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Brazil is Saab's safety blanket as Swiss Gripen vote looms
May 16, 2014 / 2:59 PM / in 4 years

Brazil is Saab's safety blanket as Swiss Gripen vote looms

STOCKHOLM, May 16 (Reuters) - Sweden’s Saab faces a possible rejection by Swiss voters this weekend of a $2.8 billion purchase of its Gripen but while a setback in terms of revenues, the deal will have assured the future for the fighter jet regardless of the outcome.

The deal is equal in value to roughly four fifths of turnover last year for Saab and a ‘no’-vote could inject some uncertainty concerning the timing of a purchase of the latest generation of the fighter by Sweden.

All the same, inking the Swiss 2011 deal that may now be over-ruled in a referendum has already given the new version of the fighter a lease of life that was necessary for it to eke out a surprise win of a larger tender to supply planes to Brazil.

“Even if there is a loss in the referendum, Saab won the tender in an advanced Western European country and that was important,” Jan Joel Andersson, Senior Research Fellow at the Swedish Institute of International Affairs said.

An opinion poll carried out two weeks ago showed 51 percent of Swiss voters opposed to the deal, worth 2.5 billion Swiss francs for Saab, while 44 percent backed it. The remaining 5 percent were undecided.

Supporters of a modernisation of the Swiss air force argue the country needs to protect its neutrality and say the deal will provide Swiss businesses with around 2.5 billion francs in off-set deals. But it is controversial because a deal requires cost cuts in other areas, such as education, opponents stress.

Saab’s win of the Swiss tender paved the way for Sweden to commit to continued development of the figher and in turn made it easier for Saab to win in Brazil, Andersson said.

Sweden needed a partner in order to share development costs and Switzerland was highlighted as such in the Swedish parliament decision to buy 60 of the next generation Gripen jets. Since then, a house majority in Sweden has agreed to hike the number to 70 jets.

But after landing the Brazilian tender for 36 jets late last year, beating larger rivals Dassault Aviation of France and U.S. Boeing, Sweden now looks to gain the strategic partner it needs in Brazil.

Saab Chief Executive Officer Hakan Buskhe said earlier this year the ambition was to finalise the Brazilian deal this year.

“As long as the deal in Brazil crosses the finish line, I do not think Switzerland plays a major role,” said Gunnar Hult, professor at the Sweden’s National Defence College.

“If they close the Brazil deal, there will be development of a new Gripen version by Sweden and Brazil.”


The Swiss government decided in November 2011 to back the procurement of the Gripen E as a cheaper alternative to the Eurofighter Typhoon, developed by a consortium of BAE, Finmeccanica and EADS, and Dassault’s Rafale.

The Swiss purchase is a government to government deal where Sweden has ordered 82 Gripens from Saab with an eye to sell on 22 of them to Switzerland.

Swedbank equity analyst Mats Liss said the reaction in the Saab stock was likely to be muted in case of a ‘no’ vote on Sunday. “It (a ‘yes’ vote) has not been priced in to any greater extent,” he said.

While unlikely to scupper the future development of the latest generation Gripen, Switzerland backing out of the deal could still delay Sweden’s 70 plane order as it would likely wait on a final contract being signed in Brazil.

But Sweden has already invested billions of crowns in the project and as such would be unlikely to abandon it, especially as the stand-off between Russia and the West over Ukraine has highlighted geopolitical risks in the region.

“It is possible Sweden would go ahead on its own to develop the new Gripen fighter,” Hult said. “I do not think that was possible before, but now we have a new political situation with Ukraine.” ($1 = 0.8898 Swiss Francs) ($1 = 6.5639 Swedish Crowns) (Additional reporting by Caroline Copley in Zurich; editing by Niklas Pollard and Alistair Scrutton)

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