Now that Ford and General Motors have announced that their Volvo and Saab subsidiaries are on the market, a number of potential scenarios have come out – none of them particularly kind to the Swedish auto industry. Sweden has essentially ruled out buying the two brands, so they will either end up vanishing from the market, being swallowed up by another automaker or spun off as independent manufacturers.
The government of Sweden is still evaluating what to do with the automakers, both of which date back more than 60 years and are seen as pillars of the local economy. Despite continued discussions with GM and Ford representatives, no decisions have been made.
Earlier today, the government announced a $1 billion stimulus package, but it won’t go towards the automakers.
Independence
A management buyout is a distinct possibility, even though a small, independent automaker will surely find difficulty marketing its products to consumers in a world of large, multi-national automakers.
In different economic times, finding the funds to buy the automakers wouldn’t be quite so difficult. With the credit market in its current situation, the ability to secure funds by traditional resources has all but dried up.
Steven Odell, the current head of Volvo , has only been in place for a few months after being placed in his current position by Ford , Volvo’s owner. The rest of Volvo’s management team is also from Ford.
“I’m not sure the Volvo management actually would want to do that [buy out the company], because management at the end of the day is Ford management,” said Stuart Pearson, analyst at Credit Suisse.
Pearson told Reuters that he’d expect Volvo management to be more interested in retreating back to Ford.
Selling the brands
Both brands have their positive selling points, but both also have numerous hurdles to overcome.
Saab ’s small engine and turbocharging expertise would be valuable to a manufacturer of larger automobiles looking to move a bit downmarket. GM has relied heavily on Saab’s engineering ability to produce small engines, like the turbocharged four-cylinder in the North American Chevrolet Cobalt SS.
Yet Saab relies heavily on GM-developed platforms and larger powertrains, making it difficult to remove from the GM group.
Volvo, on the other hand, sells about three times as many cars as Saab, but would still take a large infusion of cash to keep afloat.
“You will need tens of billions (of Swedish crowns) after buying it,” an unnamed investment banker told Reuters.
Suitors for either brand from France, Germany, Italy, Japan and China have all been rumored, but only time will tell what happens to Sweden’s volatile auto industry.
