Swiss Reject $3.5 Billion Jet Purchase in Blow to Saab

Swiss voters rejected a 3.1 billion-franc ($3.5 billion) order for Gripen fighter jets, a setback to Swedish defense company Saab AB. (SAABB)

The 22-plane contract, which Switzerland awarded 2 1/2 years ago, was opposed by 53.4 percent of voters, the government in Bern said on its website today. That’s in line with the latest survey ahead of the vote, which showed some 51 percent of people polled opposed the transaction.

“The people have spoken,” said Susanne Leutenegger Oberholzer, a Social Democrat member of parliament. “We surely don’t have the money for such unnecessary acquisitions.”

Gripen opponents had argued that the planes would cost 10 billion francs over their lifetime, money that could be deployed elsewhere. The fighter plane’s supporters said neutral Switzerland needs the Gripen to defend its airspace. That claim got undermined in February with the forced landing of an Ethiopian Airlines Enterprise plane in Geneva. The hijacked plane had to be escorted by French and Italian jets as the Swiss air force doesn’t operate to protect the country’s airspace outside of business hours.

The result is “negative for Saab, but not exactly unexpected given the opinion polls,” Mats Liss, an analyst at Swedbank AB in Stockholm, said in an e-mailed response to questions today. While a Brazil order is more important than the Swiss one, a rejection by Swiss voters means there will be “a period of uncertainty until the Brazil order is finalized,” he said.

Photographer: Casper Hedberg/Bloomberg

Employees work on the production of a Saab Gripen fighter jet at the company's factory in Linkoping, Sweden, on Wednesday, Jan. 13, 2010. Close

Employees work on the production of a Saab Gripen fighter jet at the company's factory... Read More

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Photographer: Casper Hedberg/Bloomberg

Employees work on the production of a Saab Gripen fighter jet at the company's factory in Linkoping, Sweden, on Wednesday, Jan. 13, 2010.

‘Not the End’

“Today’s result requires a thorough analysis,” Defense Minister Ueli Maurer told reporters in Bern today, without saying what solution for the protection of Switzerland’s air space may look like. “An initial one this evening would be premature.” The Swiss Defense Ministry, which initiated the Gripen purchase, has repeatedly said that it will honor the vote’s results.

Saab clinched a three-way contest to replace Switzerland’s fleet of Northrop Grumman Corp. (NOC) F-5 Tigers in November 2011, edging out offers from France’s Dassault Aviation SA (AM) and from the Eurofighter consortium of BAE Systems Plc (BA/), Airbus Group NV (AIR) and Italy’s Finmeccanica SpA. (FNC)

Chairman Marcus Wallenberg told Switzerland’s Tages-Anzeiger earlier this week that a rejection of the Gripen deal by Swiss voters “won’t mean the end of the Gripen’s development.”

The Swedish Defence and Security Export Agency FXM, which is responsible for the Gripen negotiations with Switzerland, said what happens next is a question for the Swiss government.

Swedish Engineering

“The evaluation that preceded the referendum was in itself an excellent testimony to Swedish engineering skills and Swedish industry,” FXM Director-General Ulf Hammarstroem said in a statement on the agency’s website today. “We have had very good cooperation with Switzerland during the more than two years of negotiations and I am sure that our close cooperation will continue in many areas.”

According to mechanical- and electrical-engineering trade group Swissmem, the no-vote will deprive the Swiss economy of 2 billion francs of orders. The compensation deals tied to the Gripen contract “would have secured jobs in Swiss companies,” Swissmem said.

Saab beat Boeing Co. last year to develop fighters for Brazil’s air force in a deal worth $4.5 billion through 2023. Saab is pushing the Gripen against rival offerings from companies also including Lockheed Martin Corp. (LMT), the world’s biggest defense contractor, just as tighter military spending makes U.S. and European orders harder to come by.

Reworking Unlikely

It aims to sell around 400 Gripens over the next 20 years, said Lennart Sindahl, head of the Saab Aeronautics unit. Saab is in “serious talks” with 10 nations which could yield agreements in the near term and “a very significant country” recently made an approach, he said.

Switzerland and Brazil are the first nations after Sweden to pick the next-generation Gripen E, whose development is contingent on an export order of at least 20 aircraft. Thailand and South Africa operate older C-model jets made by the manufacturer of Gripen, which is the Swedish word for griffin.

Sindahl said on May 8 that while the Swiss deal is “a great opportunity” and that missing out would be “very unfortunate,” delivery of 60 Gripen E’s to Sweden and 36 to Brazil would still represent “a very successful start” to the development program.

Sindahl said that a reworked deal with Switzerland is unlikely if voters reject it. “That is up to the Swiss to answer, but I can’t see it happening,” he said.

The Swiss purchase was put up for a plebiscite after opponents collected the required 50,000 signatures needed for a national referendum to cancel a recently passed law. Turnout averages about 40 percent, though it sometimes is higher for controversial measures.

Swiss voters today also rejected the world’s highest national minimum wage, striking down a proposal for an hourly minimum of 22 francs ($25).

To contact the reporters on this story: Niklas Magnusson in Stockholm at nmagnusson1@bloomberg.net; Niclas Rolander in Stockholm at nrolander@bloomberg.net; Catherine Bosley in Zurich at cbosley1@bloomberg.net

To contact the editors responsible for this story: Tasneem Hanfi Brogger at tbrogger@bloomberg.net Zoe Schneeweiss, Jan Schwalbe

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