Page last updated at 12:20 GMT, Friday, 8 January 2010

Job cuts likely whether Saab is sold or not

By Jorn Madslien
Business reporter, BBC News

Workers at Saab's automobile manufacturing plant in Trollhaettan, Sweden
A new Saab owner would probably not need 3,400 workers at Trollhaettan

Lots of people who do not have any money seem to think they can make a lot from taking over Saab, while those who actually have money to invest are convinced they cannot.

The above comment, from a reader of the Swedish business newspaper Dagens Industri, seems an apt summary of the situation as Saab's owner General Motors (GM) was presented with up to three bids for the troubled carmaker just before a deadline on Thursday night.

The bids - one from Formula One boss Bernie Ecclestone and investment firm Genii Capital, a second from the Dutch supercar maker Spyker and reportedly a third from a group of Swedish industrialists - arrived after GM had been trying to sell Saab for a year.

So far, nobody has managed to come up with the cash, according to GM's chief executive, Ed Whitacre.

But however many bids there are on the table, the future still looks as uncertain as ever for Saab's 3,400 workers.

Distinct cars

Saab under new ownership would almost certainly be a low-volume carmaker that would not require a large workforce.

Saab Turbo X
The Saab Turbo X failed to bring in new business

Two years ago, Saab abandoned its lofty sales targets of 250,000 cars per year, insisting it could make money selling just 150,000 cars by trying to make them more distinctive and thus charge more for them.

Most other automotive groups see 200,000 cars a year as a more realistic break-even production level.

At the time, Saab launched the Turbo X with a 2.8-litre 280-bhp engine and, unlike conventional Saabs, with four-wheel drive.

The car is great to drive and feels very different from other Saabs, yet it failed to bring in much new business.

New models needed

Mr Ecclestone's involvement suggests there is still value in the brand, but there is little technology left in Trollhaettan that is owned outright by Saab itself.

Saab chief Jan Ake Jonsson
Saab chief Jonsson may not be able to prevent job losses much longer

Saab engine, gearbox and tooling technology was recently sold to Beijing Automotive.

Hence, any buyer would need to strike a technology-sharing deal with GM to keep the Swedish operation going, initially with its new 9-5 model.

Building Saabs that contain little other than Opel parts has not helped preserve the marque's prestige in the past, so a new owner would soon need to develop new models from scratch.

That would be both costly and time-consuming, and any new cars emerging from such a process would need to prove themselves in the market place.

Job cuts

Again, this could take a long time - and until such a process was completed, it would be tough to charge a higher price for Saabs.

So to make money, a new owner would need to slash costs, and thus jobs.

It seems large-scale redundancies at Saab's Trollhaettan factory may be unavoidable, whatever GM decides to do.



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