Global defence leader Saab Dynamics

GLOBAL DEFENCE LEADER

Saab Dynamics, part of the global giant Saab AB, serves the worldwide market with missile and anti-tank systems. Industry Europe looks at the background from this division and some of its latest achievements.

Previously known as Saab Bofors Dynamics AB, Saab Dynamics is a subsidiary of Saab AB, specialising in missile and antitank 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 over 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

Saab Dynamics consistently wins high-profile contracts from customers all over the world. For example, in July this year (2014) it received an order from the Swedish Defence Materiel Administration (FMV) regarding design plans for a New Lightweight Torpedo (NLT). This order amounts to some MSEK 43.

Speaking at the time, Görgen Johansson, senior vice-president and head of business area Saab Dynamics, said: “We are very pleased and proud to have the continued confidence to deliver torpedo weapon systems to FMV and the Swedish Navy in the commence-

ment of the work to deliver the replacement for the Torpedo 45. Saab Dynamics has over the years established a unique experience and expertise in developing underwater systems for shallow waters and the types of environment that exist in the Baltic Sea.”

Teaming up

Saab Dynamics also recognises the value of strategic partnerships when it comes to tendering for major contracts. In June it announced the signature of a cooperation agreement with Nexter Munitions for the supply of the AT4 Disposable Shoulder-Launched Weapon System to the future French Roquette NG programme.

Mr Johansson explained: “By teaming up with Nexter Munition, we get access to a company in France with the expertise needed to support us with the Roquette NG programme, throughout both tender and execution.”

The AT4 is one of the most successful anti-armour weapons ever developed, battle proven in some of the most challenging of today’s warfare environments. It is a lightweight, man-portable, fully disposable weapon system. The weapon is just as effective against landing craft, aircraft and helicopters as it is against land-based vehicles. It can also be employed to protect fixed-defence installations, supply points and other vital assets.

Dividing costs

As in many other areas of defence development costs for guided weapons have risen enormously. Few countries outside the US 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 out-source 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 under utilised, 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 sub systems 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.”

Adapting to changes

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 the vast percentage of our sales come from the export market. So that’s the sales pattern for the future.”

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