(Adds detail, quotes)
By Madeline Chambers
FRANKFURT, Nov 27 (Reuters) - General Motors Corp's loss-making Saab unit said on Wednesday it planned to cut 20 percent of its workforce, or about 1,300 jobs, in an overhaul aimed at improving the Swedish car maker's financial situation from 2003.
Saab said the the job cuts, mainly in Sweden, would be accompanied by a streamlining of its engineering organisation and cooperation on cost cuts with other GM units in a bid to improve efficiency in all areas of the business.
"The aggressive efficiency program presented today aims at enabling the company to substantially improve the financial situation beginning in 2003," said Saab in a statement.
It did not say when it expected to return to profit, and a GM Europe spokesman declined to elaborate on the statement.
The restructuring plan has been dubbed Viggen -- the Swedish word for Thunderbolt and the name of a fighter jet once built by Saab Aerospace -- to underscore the urgency of GM's desire to repair a key component of its European operations, which are struggling against declining demand and fierce competition.
Production capacity is now outstripping demand in Europe by around 30 percent, forcing downsizing actions among other car makers, including Fiat Auto , which is also 20 percent owned by GM.
Saab Automobile blamed start up costs for its new 9-3 saloon, investments in its main Trollhattan plant and a deteriorating dollar exchange rate to the Swedish crown for a first half loss of 1.2 billion Swedish crowns (US$131.4 million).
Saab, whose brand has lost some of the cachet it enjoyed among young urban professionals in the late 1980s, has posted financial losses in 10 of the last 12 years and last reported profits in 1994 and 1995 following the launch of the revamped 900 car.
Analysts say Saab may post an operating loss of about 500 million euros this year, but note that the brand still has potential for GM as a premium European product.
"From an image point of view, Saab is important for GM Europe," said Michael Raab, auto analyst at Sal Oppenheim in Frankfurt.
The unit hopes new versions of the new 9-3, including a station wagon and convertible, will help to boost revenues and return Saab to profitability.
The Swedish unit has already cut its unit sales target for this year to 125,000-130,000 from a previous goal of 140,000 and aims to sell around 200,000 vehicles per year by about 2005.
ANOTHER HEADACHE
GM Europe, which also includes the Vauxhall and Opel brands, also in the midst of a restructuring, has already said it will miss this year's target of halving its full year loss to $350 euros from last year.
According to data from European carmakers association ACEA, GM's western European market share has slipped to 9.9 percent in the first 10 months of the year from 10.9 percent in the same period a year ago and Saab's share is unchanged at 0.5 percent.
"In view of the aggressive action plan to improve Saab's efficiency and to increase its volume and revenue base, we are confident that the company is now on the right track," said GM Europe President Michael Burns in a statement.
"Saab plays a key role in GM's brand portfolio and has full access to GM's capabilities," he added.
The measures, which Saab hopes will improve productivity by 20 percent in manufacturing include 800 job cuts in production, 450 in the engineering organisation and 50 in sales and marketing. The southern Swedish city of Trollhattan will take the brunt of the job losses.
"This is a difficult situation for the employees affected by this and for the city of Trollhattan," said Saab Automobile Chief Executive Peter Augustsson in a statement.
"We will closely co-operate with the unions, the county council labour committee and other affected parties in order to handle the redundancies in a responsible way," he added.