No Saab Story Here

By Richard Pettibone, Forecast International

saab

As it faces an austere and highly competitive global defense market, Saab is building its strategy to increase revenues and profits.  Under this effort, the company plans to reduce costs and focus on successful niche markets and opportunities abroad.

While cost reductions have been ongoing throughout its operations, the company has so far maintained a high level of R&D. Much of this funding will be targeted to niche areas, especially the growth market of unmanned vehicles.

Around the globe, Saab has been quite successful in building its presence.  Through a series of acquisitions and joint ventures, Saab has been aggressively penetrating new markets in India, Brazil, and most interestingly, the U.S.

Though not without risk in this downturn/recovery, the push into the world’s largest defense market does make sense.  However, with U.S. defense spending set to be reduced, Saab may face some difficulty in penetrating the market.  The pressure from the U.S. government to buy local will be high in the face of budget cuts and the resulting layoffs at manufacturers.

A big part of this drive will entail Saab establishing partnerships with U.S. aerospace and defense firms.  Such teaming would make the acceptance of Saab products for military consumption all the more palatable if it is perceived as supporting a local firm as well. True to this strategy, the company teamed with Boeing in late 2013 to offer a new, clean-sheet aircraft design for the USAF T-X trainer program.

Saab’s operations in the U.S. have also been consolidated under a new organizational umbrella, Saab Defense and Security USA (SDAS).  This new organization includes Saab Training USA, Saab Barracuda, Saab Support and Services, and the defense-related operations of Saab Sensis.  SDAS will focus its energies on providing defense and homeland security systems and services to the U.S. market.

Gripen_JAS39E

In South America, Saab scored a major coup when its JAS 39E Gripen NG was selected to fulfill the needs of Brazil’s FX-2 fighter competition.  The Gripen beat the Dassault Rafale and Boeing F/A-18E/F Super Hornet after a lengthy tender process. The deal is for the purchase of 36 fighters for an estimated cost of $4.5 billion. The contract is expected to be finalized by December 2014 and completed by 2023.

However, along with the good news the company had to deal with the bad when Swiss voters rejected a proposed acquisition of 22 JAS 39E Gripens. The deal, which had been worth an estimated $3.5 billion, was opposed by 53.4 percent of the voters. A reworked deal with Switzerland is considered unlikely in light of the vote. Despite that setback, Saab is proposing the Gripen for upcoming fighter procurements in Bulgaria, Croatia, Denmark, Greece, Malaysia, and Slovakia, among others.Next Generation SubmarineAt sea, Saab expanded its maritime activities with the purchase of the Kockums submarine yard from Germany’s ThyssenKrupp Industrial Solutions AG. The acquisition was pursued after a falling out over price and submarine exports between Sweden and ThyssenKrupp.  As a result, Sweden pulled A26 submarine work from the firm and tasked Saab with coming up with a plan for the country to maintain an indigenous submarine-production capability.  Under the $50.5 million deal, Saab will acquire operations in Malmö, Karlskrona, and Muskö and add around 900 employees.

All told, Saab has been very proactive in adapting to the new aerospace and defense marketplace. Although it has at times been challenging, Saab has proved over the years that it can adapt quickly and successfully correct its course. With competition in these markets becoming even more fierce as government spending declines, this skill will be critical in the years ahead.

@RPettiboneFI

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