What Valmet’s Success Says About Saab’s failure

Valmet and Mercedes have announced that production of the M-B GLC SUV will increase at their Uusikaupunki plant. This is to make room at Benz’s Bremen plant which is already completely busy making GLCs.

2015 Mercedes GLC: caranddriver.com
2015 Mercedes GLC: caranddriver.com

Production of the A-class at Valmet will move to Germany. Valmet will make as many GLCs as they did A-classes so it’s a production swap rather than an increase. The change will result in an increase in labour requirements at Valmet.

As well as being an endorsement of Mercedes product plans and design (which we here at DTW are rather critical), it also makes one think about the fate of Saab in Trollhattan. One of the arguments against Saab was the cost of Swedish labour. Finnish labour is not exactly cheap, probably more expensive than Swedish labour and Finland is also hardly well-placed geographically. Yet Valmet is able to competitively manufacture the GLC and allow Mercedes to sell them at a profit.

2006 Saab 9-3: www.kenrockwell.com
2006 Saab 9-3: http://www.kenrockwell.com

Saab had a lot of problems such as a tricky place in the market and a small portfolio of models. Labour costs and geography probably didn’t help. However, Valmet´s ability to deal with geography and labour points to Saab’s problems really being about management. In theory Saab had the worldwide resources of GM to draw on which gave is scaling economies equivalent to Mercedes. The GLC is, after all, a variant of the of A-class just as latter-day Saab’s were based on GM vehicle architecture.

What I am arguing for here is that Valmet’s ability to make one model of car indicated that Saab could easily have survived making a few models and not necessarily in the volumes that were supposedly required. It might have been a separate brand but in truth Saab’s few models were no different from other GM cars than Mercedes Benz’s GLC is from other Benz vehicles. If Benz can make a living selling 350,000 GLCs a year, so Saab could have done equally well in Trollhattan making 250,000 9-3s and 250,000 9-5s. That they never got near those numbers has more to do with poor management than the costs of doing business in Sweden.

Author: richard herriott

I like anchovies. I dislike post-war town planning.

27 thoughts on “What Valmet’s Success Says About Saab’s failure”

  1. That General Motors was so incompetent at taking two companies with excellent reputations and loyal customers, Saab and Lotus, and applying their own supposed expertise to them to make them strong competitors in their fields is a huge mystery to me. However, if you worked for General Motors back then, and saw the quality of the day to day decision making, I suspect it would be less of a mystery.

    The UK motor industry, too, is doing very well for itself and is forecast (for what that is worth) to carry on expanding. But very little of the industry is controlled from the UK though, fortunately, its stewards are generally more intelligent than GM. Back when it was assumed that the UK would recede as a car producer, much of the industry was controlled locally within a structure that reinforced hierarchies and strife and was notoriously adverse to intelligent investment. Mercedes are much smarter.

    Of course one factor is that the cost of labour has become less relevant, as car production has become far less labour intensive, as you pointed out in a previous piece Richard.

    1. That point about labour intensity is true everywhere though so it cancels. I think productivity is the key not blunt man hours. If you can get 100 people to make 1000 things then it’s better than employing 50 to make 800 things, assuming there is demand for those extra 200 things, of course. The Valmet people are very productive and the hourly rate can be justified. The product can command those prices. You couldn´t make a Clio or Fiesta at Valmet.

    2. Yes, of course. But is your suggestion that Mercedes have set up an inherently efficient production system, or that the Finnish workforce is especially productive?

    3. The Finnish are very productive and the product is good (for its customers). If GM had allowed Saab to build the cars it wanted to (and that 9-3X was the kind of thing I am talking about) Saab would still be here today. Instead the suits at GM forced Saab to take Opel´s old hardware or were not allowed to have input into it. The result was thinly Saabised Opels. Without looking I bet the prices Mercedes want for their Finnish cars are not far from the prices Saab were asking for. Good product, good workers, acceptable geography: you can make cars profitable in Scandinavia. Unless you´re GM.

    1. They could have sold a lot of those. That´s a very good looking car, period.Goodness – it´s spot on. And that it is a concept car and not a production car makes its look all the more remarkable. 2001? From 2001? I just noticed that date. That does not look like a design nearly 15 years old….

    2. Well the image link that displays a photo is the 2003 9-3X, so it’s a bit newer. The image link which doesn’t display shows the 9X concept. If memory serves this was during Michael Mauer’s time in charge of the Saab design team? I wonder if people would have bought a pioneering Saab crossover in the early 2000s.

    3. That´s still quite old in car terms. The US market is very open to such things as the cross-over. I bet it would have been a good seller. I found a website for Saab concept cars which dates the 9-3X as from 2002.

    4. That´s still quite old in car terms. The US market is very open to such things as the cross-over. I bet it would have been a good seller. I found a website for Saab concept cars which dates the 9-3X as from 2002.

  2. Hmm. Saab was a GM division. GM was broke. The company had minimal funds for development, hence long product life cycles and the eternities that bringing a new model to market took. Saab wasn’t alone in having no resources. And that was true before GM rescued Saab.

    I’m not sure why GM shifted most new product development to Opel. Lack of faith in their US-based engineers, perhaps. But GM’s products have almost always been badge-engineered somethings, were never products of independent companies. The big exception is Lotus when GM owned Lotus, but even there GM insisted on using major components from elsewhere in the empire. Isuzu Elan, anyone?

    Late in GM’s collapse the best management in the universe couldn’t have saved Saab or any of the US nameplates that were cancelled after the bankruptcy. The collapse was due to decades of bad management, didn’t just happen for no good reason.

    1. Your post seems to support my idea that it was bad management that drowned Saab. GM seem to want only two global engineering centres, one in the US and one in Europe. They didn´t feel Saab deserved much more say over and above mere styling. They also want to get the most value for money out of their Russelsheim staff, I suppose. I agree Saab was out of money by the time GM took over. I would also go on to say that GM ought to have helped out with investments in production but left Saab engineers to take over a platform sooner in the development process than they did. So, rather than have a Saab as a re-skinned Opel, they should have had cars share common stem-architectures. Was it really to hard to design a Saab able to take all GM´s engines but with the tangible aspects and controls Saab-ised in a convincing way?

  3. The key to success in any business is to make something that people actually want to buy. GM seemed to forget that. Saab did what they could within their means, but were hobbled by the sclerotic processes of their parent company.

  4. Renault gets around their high labour costs with outstanding productivity. It is a shame about what they are being asked to build, but that is hardly the fault of the production line workers.

  5. I think GM has effectively killed Saab, perhaps deliberately. Swedish wages were only one lame excuse. They did a good job by doing so though, seeing the model range Saab were (not) producing in the end. I sincerely hope the Saab badge will never reappear on cars, end of an era.

    The Valmet made Saabs were the better ones by the way, I’ve always had the impression they’re less prone to rust than the ones made in Sweden and other countries.

    1. Hi Melle, nice to see you again.
      Did Valmet make only convertibles or did they do other Saabs as well? Why do you suppose GM wanted to kill Saab? Dumb as GM is, I don´t think they were that dumb but I am open to further data. The theory went GM needed a premium brand and Cadillac would not do in Yurrup. Surely it was in GM´s interest to have Saab to sell cars in a price range Opel would not be able to.
      If alive today Saab could sell a nice crossover, a smart A3-competitor, a 3-series competitor and perhaps an SUV to put up against LR´s small and mid-range vehicles.

    2. I always keep an eye on DTW, don’t worry, just not much time to comment!

      Yes, Valmet made other Saabs as well from the end of the ’60s onwards if I’m not mistaken.

      If GM needed a premium brand, why did they try and sell what were in fact middle-of-the-road cars with a premium price tag? Apparently, uprated Opels just didn’t do it for car buyers and it looks like it was a wise decision to take the Saab brand off the market as a result. The real drama started shortly after and seems to be ongoing. I’m not really following it very closely any longer to be honest.

  6. “it was a wise decision to take the Saab brand off the market as a result.” I meant: seen in the light of GM lacking funds to develop an Audi killer with a Saab tag.

  7. Richard, yes of course bad management did in GM and Saab. But the bad managers who killed them weren’t, for the most part, present at the deathbeds. They’d inflicted the fatal wounds long before.

    The sad fact is that towards the end there was no money for development. Giving Saab’s engineers more say wouldn’t have created the funds needed to develop Saabs that would sell and that wouldn’t fall apart after purchase.

    Fantasizing about what might have been is great fun but in reality GM was insolvent years, if not decades, before it admitted it was. That’s what prevented dreams from being made flesh.

    GM’s preoccupation, at least in the US, with halo cars that sold poorly didn’t help either. Pontiac Solstice/Saturn Sky. Pontiac GTO and G8. Cadillac hot rods. All flops, all wastes of scarce development funds.

    1. Are Saabs that poorly regarded in the US? Here they are viewed as really solid. It’s strange how the US conditions change how a car is received and perceived.
      The halo cars evidently hadn’t enough shine and GM has always had difficulty making the ordinary cars seem as consistent as Toyotas and Hondas. They all seem to have some irritating deficiency if the chat at sites like TTAC is to be believed. What about the 80s and 90s cars? I feel Buick were still making some decent barges such as the Park Avenue and Regal, for example. I particularly liked that one. Olds’ Cutlass was also a decent car. The Regency and 98 had a robust quality to them. Or am I being a bit rosy tinted in my view?

    2. Rick Wagoner fiddles while Bob Lutz burns rubber. I was guilty of cheering on Maximum Bob’s championing of sports cars and Holdens to America but as Fred says the halo cars didn’t help. Neither did the opportunistic Hummer SUV line, which was easier to dislike at the time.

      I still miss Pontiac, although having driven more G6 rentacars than is probably healthy and ridden in a friend’s Solstice GXP there was no way Pontiac was going to beat Mazda in the ‘mass-market sporty’ niche without major investment.

  8. I miss Oldsmobile, at least the Olds of the 80s and early 90s. Sure, there wasn’t much of a reason for the brand, was it a better Chevrolet? Or a cheaper Buick? They were just nice cars for a nice price. Pontiac’s gaudy trim offended me, I must say.

    1. I know what you mean, Oldsmobile’s GM10s and later cars like the Alero were far more tastefully styled than the heavily overclad equivalent Pontiacs; there was the Olds Quad-4 engine, and don’t get me started on the horrors of the (Daewoo-)Pontiac Le Mans.

      But to me Pontiac had a run of swoopy, futuristic concept cars in the late-80s (particularly the Stinger compact crossover, but also the Banshee, Sunfire, Protosport 4 and Salsa concepts) that appealed to schoolboy me. Between Knight Rider and Smokey & The Bandit I never understood why people would buy a Camaro instead of a Trans Am, and I liked the Fiero and even the Trans Sport. Between cookiecutter GM bodies with plastic cladding, poor build quality, obsolescent powertrains and then that whole blunt-pencil styling era with the Aztec none of that 80s space-age concept car promise was realised. But by the time the G6 came along, then the idea of the G8/Commodore, and the Solstice, I had a feeling that someone at RenCen realised that Mazda was on to something and there was an opportunity to emulate zoom-zoom with an American accent using Pontiac. So that’s where I’m coming from when I say I miss the ‘we build excitement’ brand. I could have made a far more respectable argument around deLorean era widetrack Tempests and GTOs but that was a bit before my time.

    2. Being more of that time before which you were, Mark, I did indeed find 60s Pontiacs the most endearing US marque. GTOs apart, even a full-sized, stacked headlamp, entry level Catalina looked good to me,

  9. Richard, I’m sorry but I don’t share anyone’s enthusiasm for GM’s — or, for that matter, any other US manufacturer’s — cars from the late ’60s on. Its true that some were pretty, also that some were, for their time, quick/fast in a straight line. What they had in common was poor fuel economy, poor rust-proofing, low usable volume/volume enclosed by sheet metal and poor build quality.

    At the time I was in the minority. I still probably am, although in my neighborhood the majority of vehicles have “foreign” nameplates and the most common US-made vehicles are pickup trucks. I can’t see trucklets’ charm either.

    In the ’70s, US manufacturers squandered resources fighting increasingly stiff emissions and safety regulations instead of, like Honda, working to understand better what goes on inside internal combustion engines and, like Honda and Toyota, working to understand manufacturing. They didn’t want to change at all. They still don’t. “Deming thought” hasn’t sunk in yet.

    Mark, if you want a modern vehicle that will outperform Pontiac Goaties through ’73 — emissions regulations killed later ones’ performance — in every way get a V6 Accord or Camry with automatic transmission. The modern blandmobiles are qucker, faster, have better brakes, handle better and are generally nicer. Longer-lasting, too. They lack, however, the noise and the image.

    Lets not even think about early pony cars. The second most terrifying car I ever drove was a ’65 Mustang with the small V8 and a/t. For reference, the most terrifying car I ever drove was a ’55 1500N Speedster.

    1. Hi Fred, and a belated Happy Thanksgiving to you over in America.

      You make some very good points about the decline of the US industry. For those of us living offshore it’s easy to form a rose-tinted picture of Detroit iron, especially if we didn’t have to pay for it at the time.

      These days you don’t even need the ‘sports’ model of a family car like an Accord or Camry to outperform the old muscle cars. I realised when Ford effectively ‘did a Miata’ in 2004 with the new Mustang’s best of the 60’s styling that I would be happy with a pony car that referenced the original but had modern conveniences, passive safety and reliability. Your description of driving the ’65 Mustang with the 289 is another reason to buy new or build a restomod. As for the Speedster, that’s why I have zero interest in driving rear engined Porsches.

    1. Sorry about that, fat finger. Ah Saab our favourite lost cause. I have owned three Saabs, a 1975 99 Combi Coupe, a 1979 900 and a 1996 9/3s (or 900s, not sure of when the nomenclature changed. The 99 was a revelation in solidity and space, great heating and ventilation, huge flat boot space, heated front seats and the idiosyncratic hand brake on the front wheels. The 1979 car was better resolved stylistically but no great leap forward mechanically. The interior was more attractive but build quality down. A respray under warranty and numerous niggles ended the affair.

      In 1996 I saw a black 9/3s with alloys and I was once again smitten. Alas heartbreak followed; when you are sitting in a French autostop and someone asks who owns the black Saab you know there is a problem. This was a wretched car with terrible scuttle shake, unpleasant steering and awful reliability. It went after two years.

      The point of my ramble is that Saab’s problems started before it fell in to the arms of GM. At one time it was (I think) producing only one model so reliability should have been excellent and development clearly planned. Unfortunately Saab could not manage the first and I doubt if enough cars were sold to fund the latter. Of course GM treat the brand well but really Saab should never have ended up there.

      Yes I still like the idiosyncratic underdog so am on my third Subaru and I still hanker after a 99 Turbo

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