts in the U.S. and Europe are anything but effusive about the potential for rapidly recovering industry sales next year.

Saab CEO Jan-Aake Jonsson told reporters in Europe that Saab is taking longer than expected to pull itself up from near extinction and a total shutdown of its single assembly plant in Trollhaettan, Sweden. 

Meanwhile, Muller seemed to point to the problems in restarting production for the dismal results in Saab showrooms.

"You will not sell product that's not on the showroom floor," Bloomberg News reported Muller as saying. "It's been a tremendous fight to fill the pipeline."

Add to this the news earlier this month that Saab's executive sales director, Adrian Hallmark, left the company after just seven months to assume a position with competitor Jaguar Land Rover. 

Not Even Life-Support Sales Levels

Saab's U.S. sales totaled just 1,127 last month, despite the presence of its all-new 9-5 Aero flagship, the car on which Saab is pinning its hopes for reigniting enough consumer interest - although at least for now mainly from those who already own or have owned a Saab - to get the brand back on its feet.

But September was the first month this year the company was able to surpass the 4-figure sales mark, and a Saab that needs to sell at least 17,000 to 21,000 units for the U.S. to live up to its portion of the eventual breakeven target moved a meager 3,216 vehicles through the first three quarters this year.

Source: Edmunds.com

Saab executives said this summer that after nearly two months early this year in which Trollhaettan's production was shut down, as well as the fact U.S. dealers couldn't order any new inventory for 16 months and the company had no in-house financing, it was no wonder Saab sold just 8,000 vehicles in the U.S. last year. That 8,000 doesn't look so bad at the moment.

Moreover, although the all-new 9-5 should be the company's sales-chart hero, the ancient entry-level 9-3 outsold the new car 15 to one last month, when 72 copies of the 9-5 Aero were sold compared with 1,046 9-3s.

Nor does the problem seem to be one of availability: some 485 units of the 9-5 were reported by Saab to be in inventory at the end of September, enough for a couple of units for each of Saab's 202 U.S. dealers, and the company said in July that the new 9-5 would be available in the U.S. in mid-August. As August 9-5s sales were just 13 units, the 72 sales last month might be more indicative of improved availability, if not outright sales potential.

Analysts at Edmunds.com say Saab's sales figures remain too low to capture representative figures for days to turn, or how long it takes a vehicle to be sold once it reaches the dealer's lot.

And if sales in the U.S. have yet to evidence an uplifting trend for Saab, the company will find little solace in Europe, where the latest sales figures shown a region now trailing 2009 - a sales year boosted by Cash for Clunkers-type programs in many countries - by 3.2 percent, with sales in September sliding 9.1 percent heading into the dark final months of the year.

For Saab, many analysts have been skeptical of the company's ability to recover after such a long period of near total shutdown as GM and Spyker hammered out a deal. Others, too, have criticized the pricing of the new 9-5 Aero, starting at $49,990 for 2010 models, as being too high given the brand's long dark period in the market and Saab's longstanding difficulty in achieving competitive parity while under GM management for a decade.

Saab CEO Jonsson said at a U.S. media event in July that the company can break even at 85,000 sales globally and that the company could be comfortably profitable at 125,000 annual worldwide sales.

One reason the company expects profitability at such volumes: Jonsson called the Trollhatten assembly plant in Sweden "probably the most efficient in Europe."

But with sales of the new 9-5 being far from explosive and the latest admission of slower-than-optimal ramp-up at the Swedish assembly plant, the company surely is looking forward to the sales launch of the Mexico-built 9-4X crossover in April. The 9-4X will be built under contract by GM alongside its Cadillac SRX crossover, effectively the mechanical counterpart to the 9-4X. 

Saab officials said this summer they hope to sell 11,000 of the new crossover next year, with the number increasing to 15-20,000 annually, while another new model for showrooms - one with assured manufacturing supply - also is vital. The only two products Saab currently sells are the 9-5 and the decade-old 9-3.

 

Photos by Saab

1 - The Saab 9-5 just went on sale.

2 - The Saab 9-4X is the Swedish brand's next product to sell.

Bill Visnic:  is an AutoObserver Senior Editor. Follow @AutoObserver on Twitter