IMI Magazine

Swede dreams

 Bought in the good times by a prosperous US automaker. Sold off in the bad times after a failed attempt to compete with the German luxury brands. The stories of Sweden's two car companies follow a depressingly similar trajectory.

But at least Saab and Volvo are still in one piece. For Saab, it's been especially tough, having come within a whisker of following Pontiac, Hummer and Saturn into General Motors' dustbin of discarded brands.

While the old owners of Saab and Volvo were similar, at first glance the new owners couldn't be more different. Saab is now in the hands of Spyker, a Dutch supercar maker that built a total of 31 hand-made sports cars in 2009. Volvo has passed to Geely, a Chinese independent maker of low-cost cars, which started off making refrigerators and scooters. It makes rather more cars than Spyker - 2009 production topped 329,000.

And then again, the companies have considerable similarities. Both are barely a decade old, and both have strong, entrepreneurial leaders. Victor Muller's background is in finance, but in the 10-year existence of Spyker, he's been successful where others have failed - even dabbling in Formula 1 in 2006. $200m of the $1bn needed to finance the Saab takeover came from Spyker funds.

Flagship deal
Geely chairman Li Shufu has ridden the wave of 21st century consumer growth in China. Last year, Forbes magazine ranked him the 44th richest person in China, with a net worth of $1.3 billion. Volvo has cost $1.8bn, but funding the deal has not been a problem - this is a flagship deal for China, involving a full-scale overseas acquisition.

Both sets of new management face different challenges and bring different skills to the party. Geely's main challenge is cultural. Chinese companies are not used to overseas acquisitions, especially something as brand-critical as a car manufacturer. And few companies have such a finely honed profile as Volvo, with its history of solid, safe reliability, but updated with more exciting recent designs and a new, strong focus on the environment.

It's to be hoped that Li Shufu is a sharp enough operator to realise that Volvo doesn't need 'Geelification'. Ford left the new owners a very handsome dowry in terms of a model range that is new and desirable - especially the most recent models, the S60 saloon and XC60 SUV. Also back at the company is Peter Horbury, the British chief designer who steered Volvo away from its boring, boxy past in the 1990s.

Where Geely can offer the most is in access to China. And this is the key to dragging Volvo's annual production up to the sort of level that the company has for years wanted to achieve - between 800,000 and 1 million units a year. However, Volvo hasn't come close to that level, hovering around 400,000 for much of the past decade.

Copying the template
Geely's stated intention is to push Volvo up to 1 million cars a year within five years. It is already planning a new Volvo factory in China with a capacity of 300,000 cars, aiming to cash in on the seemingly inexhaustible demand for large, foreign-brand cars in China. Audi has been a particularly strong performer and you can expect Geely will be looking to copy this template, offering the sort of long-wheelbase saloons that Chinese consumers seem to like - an LWB S80 would play well in China. Other new models are in the pipeline too, including an XC-30 compact crossover to compete with BMW X1 and the planned Audi Q3

If this plan comes off, the additional revenue should give Volvo the funds to keep on developing new models. It's unclear for how long Ford will continue to licence its platforms and powertrains to Geely. Where the plan might come unstuck is if Geely decides to source cars from China for western markets. Quality is still crucial - and any compromise could be catastrophic.

For Saab, the situation is less complicated. For a start, the ambitions in terms of volume are much lower. Spyker is starting the rebuilding of Saab from a much lower base. A combination of recession, uncertainty and ageing models saw sales slump to just 40,000 in 2009 - a very long way short of Victor Muller's break-even target of 100,000 cars a year.

However, he does have a roadmap to reach beyond that level - and he makes it sound quite easy to achieve. The new 9-5 is about to go live, and Muller said this would boost production to "between 50,000 and 60,000" in 2010. A 'Sport Combi' wagon version will follow in 2011, as well as the 9-4x crossover, which will be produced at a GM plant in Mexico, alongside the Cadillac SR-X, with which it shares a platform.

'Doing a Mini'
Beyond that, there's a new 9-3 in the pipeline for 2012, and Muller hopes real volume will come from "Project 92", an attempt to create a retro car based on the iconic 1960s Saab 96. Muller believes this could "do a Mini" for the Saab brand, opening the marque up to a whole new audience. "Where can you find an iconic design like that which hasn't been put back into production in a modern way?" he said. "I think we can easily sell 30-50,000 a year."

Muller recognised the need for such a car "very early on" in the discussions. "I looked at the range, and thought this is the missing link. Everyone is downsizing, but that is what we don't have. It has to be light, very quirky and very stylish." Muller believes Saab has the technology in-house to make the car, too. "It's underestimated just how advanced Saab is today," he said. "It's all there."

It will need more funding, and might be built on an outsourced platform, even by a third-party automaker. But Muller believes Saab as a niche player will be able to pull off deals like this. His ambition is to emulate Wendelin Wiedeking at Porsche, creating a highly profitable company on relatively low volumes.

Brand immersion
While Geely might have more resources and greater ambitions in terms of volume, Muller's plans for Saab are perhaps more realistic. And Muller himself clearly understands what Saab is about - he's even immersing himself in the brand's motorsport tradition by driving an original 1950s 93 model in the classic Mille Miglia race this year.

The potential problem is funding - Saab has $400m from the European Investment Bank and $326 from GM - but will this be enough? Geely, on the other hand, has access to a bottomless well of Chinese investment, which could propel the brand into global Audi volume territory. But this might be irrelevant if Geely disturbs Volvo's carefully cultivated image.

Li Shufu needs to heed the scorn poured on MG's Chinese owners when they announced that the company name was not an acronym for Morris Garages, but for 'Modern Gentleman'. Leave the marketing to Gothenburg, Mr Li. Instead, why not take a PV544 on the Mille Miglia, and get to know your brand from the ground up?

Mark Bursa