CAR recently interviewed the two men running newly independent Saab: Jan Åke Jonsson, Saab’s chief executive officer who’s carrying on running the Trollhattan business, and Victor Muller, the entrepreneurial CEO of sports car maker Spyker. In a frank, half-hour interview, Jonsson and Muller talk about their plans for Saab, future models and what went wrong under GM. JAJ is Jan Åke Jonsson and VM is Victor Muller.
CAR: Congratulations on the takeover of Saab. Great news and we haven’t met anyone yet who’s not happy to see you survive! But last year you built just 39,000 cars. There must be a huge mountain to climb…
JAJ ‘Saab – like everyone else – suffered from the financial downturn last year. The outgoing 9-5 was 12 years old in its run-out phase and we were in desperate need of a new vehicle. Then the rumours about Saab impacted on customers and dealers – everyone hesitated. Sales were also driven down by GM’s decision to limit production. We took 20,000 units out of our inventory, which is a good thing to do. But it had an impact on our sales volumes. In the US, for example, we had less than 500 units in the whole country. It should have been 10 times that volume.’
What are your first steps now as a fledgling independent?
JAJ ‘What we are doing right now is moving the 9-5 to Trollhattan, rolling out the sedan and then in 2011 the 9-5 SportCombi. We have relocated the [9-3] Convertible to Trollhattan and will start production in the spring, and then in 2012 we will roll out the new 9-3. Suddenly we will have an entirely new portfolio. And that means we have dimensioned our costs towards a volume around 100,000 to 120,000. By doing that, we are driving down the breakeven point. Today the breakeven is a little bit over 100,000 units, but by 2012 it will be down to 80,000 to 85,000 cars. Which means that if we are building 100,000 to 120,000 cars again, we will have a great return on our investment. That’s how we see us moving into the future. Driving down the breakeven point is a key task. Traditionally as part of General Motors we had a volume focus – that’s how GM as a big company is driving their business, and understandably so. But unfortunately, we have been dragged into that from time to time: the UK or US are good examples where we were working the wrong way. But now if the demand is not there, we at the factory have to be sure we are flexible enough to reduce our production volumes and lower our costs. That’s the strategy we have.’
Saab in recent years became that quirky little brand from Sweden. It was always low on GM’s list of priorities and today’s product line-up perhaps reflects that. How do you position the new Saab? Is it premium against the Germans? Or will you come up with innovative new models?
VM ‘You are so right, so right. That was the price Saab paid for being part and parcel of a large OEM like GM. We weren’t the priority. I read an interesting article this morning in which Nick Reilly admitted the focus wasn’t on Saab and they could have been a better shepherd. Which I think is a very frank statement to make – and a very impressive one. This is admitting to something everyone knew about, it was hardly a secret. The wonderful thing about Saab being on its own is that it will be in charge of its own destiny; it will be able to set its own priorities and it has its own fully funded business plan based on the new 9-5, which is already much more premium than its predecessor. I mean just look at it! This is what I call a “Saab Saab”. The 9-4X is our new crossover that Saab lacked so badly before – and it will come within the year. The 9-3 will definitely arrive in 2012 and its design DNA will be revamped to become more in line with the 9-5 and 9-4X. And then, if we manage to pull it off… if you ask Jan and myself what our biggest wish outside the business plan is – it would be the introduction of a Saab 92. A small car, a quirky car, a Saab in the truest sense of the word.’
Which segment would the new Saab 92 be in?
VM ‘That would be in the A-segment, slightly north of the Mini. Let’s be very clear about this: I don’t think a Saab 92 would compete with the Mini. It will be as iconic a design as the Mini though. There are just a few cars that qualify as all-time design icons that you could simply relaunch: the original Mini, the Fiat 500, the Citroen DS. A new Saab 92 would not be retro – it would be a massive mistake to make it into a retro car. But to have all the Saab DNA in it and to be a very modern Saab – that would be our wish.’
I hear you have a sketch of the new Saab 92 in your pocket! Can I see it?
VM ‘Unfortunately, the CEO has taken my phone! [Cackles and ignores our request, but he shows it to Gavin Green later the same day]. Listen, the past three months have been extremely tough. Nothing like what Jan Åke and his team have been through, because they’ve been at it for 15 months. I am just the new kid on the block. But the situation we have all lived through wasn’t very pleasant. One of the things I did when I was away from home for almost 93 days, and working 20 hours a day on the deal, was designing what I thought was the new Saab 92. I think it came out really nicely! But this is nothing more than a sketch. It’s a nice sketch, but it’s such a long way from being a car on the road. An advantage of being independent is that we can make our choices for technology partners now. The choice of a tech partner is imperative if we come to do a Saab 92. There are so many things that need to happen before you have a proper design, a clay model, to an engineered product to a car in production.’Parallels have been drawn with MG Rover. They went independent, the first year was quite successful with new MG models etc. But they took their eye off the ball. They had a respected name like Saab’s and even bigger production figures – but they couldn’t find a technology partner. Is it four to five years down the line where the worries lie?
VM ‘Until the acquisition was signed a few days ago, neither Jan or myself had anything other than saving the company at the forefront of our minds. Now our first 100 days’ plan for management is to implement our new fully funded business plan. Once that is underway, we will catch our breath and start looking beyond the first five years. Our business plan runs to 2016-2017. But you’re right. You can’t sit back and wait unitl 2016 and think – hey presto – “we have a problem”. That’s not going to happen, rest assured. The necessity of having a tech partner is not there on day one or two. We have long-term ancillary agreements with GM. Theoretically we could even survive for a full decade on that alone, with no problems. But the fact is Saab as an independent, entrepreneurial-driven company needs to ask itself some questions. Can we, within those agreements, achieve our objectives as a real Saab company? If we think we’ll meet our objectives better with an independent technology partner, then we will do that.’
JAJ ‘You need to look at it from a timing point of view. If you want to implement a new powertrain, you need to think about your development cycle, when is the right time to change to a new engine type or a new architecture or whatever. It’s a very complex activity, as Victor says. Now we are about to think about those terms. During these past 15-18 months, we’ve had numerous interest from big OEMs to small suppliers all over the world who want to work with us. It gives us great confidence that we’ll be able to select the right partner for the Saab brand. Within the GM framework we’ve been limited to use what’s within GM. Now we can decide who we want to work with.’
What’s in it for a big OEM? Why would they want to help Saab out in such a crowded marketplace?
JAJ ‘It makes sense for everyone. If you sell a million engines and you can sell another 100,000, the business case for that is very impressive. Then don’t forget we bring a lot to the table. We’ve been at turbos for 25 years. The Biopower technology we have is another Saab asset. We have been the centre of expertise in various areas for GM: manual transmissions, VCTs. There is a lot of know-how within Saab that we can offer.’
VM ‘It’s worth mentioning that this crisis is not all bad. It’s good in many ways. If I’d have told you two years ago that a company like Spyker would buy Saab, you would have burst out laughing. But it’s happened. It’s the new reality – a tiny company can buy one 500 times bigger. More importantly, every boardroom of every OEM around the world has realised that your demand can collapse by 40% overnight. Nobody thought that was possible. The old rules laid down by Mr Wiedkeking in his Porsche days – “What does this decision do to enhance our profitability?” and “What does this decision do to our breakeven point?” – are going to go round every boardroom more than every before. If you are a manufacturer and you can get 10% more production of your engines, it means you get a better margin on those engines you supply (which is great to have) but it will also reduce your own breakeven on those engines, it will in fact contribute to your own development cost of those engines. In the past, manufacturers clung onto their own technology and were not inclined to share. That’s one great change. Everyone now wants to share everything with everyone. That’s new. There couldn’t have been a better time for Saab to stand on its own two feet and say, “Here we are, we have something to offer you – we can reduce your breakeven point and bring things to the table”.’
You can’t control the kroner versus the dollar exchange rate. It must be difficult to make things in kroner and sell them in dollars?
JAJ ‘We’ve had limited opportunity to influence that, it is true. Our whole supplier footprint has until now been decided by GM… when we sourced a part for the new 9-5, it was done by GM. Now we have the opportunity to work it our way. We are going to build the 9-4X in Mexico, so all the cost of that is in dollars… We need to work out how to change our foreign exchange footprint over time. It won’t be overnight. But don’t forget, with our loan from the European Investment Bank, we can decide what currency we want to have that in. So we could build up some costs in other currencies other than euros. Typically, we have more sales in dollars and pounds than we have costs in euros. When we have a weak euro and strong dollar and pounds, that’s good news for Saab!’
So how are you going to make Saabs more Saaby again? Are there other greatest hits you want to bring back? Like return the 9-3 its rightful hatchback?
VM ‘You’re hitting the nail on the head. Saab has not been in charge of its own destiny. It couldn’t make the decisions that were best for Saab. I want to stay far away from GM bashing. No way. We have to acknowledge that in 2000 GM asked Anthony Lo to design the Aero X concept car. It was a milestone in modern Saab DNA. The character was going downhill, but GM finally – pressured by Saab management – agreed it was time to bring Saab DNA back. The Aero X must have been one of the best designs of the past five years. So here we are, having bought a car company for the cost of a wind tunnel, and what have we got? We have the new 9-5, which is done and paid for and ready to go. A done and paid for 9-4X ready to roll next year. A very well developed, basic engineered 9-3, which is just two and a half years out – and we very fortunately still have the chance to put more Saab DNA into it than ever before. And we have a fully funded business plan.’
Ok, what about further extensions beyond the bread-and-butter models. Could you have a small convertible version of the proposed new 92? Or what about a new flagship like the Aero X concept car? Come to think of it, it could be based on a Spyker!
VM ‘Never as a Saab Spyker! The Dutch call it “cursing in church”. You cannot combine two brands! It is really bad if you do that. A brand identity is an identity. We’re not here as Mossad trying to steal identities! Put this in perspective. My experienced guess at how much it would cost to put the Aero X into production is that it will set you back €20 million. That’s all. We would use so much of the low-volume production knowledge at Spyker. It would never roll down the production line in Trollhattan among the 9-3s and 9-5s. It’s a completely different animal from a cost and efficiency perspective. You cannot build it in that way. We’re talking now about a purely hypothetical situation. But assuming we had €20m, where would we invest it? In a supercar, or in hatchbacks or 92s of which we could build 30,000 to 50,000 units per annum. Being a small manufacturer has wonderful advantages, but it also has restraints and one is that we don’t have big money. Every single investment decision needs to be tested in two ways: does it bring profitability closer and does it bring down our breakeven point? Much as I would love to build the Aero X next week, I don’t think it’s going to happen. We have such other priorities. We must be more quickly profitable. The Aero X – even if we sold it for €1 million apiece – would never make that contribution.’
So how will you stand out from the crowd?
VM ‘We have to be realistic. If I sat here and told you that within two years there would be a new Sonnet, the 92, an Aero X you’d think either this guy must have an oil well in his garden or he’s lost he plot. It’s wonderful to talk to you about the 92, but other than this drawing it’s just a great plan. We have a business plan with three models which will bring the company into profitability.’
JAJ ‘You should not underestimate the impact of making money from a PR point of view. Imagine if in the first quarter of this year we posted a black number… All those who have talked about 20 years of losses at Saab sadly based their argument on the wrong facts. I said to my people, “Us making money would be like launching a new car”. It would have this impact in the marketplace, especially in confidence. We need to deliver in 2010 and 2011 and 2012 on our business plan. Then we can confirm that what we said is what we deliver.’
Let’s put the breakeven points to one side. What are your actual volume aspirations? Where will Saab be in five years?
JAJ ‘Well, we’re saying in the area of 100,000 to 120,000, depending on which calendar year and which new models are coming on, but that’s how we’ve modelled the business plans. We will have good returns. With all the bodystyles in place, we forecast average lifecycle sales of the new 9-5 to be about 40,000. We’re being cautious; the last 9-5 was over 60,000 at its peak.’
CAR came and heard about your plans for turbo hybrids and BioPower hybrids last summer. Are they still in the pipeline?
JAJ ‘The focus on improving fuel economy and lower emissions is crucial. It depends how you define a hybrid – some people call it stop-start, others full electric running. But absolutely, we need to have this technology in our vehicles to hit our figures. It’s already in the works.’