updated 1/11/2005 9:16:59 AM ET 2005-01-11T14:16:59

A General Motors review of its Saab subsidiary could lead to the upmarket car brand being axed, if the heavy investment required to revive it is deemed unjustified.

GM executives and people familiar with the study said there was only an outside chance that the Swedish brand would be killed off by the review, due to be completed within three months.

But even a remote threat of the company being closed is likely to prompt a political storm in Sweden, where the automotive industry is one of the most important employers.

Goran Persson, prime minister, has already visited Zurich, where GM's European headquarters is based, to offer significant investment in the region around Saab's Trollhättan factory if it is given more production.

GM added two new models to the Saab line-up last year in what executives said was a "quick and dirty fix" to improve sales. But Rick Wagoner, GM chairman and chief executive, admitted on Sunday that the new 9-2X small Saab, based on a car from Subaru, GM's Japanese affiliate, had not met sales targets after a botched US launch.

John Devine, GM's chief financial officer, said in an interview on Monday that the Saab brand "still has attraction".

"It does have a future but how big and what role it plays are what we are looking at right now," he said. One big question, he added, was "how to take the currency risk out of manufacturing". That comment is likely to increase concerns about the future of the Swedish factory, which has been badly hurt by the strength of the Swedish krona.

According to GM insiders, the company remains unclear what the Saab brand stands for. The typical customer is an academic - and, says one executive, "the question is, are there enough university professors to make the investments worthwhile?"

Saab has lost money in all but one of the past 10 years and GM has steadily reduced its autonomy over the past 18 months. Manufacturing, engineering and most design decisions are now controlled by GM Europe executives, based in Germany or Switzerland, reducing Saab's local management to controlling branding and marketing.

The review coincides with a decision on whether to build GM's new Opel Vectra saloon and the replacement for the Saab 9-3, both due in 2007, at Saab's Trollhättan factory. Trade unions have warned that if production is moved to Opel's Rüsselsheim plant, which has also bid for the work, then Trollhättan is likely to close, although GM denies this. The Saab plant employs 6,000 workers.

Trollhättan was given a boost this week by the news that it will build the small Cadillac aimed at Europe, but the car, based on the existing Saab 9-3, will not sell enough units on its own to justify keeping the factory open.

Copyright The Financial Times Ltd. All rights reserved.


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