Saab, Plan B and All That Jazz

Imagine it’s 11:58 on your personal doomsday clock. You’ve got a heart condition and you’re due for surgery. Tomorrow.

Being a strong spirited type and knowing that your time might be limited, you decide to dress up and head out for a night at your favourite jazz club. Jazz is what you love most in all the world and if you’re going to check out, then you’ll go on your own terms.

miles-davis-1967-stockholmThe band gets up to play and to your surprise, you find that the lead musician – the trumpet player – is your heart surgeon. And he’s HOT. It’s like he’s channelling the spirit of Miles Davis himself. You can’t believe what you’re hearing and it fills you with hope to know that the man who will take your life in his hands tomorrow is so in tune with your passion.

After the first set, the band steps down for some dinner. You wait a respectful 20 minutes or so but you have to get home at a reasonable hour, so you head on over to the band’s table to congratulate Dr Davis on the best set of jazz you’ve heard in your life.

As you arrive, the good doctor is thumping his fists on the table because his $5,000 glasses just fell off his nose and into his fillet steak. The whole table’s laughing but your doctor is mad as hell before he sees the funny side for himself. As you look down to examine this odd occurrence, you notice that this tender fillet of beef hasn’t been delicately cut and consumed. You might have expected that from a surgeon, but no. In fact, there are shreds of beef all over his plate. Maybe he got a blunt knife? Who knows? But for whatever reason, the steak looks like it’s been set upon and torn up by a couple of hungry dogs.

The whole situation is a little bit slapstick. “Imagine those glasses just falling off his nose and into that messed up meat”, you think. “What a laugh!”

You go home and sleep soundly on what might be the last night of your life. Why? Because despite the fact that your heart surgeon might be a bit clumsy with both his utensils and his food, he sure can play a mean horn!

——

NEVS/Saab survived their creditors meeting earlier this month and earned a stay of execution to continue their business reorganisation plans. During that creditors meeting they outlined what they called “Plan B” – a totally new element to their business plan involving the potential to offer technical services to other OEMs as well as adapting the Trollhattan factory to build cars for other OEMs. It’s not written in stone. It’s something they say that they can do without, if necessary. But it’s there.

Saab’s business plan has been quite fluid since NEVS took over. In the beginning, they were gung-ho on going fully electric. Then NEVS took on a 22% shareholder who – they have recently claimed – insisted that Saab produce petrol-driven vehicles for immediate use. Consequently, NEVS swung its resources into resurrecting the Saab 9-3 only to have the 22% investor fail to honour their contract while new 9-3’s sat in the factory car park with very-close-to-zero interest from buyers.

Now the business plan has a new, slightly desperate element. Well, it’s new for NEVS but not totally new for Trollhattan.

Spending time on the viability of Plan B is a bit like our heart patient at the top of this article. It misses the point. It’s fundamentally irrelevant. The court knows it. The suppliers/creditors know it and NEVS knows it, too. Plan B is merely complimentary information included for the sake of saying “we’re trying everything” while they continue to talk with their two Asian [potential] investors. It purchases time and nothing else.

The real issue here – the one that creditors are hoping NEVS can solve – is the issue of ownership and management. I think it’s only by changing the ownership and management structure of NEVS that the creditors can hope to see their debts collected.

Kai Johan Jiang was let down by his Chinese investor and he’s been burning cash trying to keep things afloat. NEVS spent bundles of money on a car it can’t sell while slowing development on its key technologies – the Phoenix platform and vehicle electrification. Qingbo might have let NEVS down but the bottom line still tells you a few things:

  • NEVS market intuition wasn’t keen enough to realise that a petrol-driven 9-3 would be a complete sales disaster.
  • NEVS management voice wasn’t strong enough to resist Qingbo’s urging for a petrol driven vehicle and stick to its plans.

That NEVS was able to build a 9-3 that motoring journalists in Sweden described as being quite capable is intellectually interesting but ultimately, irrelevant.

The only thing that NEVS had to do, the only thing that NEVS had to prove, was that it could live up to its promise of building a premium electric vehicle. Anything aside from that was, and still is, a distraction from the core reason the company was established.

As always with car companies, it all comes down to the product. You can position a company any way you want in the public eye but if you haven’t got a good product that people want to buy, you’re toast.

Building that product is a tough gig. I’ve said a million times that there are no fingersnap solutions in the car business (and by the way, “Plan B” is no fingersnap solution, either. The logistics involved are mammoth, which is one of the reasons I count it as a mere smokescreen to buy more negotiating time). Designing a car and its component parts takes time and LOTS of money. Right or wrong, NEVS got distracted from that tough gig. Whether the company would have succeeded anyway is a matter for debate but only as another intellectual exercise.

What matters now depends on your point of view.

If you’re KJJ, you want to keep your shirt on.

If you’re a supplier, you want to get the money that’s owed to you.

If you’re a Saab fan, you want to see meaningful vehicles being developed and built in Trollhattan in the future.

If you’re a potential investor, you want……… something that we don’t really know right now.

From here, though, the best way for most of these things to happen is a change of ownership to someone with the management skills and the resources to make something meaningful out of this mess. The upper level of NEVS management has neither the skill set or the resources to have meaningful success with the Saab facility at Trollhattan.

The decision to extend NEVS’s time in reorganisation had nothing whatsoever to do with Plan B or anything else to do with product plans, etc. If you believe it did then IMHO you’re missing the point. The decision to extend, again IMHO, was to allow time for an outcome that gives people what they need the most – a change in ownership and management.

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33 Comments

  1. After all the waiting, I did the only thing I could do. Last week (U.S.) I bought a 2015.5 Volvo.

  2. Nice piece Swade. I’m afraid I’ve finally given up on the idea of seeing a new Saab I’d want to own this decade. I think the brand still has some cache and is in many ways the perfect brand to “go electric” with, but it’s too bad NEVS didn’t get there, if they ever had a hope of doing so.

    Offering our favourite Mr Muller a contract to guide the business to the next step would get people talking positively about Saab again, but I doubt they could afford him even if the idea remotely appealed.

    And finally building an Aero X halo car might help. They’d only be – what? – nigh on 10 years too late?

  3. Volvo is probably the key to their survival, assuming that demand suddenly increases in the European market and they need extra manufacturing lines (unlikely, the triple dip recession put paid to that)

  4. Within all this commercial madness I was impressed by the sheer size of the retainer negotiated by Karl-Erling Trogen. Otherwise it’s a big mess.

    1. Agree, getting SEK 1 million a month for charing the board meetings in this small company is impressive. Did he bring anything to the table except an arm to swing the gavel with?

  5. Any article that references Miles Davis is cool with me.

    I bought the NEVS line. Now I realise it was just that: a line.

    Two reasons why I will never give up hope:

    1) The Volvo story shows that making cars in Sweden profitably can be done.

    2) The JLR, Mini and Triumph stories show that dead or dying heritage brands can live again.

    No doubt in my mind therefore that Saab could come back. The question is, how?

    1. My belief that it can be done remains. As you point out, other companies have shown that it can be done.

      My hope that it will be done diminishes a little every year, but still flickers.

      The how? Well, that’s the hard part, isn’t it? All the brands you mentioned have massive resources behind them, dedicated to developing and marketing new cars. In some cases, they were/are helped by very well known histories, too (much better known that Saab’s).

      So how? LOTS of money, plans to build and market the right vehicles. And the skill to execute, of course.

      It sounds so simple when you write it down like that 🙂

  6. NEVS never seemed like a probable endeavor. The 9-3 is not a logical platform to create an electric car on (too old, heavy, the list is long).

    I’ve just acquired a “new” (to moi) 2008 9-3 Sportcombi 2.0. 60,000 miles, it looks & smells like a new car. I really like this car.

    I have no expectations of a future new Saab. As much as I revere the brand (this is my 3rd Saab), making cars is a business, not an emotional hobby. I can’t imagine why a real car company would attempt reviving the brand today.

  7. I traded in my 9-3 SC about a month ago for a BMW 520 Touring. I loved my Saab and the brand and I have always had a “evil eye” towards BMW and their owners.

    Still, the BMW is a very good car and I like it, I like it a lot actually. As of now I think that Saab/Nevs are at least two or three model iterations away from catching up (if ever) , and even if they do, I have a hard time seeing I would go back.

    I would like to go electric and then it will probably be a Tesla or something else. I will not drop 60-80k euro on something from what feels like a shakey startup with two reconstructions in the baggage.

    I like the BMW but I will never love the car or the brand like I loved Saab. But old love isn’t enough when you have been let down time and time again. Sometimes you move on and find something else that as good or better but with less emotional investment.

  8. The faintly depressing thing in all of this, to me anyway, is the whole-hearted apparent and increasing abandonment of the fan base, something that doesn’t sit all that well with many of us in recent times. As time ticks by, you can only wonder how long they will hang about. In two years, with even less cars on the road, brand loyalty will be at an all time low. Week by week there is an imperceptible but noticeable drop off in interest of the brand. At least Scania Buses and Trucks carry the badge with pride, and might just keep the flame alive until a car is seen on the road.

    1. NEVS is a Chinese company that wants to make cars for the Chinese market using Saab technology and brand name. They don’t have a fan base in China and they couldn’t care less about Europe and America. Saab fans still don’t want to accept that fact.

      1. NEVS AB is actually a Swedish company with PRC owners, if you want to be completely accurate. The PRC ownership will soon come to and end, either through liquidation or purchase by an Indian entity.

        One important change will be that the Indians do not have this obsession (direction?) to sell cars in India, nor an overarching goal (requirement?) to move technology and production home. One can be policitally correct in what you want to call it, but I think it’s become pretty clear how the CPC and PRC operate. Hopefully Volvo Cars live on as a truly Swedish car company, but I wouldn’t place any bets on that. We all saw what happened with MG.

        Anyway, long story short, the situation you describe no longer exists.

    2. I don’t understand why, given VW’s ownership of Scania, and its hunger for brand names, hasn’t made a play to purchase SAAB and the factory in Trollhättan?

      Likewise, it really could have been a great deal for BMW. The MINI line has reached its size limits, and SAAB would be an excellent FWD/AWD brand for C-segment and above. This would allow BMW to have a full range of FWD models and not need to move away from RWD BMWs. Seems like a match made in heaven.

      I had always thought Fiat purchasing SAAB, and having Lancia and SAAB collaborate on platforms to revive both of these monumental brands would have been a good idea, but I don’t see FCA having the time/resources right now to do this.

      Lastly, I could have seen Tesla making a go for the SAAB brand. They’d have a medium range brand to use, if they want to keep Tesla upper luxury. They’d also have an assembly base to use for European sales.

      SAAB has certainly been damaged, but there is still plenty of enthusiasm and global name recognition — we should be able to much better than people like KJJ or M&M.

      Swade, any thoughts? Can we get someone’s ear at VW or BMW?

      1. VW and BMW are extremely successful and knowledgeable enterprises. They know much more about Saab than any of us and I’m sure the possibility of Saab adding to their portfolio has been both discussed and dismissed.

        1. I could see them not wanting to get into it when GM was offloading SAAB. Also, it is not like GM would have sold SAAB to any major manufacturer. It was clear from the beginning that GM doesn’t sell its brands, it buries them. This is what happened to the farce that was the sale of both Hummer and Saturn. Same goes for placing SAAB into the hands of Spyker, knowing full well the finances weren’t there…

          Anyway, getting off the point. I’d still find it incredible that neither BMW or VW wouldn’t take a SAAB that is a clean slate, so to say. BMW did this with MINI, VW did the same with Bugatti.

          Of course on the other hand, the Germans have never seemed to do that well with foreign companies (i.e., Daimler and Chrysler, BMW and the Rover Group, etc.). I feel in these cases it was their own fault, but I’m sure they feel burnt nonetheless.

          It’s just so sad to see SAAB become some sideshow brand like MG.

        2. Yes Steven, you are most likely correct.

          There is a very good reason BMW & Volkswagen Audi Group (VAG) have not entered the fray. SAAB used to compete directly with models from both manufacturers. Why on earth would they pay money to revive a competitor?

          And no, the argument that it would give them another brand in their portfolio is irrelevant. They both don’t need another brand. Both are doing just fine the way they are, setting sales records every month, and SAAB were never big enough anyway to take a chance on investing billions of D-Marks on it to see if it would fly. Which it wouldn’t.

          BMW Group produced 2,006,366 vehicles in 2013. Volkswagen Audi Group (VAG) produced 2,957,653 vehicles in 2013.

          BMW produced 115,215 MOTORCYCLES in 2013.

          SAAB only made that many CARS in one year a very few times, which would only represent about 5%, or less, of sales for either one.

          Ducati, a division of Audi, sold 44,287 motorcycles in 2013.

          Not a chance either of them would “throw good money after bad”.

  9. I think this whole situation reflects how many have underestimated the subtle ways that GM’s neglect affected the Saab platforms and infrastructure. Prospective owners and revivalists put value in the existent platforms that the market doesn’t. In my opinion, the value of Saab is in the people and the brand, and you have to build entirely new things using those two as your value. (As Allan points out above, this has happened with Mini and others.)

    Having Chinese partners has not helped the cause in the long run. They’ve proved recalcitrant and demanding while their very presence hinders involvement from other suitors with more progressive agenda. If there is any hope for Saab, it’s with an established global automaker who wants a brand to extend their product portfolio.

    1. The value is in the people and the brand? Well… the people are gone and found other jobs and the brand has been damaged beyond (extensive) repair. It’ll go into the history books like Rover. And that’s the saddest part about this once exciting, proud and different brand.

      1. Well, there is another thing, Saab car manufacturing is a big part of Trollhättan identity. That means that there is also an element of duty to support “Saab” by social pressure, which means that the possibility of rehiring personnel in the future is better than usual. If you look at the local newspaper “ttela.se” their economy section has three department: Business, Saab and newswire messages, so the Saab spirit is far from dead in Trollhättan, only badly wounded. If a deal comes through soon (and this is the big if) that clears up the skies, a rebound is very much possible. But of course, results are likely to take a while.

        1. Saab is undoubtedly a huge part of Trollhattan, but whether it stays that way or is consigned to being part of Trollhattan’s history is something we’ll find out soon enough.

          Something happened last week that will put a dent in that. Volvo announced an extra shift at their plant in Gothenburg, which means they’re looking for a bunch of skilled workers (more than 1,000). I’d imagine unemployed people from Trollhattan will go where the work is and they won’t all come back quickly, even if the Saab plant is running again in a few years.

          1. The lay off in Trollhättan may very well be connected to the hiring in Gothenburg, there are enough personal ties between NEVS and Volvo management for NEVS to possibility have caught wind or even been informed of this. Interpreting the reconstruction plans, it seems likely that there will be two years until the production will restart, so I’m quite sure that letting most of the production personnel go, and the best at this point is to part on as good terms as possible. So I think Volvo hiring really has no negative effect on Saab, quite the opposite as I think it has a slight positive long term effect as it grows the job market for the personnel Saab want to hire in the future, and Engineering at University in Trollhättan remains attractive.

            Note that what information NEVS management had is my speculation, but Swedish culture makes it fairly likely.

  10. As a total saab freak (never driven another car) it sad to see so many leave saab and all it stands for and the cars thene self has many more miles to give. I see the same thing at SU and its crew.

    I will never leave SAAB just like VM said on the stage at the museum “long live saab”
    My NG 9-5 might need some work in the future but it wont back down

    Keep calm carry on

  11. Picking up on some points already made:

    The more I think about it, it seems that a Volvo-Saab group in Sweden would be the most logical thing in terms of brand recognition. I sense that heritage and homeland is not something folk really care about when buying a Dacia (a brilliant brand in its segment). But it matters a heck of lot when people buy premium products.

    The automotive world talks in terms of ‘the Germans’ , ‘the French’, ‘the Japanese’ and ‘the Swedes’ and all the cultural car-making attributes associated therein. When you are at the premium end of the scale you have to recognise the importance of the effect on the buyer.

    It seems to me the whole point of a newly bought premium car is that it is clearly more of an emotional purchase than a rational one, no matter how hard people try to rationalise it, and so therefore this brand identity stuff really matters so fundamentally. It’s surely why GM ownership and GM product influence undermined Saab in the mind of the buyers and hurt Saab sales.

    So the best outcome has maybe been sitting there all along. The history books show that a Volvo-Saab merger has been talked about in high places many times in the past. Half an ounce of creativity would find a way to differentiate the Saab and Volvo offerings.

    If it was me I would go with:

    Volvo – big and sturdy

    Saab – small and sporty

    Volvo have never been good at small cars, and Saab has always had a more sporty image. Paradoxically that means I might end up buying a Volvo rather than a Saab, but I am just trying to see a bigger picture here.

    But I wonder if a key problem might be the actual ownership of the Saab name.

    On the other hand, ‘Saab’ is a fairly Indian-sounding name … 😉

    1. Just in case anyone is preparing to flay my skin off, I know the Volvo Amazon – one of the most lovely cars ever made – is not exactly large by today’s standards. But you get the general gist of it: Volvo learned to do big sturdy cars very well and that’s where their heart remains.

  12. NEVS were doomed from the start. Don Quixote had a better chance.

    “Car companies, too, spend enormous amounts developing new models. The price tag to develop a new vehicle starts around $1 billion. According to John Wolkonowicz, Senior Auto Analyst for North America at IHS Global, “It can be as much as $6 billion if it’s an all-new car on all-new platform with an all-new engine and an all-new transmission and nothing carrying over from the old model.”

    http://translogic.aolautos.com/2010/07/27/why-does-it-cost-so-much-for-automakers-to-develop-new-models/

    And this was FOUR YEARS ago. Costs do not go down on these things.

    They never had that much money…and were never going to get it…ever.

    VM didn’t have that much capital either, and was never going to be able to procure it. His intentions were good, but good intentions don’t pay for the massive costs of developing a new vehicle.

    Tell me just who is going to come up with the USD$1-6 billion for these clowns to develop a truly new car? The answer kids is no one.

    The SAAB dealer infrastructure is long gone. Meaning Sales, Parts & Service. The chances of it being revived are slim to none. I don’t know of one current new car dealer who would take a chance on ANY “new” SAAB…of which there are exactly ZERO. And there won’t be anytime soon.

    For the sake of the poor workers who have hung onto this pipe dream…let it go. SAAB is never coming back. Get over it.

    When will people get this through their heads?

  13. “The real issue here – the one that creditors are hoping NEVS can solve – is the issue of ownership and management. I think it’s only by changing the ownership and management structure of NEVS that the creditors can hope to see their debts collected.” Truer words never spoken. The NEVS group has been a calamity, a total disaster for Saab. It was a ridiculous decision to settle on them in 2012 as Saab’s new owners—-I’d also venture a guess that it was a corrupt decision, but that’s neither here nor there—-the reality is that NEVS was utterly incompetent in every single meaningful category. They were in over their head from day one. Their business plan was insane—-and their execution was horrific. For any chance at all of a Saab revival, the brand needs to move to new management, new owners. This was the pits—-the worst period of time in Saab’s history. The NEVS era is the lost era—-I just hope it’s not the last era for Saab.

  14. Also, any prospective owner who has ever been interested in acquiring Saab—-might want to take a long look now—-as it’s probably cheaper to get in now than it’s ever been, even though they’d be taken over a broken down carcass thanks to the current owner.