Volvo, Saab Chase Faster Competitors in US

SWEDEN'S carmakers are facing trying times.

Poor sales performance in the United States market, which accounts for one-third of both Volvo's and Saab's worldwide sales, has seriously affected the parent companies.

US sales of Volvo cars dropped from a high of 112,000 units in 1986 to its current 67,000-unit level, says Robert Austin, a Volvo spokesman. Through 1986, sales tax paid for automobiles was deductible on personal income tax returns. Unlike other recessions that hit blue-collar workers, this downturn affected white-collar workers who are the main buyers of Volvos, Mr. Austin says.

Volvo Personvagnar AB, the passenger vehicle producer in the Swedish AB Volvo group, plans to close two of its three factories and to lay off 2,400 of its 50,000 work force in 1993. Last year, Volvo sold 275,000 cars worldwide, down 14 percent from 1990 due to a sales slump in the US, Britain, and Sweden. Volvo lost $345 million on its car sales last year.

Saab Cars USA Inc., whose parent firm is jointly owned by Sweden's Saab-Scania and General Motors Corporation, recently trimmed 2,000 people from its 9,200 work force. Saab has not been profitable since the end of the 1980s, says Steven Rossi, company spokesman. It lost $411 million last year.

One of the Swedish carmakers' main problems is their slowness in introducing new models to the US market, says Susan Jacobs, president of Jacobs Automotive, an automotive forecasting consulting firm. "Saab and Volvo ... have a product that has been in the market for long time." Saab's 900 model was first introduced to the US in 1979. Japanese carmakers introduce completely redesigned models every four years, whereas European carmakers often have an eight-year product cycle. And even if Europeans come up with a new model, it is an updated version of an existing model rather than a radically redesigned product, she says.

"We don't turn around platforms as quickly as they [the Japanese] do," Mr. Rossi says, but "we're catering to an audience that looks for a long-term market investment value."

"Among the European carmakers, Volvo and Saab are hit hardest by the Japanese carmakers," Jacobs notes. Lower-end models of Lexus, Infiniti, and Acura are targeting Volvo and Saab in the affordable luxury transportation market.