Global defence systems Saab Dynamics

GLOBAL DEFENCE SYSTEMS

Saab Dynamics serves the global market with missile and anti-tank systems. Industry Europe reports on a small Swedish company with a long history.

Previously known as Saab Bofors Dynamics AB, Saab Dynamics is a subsidiary of Saab AB, specialising in missile and anti-tank systems. It also has excellent industrial underwater competence. Main product areas cover torpedoes, ROVs, UUVs and Underwater Data Acquisition Platforms.

Its headquarters and main operational centre is at Karlskoga, 240km west of Stockholm, and there are other important bases at Linköping and Eskilstuna. It currently employs nearly 1500 people.

Its corporate heritage has roots in Bofors, founded in 1646 to make cannon, and Saab’s aviation interests, which started around 1937. In 1999, Saab purchased the Celsius group, the parent group of Bofors. The company has two core businesses: complete missile solutions and short-range support weapons.

The company is prime contractor for the Swedish defence forces. Although relatively small when compared to the competition, Saab Dynamics is also a significant player on the international market, both as a system supplier and as a partner. Exports account for more than 80 per cent of the company’s order book.

Recent contract

In January 2013 Saab signed a contract for the delivery of autonomous underwater vehicle systems, AUV62, in training configuration. The order has a total value of SEK 269 million and comprises supply and long term maintenance and support of AUV62, the latest version of the advanced training target for Anti Submarine Warfare (ASW) training.

“We are very proud of the confidence our customers place in the AUV62 system and are satisfied to have been able to secure this order for the system.” says Görgen Johansson, senior vice-president and head of Business Area Dynamics.

The industry’s nature is such that depending on circumstances concerning the product and customer, information regarding the customer will not be announced.

The AUV62 is an advanced and highly modern and capable system for cost-efficient training of a navy’s ASW forces. The AUV62 is an artificial acoustic target that mimics a submarine in a way that is compatible with any torpedo and sonar system on the market today. The AUV62 system fully replaces the use of a submarine in the role as a manoeuvring training target. With the AUV62, Saab offers a state-of-the-art training capability for demanding customers investing in the future.

System deliveries will take place during 2014 and 2015, followed by long-term maintenance and support of the systems.

Dividing costs

As in many other areas of defence development costs for guided weapons have risen enormously. Few countries outside the USA feel they can afford to develop advanced missiles on their own. This has caused many countries, including Sweden, to participate in cross-border missile development projects.

“It’s a very big portion of our spending,” says a company spokesperson. “But it’s tricky to say just how much. While we have our own budget for development, some is taken on by our subcontractors and partners.

In addition to meeting the high costs of development, another reason for international collaboration is to form credible competition to the US defence industry.

Lean and light

A high proportion of the company’s production is contracted out, in many cases to factories and workshops that Saab previously owned but has since sold off.

“Our strategy since the formation of Saab Dynamics has been to outsource our production facilities. The previous company Bofors produced everything. We had our own steel production at one end of the factory and at the other end we produced guns and ammunition.

“But that cost money. We had very modern, paint workshops, electronic and mechanical workshops, with a lot of investment tied up in state-of-the-art machinery and equipment. But with the limited size of our orders they were underutilised, by up to 70 per cent.

“So, we sold them to companies working on the commercial civil market. Because their markets were less specialised they could secure jobs and increase the number of employees, while we were no longer lumbered with big capital investments in a volatile market.

“The only production we now have is the final assembly and tests. No components, no subsystems are produced within the company. It’s subcontractors all the way.”

While reliance on subcontractors gives Saab Dynamics more flexibility, it does mean the company has to pay close attention to quality control and compliance monitoring.

“Our purchasing department has become more and more vital for the company in that they are very, very professional in buying,” says the company spokesperson. “In the R&D section they must be very specific in terms of handing over all the specifications for what should be bought quality-wise, and everything must be very well-specified and controlled. During the years that we have been active that the purchasing department is much more important today than it used to be.”

Changing world

The future of Saab Dynamics is rooted in the sea changes that have affected the defence industry in the past decades. “During the cold war, Sweden had a powerful domestic defence industry. We designed and produced our own submarines, fighter aircraft and missile systems and most of the equipment for the forces in Sweden was produced within Sweden.

“Now the size of our army has shrunk by more than 90 per cent and defence contracts have reduced proportionately. Where once we could rely on a strong domestic market and could double that income through exports, now 85 per cent of our sales comes from the export market and just 15 per cent from our own country. So that’s the sales pattern for the future.”

The nature of the product has changed, too. For example, sales of the more advanced tank killers and anti-tank missile systems have fallen since the collapse of the Soviet threat. On the other hand, the company sells more of the light anti-tank systems, which are more appropriate to smaller, highly mobile campaigns such as those in the Balkans, Iraq and Afghanistan. Another trend which is very obvious now is internationalisation of the market. Sweden will never again buy a major system just for Sweden.

To exploit these changes, Saab Dynamics has established a strong presence in markets outside Europe. n