Monday, October 19, 2015

What Happened to SAAB (and Volvo)?

What ever happened to SAAB?

A recent article explores the myth of Swedish Socialism.   Many folks here in America love to point to Sweden or other Nordic countries as examples of successful socialism.   When I point out that America is the richest country in the world, they will argue that Sweden has a better per-capita income.

However, it really isn't true.  Granted, Norway is ahead of us, but Sweden is chasing our tail.  And if you look at the list, and remove Arab oil countries, the list gets really small, really fast.   And what remains prominent is that the USA has provided a high standard of living for the largest amount of people of any country in the world.    The population of the US exceeds that of the first ten countries on the list, easily.

But is Sweden a socialist paradise?  While they do have socialized medicine (hello, so does the United States, under Obamacare) and whatnot, most of their more radical socialist policies have fallen by the wayside over the years, as they realized that the "third way" was destroying their economy and driving away business.  Even the iconic IKEA company is now headquartered in the Netherlands.

Historically, Swedes have been - and still are - exceptional Engineers, and I am proud to have a number of them as my clients.  And while a small country, Sweden was host to two major car companies and a major aircraft manufacturer.   Today, the SAAB brand of cars is now lost forever.   And the iconic Volvo brand is owned by the Chinese.  What the hell happened to Sweden?

Well, if you read the article above, some clues emerge.   High tax rates punished entrepreneurs and businesses.   Profits were summarily taken from companies and used to buy stock for "the workers" - in an attempt to revert control of major corporations to the pee-pul.   Not surprisingly, companies fled, if they could.

Others sold out.  Volvo sold out to Ford.  SAAB to GM, both near the nadir of Sweden's radical socialist experiment.  Those sales worked out well for a short while, but when the recession hit in America, well, Ford and GM shed those brands at bargain-basement prices.   The Chinese snapped up Volvo, but no one, it seems, wanted the ugly stepchild SAAB.  With only one really "Swedish" car in the lineup (which would not meet increasingly stringent US safety and emissions requirements) there was not much of a brand to sell.   Volvo at least had a brand awareness.  SAABs were sort of niche cars from the get-go.   So after bankrupting one attempted savior, SAAB is basically no more, its brand being bought by a small NEV electric car company in Sweden, which may or may not be producing cars under that name..

Since those days, however, Sweden seems to have abandoned its more socialist impulses.   And as a result, its economy has recovered somewhat.   But the myth of the "socialism success" in that country is just that - a myth.   And anyone who thinks that socialism is a workable model for any country should ask former SAAB workers about that.

Now to be sure, some would blame GM for SAAB's woes.   But GM didn't force SAAB to sell itself to them, the parent company of SAAB put it on the market as it realized that under the market conditions current at the time, making a whole new line of cars would be cost-prohibitive.   And GM realized the same thing, turning SAAB into yet another "badge-engineered" brand, taking GM Opels, Chevy Trailblazers, and even Subaru's and re-badging them with SAAB grills and name badges.   It didn't work.  Not only did it not attract new buyers, those cars drove away the SAAB faithful who recognized them as rebranded GM products.

Meanwhile, in Germany - another small European country (albeit one that once tried to take over the planet), no less than three major automakers are thriving - Mercedes, BMW, and VW group.  Granted, the latter has had to resort to cheating to pass emission tests (the old game of "punch bug" has been superseded.  Whenever you see a VW, shout "CHEATER!" because that's what they are).   Perhaps German Engineering is the reason they thrive.  Perhaps a less socialist economy is another reason.

However, the same socialist tendencies prevalent in many European countries may come around to haunt Germany as well.   The Germans are opening new factories - in the United States.   Labor costs here are lower, regulations less stringent, an energy is cheap as all get out.    Unlike Germany, you don't have to ask permission to close a factory.

It is fashionable these days to declare war on the entrepreneur class, and argue for repressive taxation and regulation.  In the short run, such schemes work.  But eventually, the entrepreneurs give up or move away - realizing that all their effort and risk isn't worth the small paycheck at the end of the day.

In my own life, I see a similar pattern.   I can work hard, make money, and pay about 1/3 of it to the government.   Or I can live off of savings, pay less taxes, and get a 100% tax credit for Obamacare.   You either have to make a shitload of money, or none at all.   Being middle class, sucks.