Saab and Volvo Pin Revival on New Models

NOWHERE in Europe can the automotive sales slump be felt more deeply than in Sweden.

So far this year, Swedish new car sales have plunged by two-thirds. It means the auto industry here is more dependent than ever on the rest of the world for both sales and capital.

The new Saab 900 is a good example. The model debuting this fall will be the first complete update of the company's flagship sedan in 15 years.

"The new 900 is certainly the most important new car in Saab's history," acknowledges John Fleming, the company's vice president of sales and marketing.

From the exterior, at least, the new 900 is distinctly Saab, but under the skin, the heritage is more murky. Only a cash infusion from General Motors Corporation kept the new car's development program - and Saab - going. In January 1990, GM spent $600 million for a 50-percent stake in Saab Automobile AB.

Saab-Scania AB, which owns the remaining half, had little choice. In 1988, the company's worldwide sales shot to 115,043. In the United States, sales peaked at 47,300 in 1986.

"Buying a Saab was like being a rebel," says automotive consultant Chris Cedergren, of the AutoPacific Group. "It was status for those who eschewed status."

But by 1992, the bottom had dropped out. In the critical US market, Saab sales plummeted to 26,000, while worldwide volume dropped to 86,847. That left the automaker with a loss of 2.7 billion krona ($330 million).

But guided by GM's successful European subsidiary, Saab is slashing costs and sharply improving productivity. By closing one of two assembly plants, as well as five component factories, the company has trimmed its headcount 50 percent since 1989, and the numbers will slip below 8,000 by the end of this year.

Significantly, Saab expects to need just 30 to 35 hours of direct labor to build each new 900, down from 110 man-hours on the old model. As a result, the company's break-even is now 80,000 vehicles a year, down from 120,000 in 1989.

"My boss has been quoted saying we'll be profitable next year, and I've learned never to contradict my boss," James Crumlish, Saab's chief financial officer, chided reporters during a recent preview of the new 900.

Sweden's other automaker has its own sad story to tell.

Volvo became another icon of the '80s. Its boxy-but-safe designs won legions of fans around the world, especially in the US, its top foreign market. In 1989, the automaker sold a record 405,600 vehicles worldwide.

But other automakers have begun mimicking Volvo's safety message, one reason why the company's worldwide sales tumbled to 303,800 last year. In the US sales dropped from 101,847 in 1989 to 67,420 last year.

Last year, that translated into a 3.4 billion krona ($800 million) loss for AB Volvo's car group. Its first-quarter 1993 deficit grew by 30 percent.

As with Saab, Volvo is pinning its hopes on a new product line. The 850, introduced in late 1992, has begun winning back market share. "It's been the best-received new Volvo ever," says Volvo product planner Lars-Erik Lundin.

But company officials admit the 850 alone will not solve all of Volvo's problems. The company must also cut its labor and production costs, they say.

Like Saab, Volvo went looking overseas for help. It found two new partners. The next generation of the compact 400-series (unavailable in the US) is being designed and will be built as part of a joint venture with Japan's Mitsubishi Motors. But the more significant pairing is with the French automaker, Renault.

The trick, Lundin adds, will be for Volvo and Renault to maintain their distinctly different looks. While Volvo will not ignore the trends of the day, he insists they will also never look like "a well-worn bar of soap," a slam at the teardrop-shaped designs favored by most other manufacturers.

You've read  of  free articles. Subscribe to continue.
QR Code to Saab and Volvo Pin Revival on New Models
Read this article in
QR Code to Subscription page
Start your subscription today