Saab Automobile Ab Business Information, Profile, and History

Company Perspectives:

Saab Automobile is an international automobile company with its traditions firmly established in Sweden. Our background as an aircraft manufacturer has given us the broad-based foundation of technical expertise and innovative concepts which characterise the company just as much now as they did when it was originally established more than 50 years ago. This is precisely what typifies us in our role as car manufacturers--we never follow traditions simply for the sake of it but always search for methods and approaches in which we can believe. New approaches to develop our cars and our organisation, by leaving plenty of scope for our employees' creative ability. The results speak for themselves. Saab Automobile has always been at the leading edge when it comes to design, performance and safety. Our history is full of technical innovations which are now standard in the majority of cars--and we are planning to continue along the same lines.

Saab Automobile is a dynamic company which always makes human beings the focus of attention. This applies to everything from the way we design our cars to how we take care of our staff and deal with our customers. It is one of the reasons why the Saab will always be far more than an exclusive car. A Saab will also be synonymous with a powerful personality.

History of Saab Automobile Ab

Saab Automobile AB is a Swedish maker of passenger automobiles in the premium sector of the market. The company makes two lines of cars: the 9-3, which comes in two-door, five-door hatchback, and convertible models; and the 9-5, which includes luxury sedan and station wagon models. Considered a small automaker in the globalized auto industry of the late 20th century, Saab produces about 125,000 cars each year, with most built at its factory in Trollhätten, Sweden, where the company is also headquartered. The largest markets for Saab automobiles are the United States, Western Europe, Australia, Japan, Canada, and Taiwan. Saab began as an aircraft manufacturer, then launched automotive production in 1949. Its automobile operations became a division of Saab-Scania AB following the 1969 merger of Saab AB and Scania-Vabis AB, a maker of trucks, buses, and diesel engines. Saab Automobile AB was officially formed in 1990 when General Motors Corporation purchased 50 percent of Saab-Scania's passenger car business. The following year Investor AB gained the other 50 percent interest following Investor's leveraged buyout of Saab-Scania.

From Airplanes to Automobiles: 1937-68

With the threat of another war in Europe building in the 1930s, it became imperative for Sweden to improve its defenses. Not least important was the need for a domestic aircraft industry large enough to supply the Swedish forces with military aircraft. This led to the formation in April 1937 of the Svenska Aeroplan Aktiebolaget, abbreviated SAAB. Two years later, SAAB, with headquarters in Trollhättan, took over the aircraft division of the Aktiebolaget Svenska Jarnvagsverkstaderna, or Swedish Railroad Works, located in Linköping. SAAB subsequently transferred its corporate headquarters and construction and design departments to Linköping.

Construction was accelerated at both the Linköping and Trollhättan plants, which were building aircraft designed by Bristol, Junkers, and Northrop. During this period work proceeded on the first SAAB aircraft, the Svenska B-17 dive bomber, which made its first flight in 1940. When war came to Europe, however, Sweden declared itself neutral. As a result the country was spared from occupation by Nazi troops which had already taken control of its Scandinavian neighbors Norway and Denmark.

Plans for car production at the SAAB plant at Trollhättan started evolving as World War II neared an end, and management sought to widen the production program to meet an expected decline in military aircraft requirements. The success of small European cars in the Swedish market just prior to the war provided management with confidence that cars of the same type would also prove popular in the future, and that demand would be steady enough to ensure the success of a SAAB automobile.

A talented aircraft engineer named Gunnar Ljungström was placed in charge of the development of the SAAB auto, the first prototype of which, the 92.001, was ready by the summer of 1946. The body design, however, was neither practical nor aesthetically pleasing. A new prototype was developed with an improved external design and was designated the 92.002. First unveiled in 1947, actual production began two years later. The design of this model--which was known as the SAAB 92 and was initially available only in moss green--was to characterize SAAB automobiles for the next 30 years. Streamlining helped to reduce fuel consumption and engine wear, and enabled the car to reach speeds of 60 miles per hour. Despite a number of minor shortcomings, the car's road performance was excellent, and its appearance was stylish and popular.

Improved versions of Ljungström's original design appeared throughout the 1950s--with the SAAB 93 replacing the 92 in 1955--and by 1955 SAAB automobiles had become the most popular in Sweden; one car left the assembly line every 27 minutes. In order to meet anticipated demand, more plant space was required, and a new factory was established at Göteborg to manufacture engines and gearboxes. New models were also developed, with the 92 model replaced in 1955 by the SAAB 93, followed by the SAAB 95 station wagon in 1959 and one year later by the SAAB 96, which went on to be the mainstay of the company's sales throughout most of the 1960s.

SAAB continued to develop a variety of aircraft, particularly military fighter jets. The first of these was introduced in 1949, and production in various forms was maintained throughout the 1950s. The SAAB aircraft division also held licenses to manufacture foreign-designed aircraft and produce aircraft components for foreign manufacturers.

As early as 1953 SAAB management started exploring the possibility of selling cars in the United States, but hesitated to enter that market until 1956, when a more promising atmosphere had developed. Using New York City as a base of operations, a U.S. subsidiary called SAAB Motors Inc. was created to import SAAB automobiles, and a depot was established near Boston to receive cars and store spare parts. It was a modest beginning for a small foreign company in the world's largest automobile market, and growth was difficult and slow.

During the 1960s the scope of SAAB's operations expanded from automobiles and aircraft into satellites, missiles, and energy systems. On May 19, 1965, as its business continued to grow, the company changed its name to Saab Aktiebolag (the acronym had become so popular as to warrant the elimination of the old name). Over the next four years, officials of Saab and Scania-Vabis began to investigate the viability of operating as a single corporation. In the meantime, Saab introduced its first completely new model since the 92 when it began production of the larger Saab 99 in the fall of 1968.

Saab-Scania Era: 1969-89

Saab and Scania-Vabis merged their operations during 1969, and absorbed two other military contractors, Malmo Flygindustri and Nordarmatur. All automotive operations of the new Saab-Scania AB were centered at the facility in Södertälje, with production continuing in Trollhätten, while the aircraft division headquarters, which produced the JAS-35 Draken and JAS-37 Viggen fighter jets, remained at Linköping. Also in 1969, Saab-Scania, in cooperation with the Finnish company Valmet Oy, established an automobile factory at Uusikaupunki, Finland. In 1972 Saab-Scania's automotive division was divided into the Saab Car Division, which concentrated on passenger cars, and the Scania Division, focused on trucks. That year the Saab 99 was named Car of the Year in Sweden. By this time the 99 offered several innovative features, including headlight wipers and washers, electrically heated driver's seat, self-repairing five-m.p.h. bumpers, and side-impact door beams.

Saab decided to focus its efforts on competing for a significantly larger share of the U.S. automobile market, the main goal being to define its cars as a better choice than those offered by BMW, Mercedes-Benz, and Volvo. These cars had been highly successful with more affluent American consumers. The expanded marketing campaign produced few results over the first half of the decade, but by 1978 began to pay off handsomely. The company's sales increased by 19 percent in the United States and by 17 percent in Scandinavia. That year saw the launch of the upscale Saab 900, which was based on the 99 platform but featured a longer wheelbase, a longer body, a new front, and an all-new interior. Offered initially in three- and five-door hatchback models, a four-door sedan version was introduced in 1980. Innovations with the 900 series included a cabin ventilation air filter (1978), asbestos-free brakes (1982), and the first turbocharged engine featuring 16 valves--four per cylinder (1984). Production of the Saab 96 ended in January 1980, concluding the 30-year history of the 92-93-95-96 family--with overall production of more than 730,000 cars. The Saab 99 remained in production until 1984, at which point nearly 590,000 of the model had been built.

The Saab 9000, built on a new large-car platform, was introduced in 1984 and was only the third all-new model in Saab history. The car had a luxury four-door sedan profile but offered the practicality of a hatchback. The 9000 proved to be popular but problems related to retooling production plants thwarted a planned expansion of production capacity by ten percent during 1985. Arriving on the scene in 1986 was the Saab 900 convertible. Driver's side airbags were introduced in 1988.

In the late 1980s, Georg Karnsund, Saab-Scania's president, placed greater emphasis on marketing programs in Europe, particularly in France and Italy, as well as in Australia and Japan. Karnsund believed that Saab's ability to develop advanced technology would give its cars a distinct advantage in increasingly competitive international markets.

1990s: The Joint Venture Decade

The 1990s began with the conclusion of a pivotal deal whereby Saab-Scania ceded half of its Saab automobile division to General Motors Corporation. Prior to the consummation of the 50-50 joint venture with Saab-Scania, General Motors (GM) had sought to acquire Jaguar Cars Ltd., a British manufacturer of luxury cars, but in November 1989 the U.S. car maker was beaten to the prize by rival Ford Motor Company. Still in the mood to acquire, and seeking to increase its presence in the European luxury car market, GM announced its joint venture with Saab-Scania the following month. The deal was completed in early 1990, with GM paying US$600 million to gain 50 percent interest in the prestigious yet troubled car maker, which was reorganized as Saab Automobile AB.

By the late 1980s, the Saab division had become a perennial financial loser, crippled by declining sales in the United States, the company's largest single market for car sales. The affiliation with General Motors was expected to ameliorate Saab's position overseas, but at home, larger, more formidable obstacles faced the company and its enormously powerful part-owner, Peter Wallenberg. In addition to holding a controlling interest in Saab-Scania, Wallenberg maintained sizable investments in many other large Swedish companies, including appliance maker Electrolux Corporation and L.M. Ericsson, Sweden's largest communications company. Wallenberg's empire accounted for a third of Sweden's US$165 billion economy--a much-coveted portfolio when the country's economy was robust, but a financial nightmare when economic conditions soured as they did entering the 1990s. To make Wallenberg's position more precarious, by 1990 Sweden was prepared to join the European Community, which would force the country to drop its protective economic barriers. These barriers had insulated Wallenberg against foreign corporate raiders and thus enabled him to control companies that represented US$55 billion in market value with only US$5 billion in equity.

Fearing a hostile takeover, Wallenberg increased his ownership of Saab-Scania in 1990 from 36 percent to 58 percent, then initiated the largest leveraged buyout in Swedish history the following year--purchasing, through his holding company Investor AB, all of Saab-Scania for US$2.3 billion--after learning that outside investors were planning to acquire ten percent of the company's stock. Saab Automobile thereby became 50-50 owned by Investor and GM. Against the backdrop of Wallenberg's strategic maneuvers, Saab Automobile continued to lose money, recording a loss of US$848 million in 1990, which translated into an alarming US$9,200 loss for each car sold. Meantime, Saab's history of innovation continued, when it became the first automaker to offer CFC-free air conditioning systems in 1991.

By 1992, it appeared that Saab Automobile was destined for a more profitable future, thanks in large part to the assistance of General Motors' management, who greatly improved the segment's manufacturing efficiency. When GM management arrived at Saab in 1990, it took 100 hours to produce a single car, but by 1992 the hours required per car had been whittled down to 50 or 60 hours, cutting in half the production quota required to generate a profit. Although Investor and General Motors needed to effect further improvements to spark a complete resurgence of Saab automobiles, progress was being made. The introduction of an all-new Saab 900 in mid-1993 fueled hopes for a recovery of Saab's U.S. sales, a necessary ingredient in Saab's revitalization. Available first in a five-door sedan, then in three-door coupe and convertible models, the 900 helped Saab Automobile post in 1994 its first profit of its joint venture era. Production of the 900 nearly doubled between 1993 and 1996, with units built increasing from about 33,600 to more than 62,400. Sales of the 900 suffered, however, because of early quality problems and negative press coverage.

Saab began backsliding into the red in 1995 and 1996 buffeted by high marketing and product development costs as well as downward pressure on prices. In August 1996 GM sent one of its top executives, Robert W. Hendry, to Sweden to take on the position of president and CEO of Saab. Two months earlier GM and Investor agreed to pump another SKr 3.48 billion (US$524 million) into the troubled automaker to help it through a five-year recovery period. During this time, Saab planned to replace the 9000 and 900 models with two new lines. It also needed to sell a higher volume of the new models--overall sales of 150,000 cars per year&mdashø return to profitability, and to do so it needed to move its image more into the mainstream. Saab was almost invariably referred to as a 'quirky' carmaker and it had long aimed its advertising at 'driving enthusiasts.' With its new models, Saab aimed to emphasize the uniqueness and quality of its products rather than the eccentricity of its customers.

The Saab 9-5, the larger of the two new lines and a replacement for the 9000, debuted in 1997 with a luxury sedan model. A 9-5 station wagon followed the next year. Also in 1998 came the debut of the Saab 9-3 series, which replaced the 900 series and included two-door, five-door hatchback, and convertible models. The new models were slowly increasing Saab's overall sales, with 98,036 cars sold in 1996, 100,275 the following year, and 118,581 in 1998, but losses deepened to SKr 1.91 billion (US$240.8 million) in 1997 before improving to SKr 620 million (US$76.5 million) in 1998.

The year 1999 had the makings of a turnaround year for Saab Automobile as the company was projecting a return to profitability, a further increase in worldwide sales to between 130,000 and 140,000 units, and expected sales in the United States (the company's largest market) of about 40,000, a substantial increase over the 28,253 of 1996. Further ownership changes were also a looming possibility in late 1999 or early 2000. General Motors had an option to acquire Investor's stake in Saab and make the Swedish carmaker a wholly owned GM subsidiary. Should GM not exercise this option, Investor had the right to force GM to buy half of its 50 percent stake in the spring of 2000. It seemed likely that General Motors would in fact acquire Saab outright. Saab retained a solid brand reputation, and as a member of the GM family would be positioned to take full advantage of the auto giant's strategy of shared global platforms and its worldwide purchasing network. GM would also be able to help Saab develop the wider product line it needed to further boost sales; plans were already being laid for the replacement of the 9-3 series in 2002 or 2003 and a Saab sport-utility vehicle was also under consideration.

Principal Subsidiaries: Saab Opel Sverige AB; Saab Cars Holdings Corp. (U.S.A.); Saab Great Britain Ltd.; Saab Deutschland GmbH (Germany); Saab Norge A/S (Norway); Saab Automobile Australia Pty Ltd; Saab France S.A.; Saab-Ana Finans AB; Saab Denmark A/S; Saab Japan Inc; Saab Canada Inc.; Saab Automobile Investering AB; Saab Automobile Schweiz AG (Switzerland); Saab Korea.

Principal Competitors: Bayerische Motoren Werke AG; DaimlerChrysler AG; Fiat S.p.A.; Ford Motor Company; Honda Motor Co., Ltd.; Hyundai Motor Company; Mazda Motor Corporation; Mitsubishi Motors Corporation; Nissan Motor Co., Ltd.; PSA Peugeot Citroen S.A.; Renault S.A.; Toyota Motor Corporation; Volkswagen AB.

Chronology

• Key Dates:

• 1937: Svenska Aeroplan Aktiebolaget (SAAB) is formed to build military aircraft.
• 1939: Company acquires aircraft division of the Swedish Railroad Works, located in Linköping, where the company's headquarters are relocated.
• 1949: Production begins on the company's first car model, the SAAB 92.
• 1956: SAAB Motors Inc. is formed as a U.S. sales subsidiary.
• 1965: Company changes its name to Saab Aktiebolag.
• 1968: Production of the Saab 99 begins.
• 1969: Saab merges with Scania-Vabis to form Saab-Scania AB.
• 1978: Production of the Saab 900 begins.
• 1984: Production of the larger format Saab 9000 starts.
• 1990: General Motors purchases 50 percent interest in Saab car division, which is reorganized as Saab Automobile AB, a 50-50 joint venture of GM and Saab-Scania.
• 1991: Investor AB completes leveraged buyout of Saab-Scania, thereby becoming a joint owner of Saab Automobile.
• 1993: All-new Saab 900 is launched.
• 1996: Robert W. Hendry, a top GM executive, is named president and CEO of Saab.
• 1997: The Saab 9-5 series is launched with a sedan model.
• 1998: The Saab 9-3 series debuts with two-door, five-door, and convertible models; the Saab 9-5 station wagon makes its debut.