Koenigsegg Reaches Agreement to Buy Saab from GM
News last Friday said that Saab was likely to be sold to Koenigsegg, the Swedish boutique supercar maker, and that news is now confirmed, with the exception of the actual sale price. (For those keeping score at home, GM has not disclosed the sale price of Hummer, Saab, or Saturn at this point).
While it’s exciting to see Saab remaining in Swedish hands, the fact that tiny Koenigsegg was chosen as the winning bidder is nothing short of remarkable. As we said last week, the company had an output of 15 cars in 2007 and increased that to 18 cars in 2008. It only has 45 employees. While Saab is a small automaker – likely too small to continue independently – it sold about 93,295 cars worldwide last year and has about 3,400 employees. So, assuming that Saab sales volume in 2009 was flat compared to 2008 (which it’s not – it’s way down), Koenigsegg would be increasing production by about 518,000% and would increase its workforce by about 75,000%.
The purchase – whatever the price turns out to be – is being financed in part by a $600 million USD loan from the European Investment Bank (and guaranteed by the Swedish government), with additional assistance being provided by GM and Koenigsegg Group AB toward some new-model launches that were nearly ready to go at the time GM pushed the eject button for Saab (the 9-4x crossover and the long-awaited, long-overdue 9-5 sedan replacement).
It’s hard to see how there can be any type of synergies between Koenigsegg and Saab, given their completely different scales and clientele. Saabs appeal to safety-conscious drivers who want a dash of quirkiness and sport thrown in. Koenigsegg buyers arrive at the factory’s private airstrip in their own aircraft and are probably not financing their $1 million USD-plus toys with any kind of loan. The cars will not share any parts, and Koenigsegg has had its own documented history of problems. In August 2007, the company’s cars were consistently missing performance benchmarks, had famous reliability problems, and the company was losing money – allegedly with a unit cost $4 million per car, while selling them for about $1 million.
Last year, Koenigsegg reported sales of $13.8 million USD; financial data is hard to find, but in the above-linked article, we reported that the company lost $3.6 million USD in 2006. Saab lost about $384 million USD In 2008 and expects to post similar results in 2009. The scale of the companies just do not seem to be compatible.
The most likely outcome in the short term is that Saab’s professional management will remain largely intact, and will launch the new models, which will in turn hopefully turn the company’s sales upward. Meanwhile, let’s hope that Christian Von Koenigsegg (CVK), the founder of the sports car company of the same name, is astute enough to know the limitations of his own company and will let the business people do their thing with Saab (and his own company). Saab’s very survival depends upon the company getting the resources to launch the 9-4x and 9-5 as smoothly and quickly as possible.
In the longer term, after the agreement with GM to provide manufacturing and technology expires, Saab will have to either seek partners to continue product development or buckle down with its limited resources and make things happen. I fear that a company that has been part of GM since 2000 may be as hollowed-out as Chrysler became during Daimler’s “stewardship,” and if that’s the case, Saab will need to immediately ramp up product development efforts in order to be viable over the next several years.