Saving Saab

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Photograph by Michael Lewis for TIME

Salvage job Muller bought Saab off the scrap heap, but he'll need new products — like the revamped 9-5 — to restore the company

For all practical purposes, the Saab brand was as dead as a Studebaker last January. Abandoned by its owner, General Motors, Saab was pushed into liquidation as GM struggled to save itself. Saab's factory in Sweden was shuttered tight. It couldn't advertise, its dealers were out of cars, and its fans were reduced to writing plaintive notes to GM's management. GM was prepared to let Saab die during a long winter night in the high latitudes.

Small car companies are hard to kill (hello, Rover) since they tend to have loyal followers. After seven months in limbo, the now independent Swedish automaker will test that thesis, introducing its first new model in 13 years: the sleek Saab 9-5. The $48,000 Aero 9-5 sedan boasts a distinctive exterior design; a vroomy 300-horsepower, 2.8-L engine; and enough luxury touches to compete globally with high-end sedans from Germany and Japan, says Saab's savior, Dutch entrepreneur Victor Muller. "We were very fortunate to be there at the right time and the right place to buy an iconic brand like Saab, which was so much worth saving," Muller said during a recent visit to Detroit. "It was against all odds, but we pulled it off."

It helped that other carmakers were unwilling to gamble on picking up Saab's assets. Those assets included its factory in Trollhattan, Sweden, which had been completely rebuilt by GM, and the new 9-5, which was already designed and engineered, says Muller, who paid $74 million in cash — and dumped his Russian partner at GM's insistence — to get his hands on Saab.

A lawyer by training, Muller had previously created his own car company, Spyker NV, which builds a handful of ultra-expensive sports cars each year, succeeding against some very long odds. Muller also got help from the European Union; Beijing Auto, which invested $200 million; and the American dealer network so important to Saab's future, since half the automobiles it produces are sold in the U.S. In addition, a healthy Saab would prompt other carmakers to share technology or purchase Saab's, like its low-emissions, fuel-efficient engine. "It's one of the big cultural changes in this industry since the crisis," notes Muller, adding that Saab will likely share an engineering platform with another automaker for the small premium car he wants to add to Saab's portfolio.

Michael Colleran, president of Saab Cars North America, who was left jobless when GM began closing down the brand last December, has assembled a staff, lined up 207 dealers and signed an agreement with Ally Bank — formerly GMAC, which was once GM's finance arm — to help finance its dealers and customers. That will allow Saab to offer lease deals, which are critical to customers in the luxury segment. Meanwhile, U.S. dealers, many of whom have gone two years without new vehicles to sell, ordered 5,571 new cars — a sign of confidence in the company, Colleran says.

Saab can count on some of its old customers to return. Muller notes that there are 1.5 million Saabs on the road and another 4 million people around the world who once owned a Saab. If he gets a fraction of them to buy a new Saab, the company stands a good chance of surviving.

That won't be enough for success, though. "Saab definitely faces serious challenges, and it's less about the loyalists and more about appealing to younger buyers who may not remember the classic Saabs," says Rebecca Lindland, an analyst with IHS Global Insight. "It needs to reinvent itself to become relevant." Saab has an opportunity in China and Brazil, since it can offer a European alternative that isn't German. "But it needs to differentiate itself with creative, reliable, interesting products," Lindland says. To aid that effort, Saab is preparing its first new advertising in more than two years, which will emphasize the company's return to its Scandinavian roots.

GM bought Saab in 1990 to add a luxury brand to its European portfolio but racked up cumulative losses of more than $2 billion. In its best year, Saab never sold more than 135,000 units. The new Saab is reducing its break-even point — in part by trimming factory staff from 4,700 to 3,400 — so the company can be profitable selling only 80,000 or 85,000 cars.

The aim, of course, is to sell a lot more than that, and the new 9-5, the first complete model overhaul in 13 years, is the starting point. The 9-5 comes with a top-notch suspension, crisp steering and a turbocharged engine that will take the car from 55 m.p.h. (89 k.p.h.) to 90 m.p.h. (145 k.p.h.) in an instant. The comfortable interior remains true to Saab's tradition of wrapping the driver in an airplane-style cockpit.

Beyond the 9-5, Muller says, the company already has three new models in the pipeline, including the 9-4x, a crossover SUV built by GM to Saab's specifications; a wagon version of the 9-5; and a new 9-3, which will debut in 2012.

With new products and stepped-up sales in China, Russia and Brazil, Saab is confident it can sell as many as 125,000 units annually, "at which point we would be quite profitable," says Muller. He is predicting Saab will be in the black by the middle of 2011, which is pretty good performance for a dead brand.

This article originally appeared in the August 30, 2010 issue of TIME Europe magazine.