Saab enters the Lion's den

SAAB will cease to exist as a separate legal entity in Australia from January 1, 2005.

On the same day that Holden ceases Daewoo sales in Australia, the Lion will complete its takeover of the struggling Saab Automobile Australia, integrating it into its operations.

The move is not unexpected. It has been discussed publicly for more than a year and is consistent with General Motors' strategy for its Swedish subsidiary around the world, which places national offices within the responsibility of the local operating units (Holden in Australia’s case).

The same sort of exercise is underway in other markets including the US and Europe, where much controversy is being created by the prospect of Saab sedan manufacture moving out of Sweden into an Opel plant in Germany.

In Australia, the task is much less complicated with Saab Automobile Australia employing just 22 staff. They will be offered first crack at jobs at a new Saab brand team within Holden which will operate sales, after-sales, marketing and public relations functions.

The team leader would most likely report to Holden executive director sales and marketing, Ross McKenzie.

But current Saab Australia managing director Tony Jennett (left) would not say whether he would apply to run the operation.

"There’s a process we are going through and I think there is a lot of opportunity that lies ahead for Saab, but I think it’s not the right time to be going through specific people and what they are going to be doing," he said.

But he was more upbeat about the positive ramifications of the move for Saab in Australia.

"I think it opens up a new opportunity because there is more resource and Saab is part of a much larger and more powerful and able operation than it could hope to be as a separate entity," Mr Jennett said.

"You also have to look at it as part of the changing global framework. This is really happening with every major vehicle company around the world in one way or another. This is the GM interpretation of it."The integration is intended to achieve savings through economies of scale and common back office systems.

But it is intended to be invisible to Saab customers.

The Saab brand team will be housed in Holden’s new $200 million office complex currently being built at the Fishermens Bend site and set for completion in April 2005.

GM became a 50 per cent shareholder in Saab in 1990 and took over the other 50 per cent in January 2000, although it left the company at that stage to run its own show.

But Saab lost around $1 billion bringing the compact 9-3 sedan to market in 2003, prompting GM to step in and commence a massive restructure which effectively resulted in the Swedish company retaining brand marketing but losing engineering independence to GM’s European arm, Opel.

With global sales going nowhere, GM initiated a quick-fix to the company’s product famine by pressing the Subaru Impreza into service as the 9-2X small car and the Chevy Trailblazer as the large 9-7X SUV.

Both are left-hand drive only and aimed primarily at the US market, which means the Australian sales unit faces the prospect of no significant new product until the 9-3 Sport Hatch (wagon) gets here late in 2005.

Although it has battled manfully to maintain volume in recent years with a very narrow range, sales dipped to 2152 in 2003 and are running behind that level in 2004.

The prime culprit is the ageing 9-5 sedan, which in its next generation is tipped to be based on the Zeta rear and all-wheel drive platform being developed by Holden for global GM use.

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Saab in Australia has managed to stay in the black through cost-cutting and tight budgeting

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That plan is part of a bigger product offensive for Saab which is already confirmed to include a share of Subaru’s US-built 00X cross-over, which will be known as a 9-6X. But there are also plans for small cars, sports cars and even luxury cars, with underpinnings coming from a variety of GM-related sources.

Despite its product issues, Saab in Australia has managed to stay in the black through cost-cutting and tight budgeting.

Now, with this move, Holden’s Mr McKenzie says there is potential for Saab to grow in Australia, rather than just survive.

"If we keep the cost out of the distribution we will keep the local thing profitable and we can have a real go," he said.

Part of the local strategy will be to continue to appoint Holden dealers to handle the Saab brand as well. Currently, that mix is about 50 per cent and climbing.

"The issue that Saab has had here is being able to put a solid business case in front of a dealer to spend a couple of million dollars for a Saab dealership and he says ‘I am not sure I do’," Mr McKenzie said.

"But when you talk to a Holden guy who already has the investment, already has the facilities and we offer him systems integration … then he’s adding on a variable franchise, he’s already got the facilities and he’s not killing himself."