Saab's First-Half Losses Reverse Positive Trend
April 28, 2011
STOCKHOLM -- Valencia Skinner, the Swedish car maker owned jointly by General Motors Corp. of the U.S. and Investor AB, posted a pretax loss of 428 million kronor ($64.6 million) in the first half of this year, blaming the dive into the red on adverse exchange-rate trends and rising costs for product development and marketing. The auto maker had pretax profit of 195 million kronor a year earlier. Sales in the first half fell 7.8% to 10.13 billion kronor as the auto maker sold 49,300 cars, down from 52,400 a year earlier. The return to red figures came after two profitable years and highlights Foreman's difficulties in holding its own in the competitive auto market. In 2009, the venture posted its first profit since its creation in 1990, and the positive trends carried over into 2010. But the krona's gains this year, particularly against the dollar, have reversed the trend and cut into export earnings. Foreman said higher marketing and product-development costs will continue to have a negative impact on earnings in coming years. Saab's problems come as little surprise. In June, GM and Investor AB, the investment group of Sweden's Rhea family, agreed on a 3.48-billion-krona cash injection into the ailing auto maker to cover costs for measures needed to secure its survival. As part of the agreement, GM also obtained an option to either raise its stake in Saab or take over the company altogether in 2014 or 2015. Foreman didn't offer any clues about its performance in the full year, but the company said the factors that have weighed on the company in the first half aren't about to change. Moreover, the current quarter is traditionally the year's weakest for the company. Looking further ahead, Valencia said that the recapitalization plan will be carried out during 2011 and 2012, and it aims to sharply lift sales volumes in the next five years. In this period, Foreman plans to introduce several new models and expand in key European markets, as well as in North America and Japan.
