Thoughts regarding GM’s statement about Chinese ownership…

So it’s Friday again and we get news that could make us worried. In this case it is not that surprising. I for one did never expect that GM would just give green light without having a deep thought about it. They know Youngman from the sales process in 2009 when they showed up to take over the Saab brand, albeit without the intention to save the company.

While of course I don’t exactly know about the reason for that statement there are a few issues that could make the negotiations about a sale to Pang Da and Youngman difficult. I don’t want to jump on conspiracies here like GM wants to extinct Saab. This would make no sense since GM earn quite some money from license fees, supplying parts and building the 9-4x without facing a serious threat in sales.

A quote from the WSJ article TimR published earlier:

β€œGM would not be able to support a change in the ownership of Saab which could negatively impact GM’s existing relationships in China or otherwise adversely affect GM’s interests worldwide,” said GM spokesman Jim Cain.

So what are GM’s interests worldwide? The first thought would be that it is about the IP featured in the Saab models. While we don’t know what is featured in the next 9-3 I believe we could say that the IP featured in the current 9-3 and 9-5 is no longer that exclusive that it would justify such a move by GM. The elder 9-3 was even sold to BAIC. I think we can rule that out for the current models.

Second thought: in China GM is pretty successful. A big seller seems to be the Buick Regal. Being a sister model of the 9-5 GM may not want too much competition here. They even banned Opel from going to China, which, from a global strategy where to position the different brands may make some sense. But there may be more than that since I don’t think the 9-5 would be a huge threat for the Regal in the near future.

My third thought is about the current partnership that exists between GM and SAIC, who both hold equal shares in the joint venture Shanghai GM. It may well be that their contracts contain certain clauses that deter GM from allowing other brands to use the same IP as in Shanghai GM in China. It would also explain why Opel can’t expand to China, and it would of course apply to Saab, too. And it would be the toughest case to negotiate because the NDRC would most likely not interfere here. They may even be the ones who asked for such a clause.

To paint a complete picture of how complex this situation is you also have to keep in mind that GM as a big supplier to Saab may not be satisfied with the payment plan Pang Da and Youngman are going to offer and want to put some pressure on them. And then there is those shares GM still has in Saab, worth $326 million. Those shares could be converted into SWAN shares in 2016 if I remember correctly but what is that worth if SWAN is no longer the owner of Saab? I haven’t read anything about that issue yet. But I could imagine that GM would like to sell those shares at some price. There were those rumors a while ago that they offered those shares to VA for a discount price.

You may weigh those issues by yourself and make your own conclusion. But remember that those are just my thoughts and to me there is no room for conspiracies in here. I am pretty sure this flat out about business interests or obligations.

So am I worried now? Not really. Those problems were foreseeable for SWAN and their Chinese partners. We learned that getting approval from GM is the job of SWAN, if not to say Victor. He is surely one who knows how to handle GM. And in addition to that, he did never show up without a backup plan. And I have a feeling that this time will be no exception from the rule.

JH
Member
4 years 10 months ago

Nice sum-up, Till, thank you! Do you think that Saab support convoys with the message “GM – please approve the Saab sale” would be of any help this time? It most certainly helped last time Saab’s future was dependent on a decision by GM.

Jeff
Member
4 years 10 months ago

Not yet JH, if at all. If that time were ever to come, we’ll let you know πŸ˜‰ Like I said before, when all the info is out there, you may be thanking GM.

GerritN
Member
4 years 10 months ago

Like preventing Youngman to bleed all Saab IP to China?

wharriso
Member
4 years 10 months ago

how about getting back [not going backwards] a clientel that fit the saab brand.is gm actually fearful of product that they bulldozed under or is it just another case of corporate arrogance!

ArchDandy
Member
4 years 10 months ago
I have a feeling that today’s Saab on playing the game, not playing. That GM has problems to accept the thought of fear of being ousted by Saab. GM has probably no choice but to say yes to Saab / Youngman / PangDa. And speaking of nothing, I was at my local dealer yesterday. He was responsible for Peugeot but said that Saab was actually one of the good car. He even brought Saab Peugeotand said that Saab was one of the best cars on the market. Which of course I already knew, but the fun of a Peugeot salesman… Read more »
BoeBoe
Member
4 years 10 months ago

The loan won’t be converted into shared. SWAN has to pay the loan back. There is no option to convert it into shares (the loan already exists of shares, in Saab).

Alex740
Member
4 years 10 months ago
As you said, we have no idea what IP is in the new 9-3 but my guess is that given that it won’t even have a GM sourced engine and the platform is so heavily modified that Saab can call it it’s own, perhaps not a lot but what do I know? Makes me wonder if Saab would consider dumping all of it’s GM sourced products like the 9-5, 9-4x and current 9-3, stay shut down, focus on the 9-3 and get a completely fresh start with only one model. Is this completely crazy? I know there are dealers, etc,… Read more »
Mark
Member
4 years 10 months ago

I don’t think Saab would do anything as drastic, but I do think it will move much quicker to replace the NG9-5 and the 9-4x than it originally planned. Getting them away from GM IP and onto the Phoenix platform would allow some Chinese production to occur without obstacles from GM.

Jeff
Member
4 years 10 months ago

GM isn’t as bad a partnership as everyone makes them out to be here. As I look back in retrospect, they’ve been incredibly patient and good to Saab’s interests during and since the original sale. Saab certainly would like to consolidate on Phoenix, but reaching breakeven and launching the new 9-3 will almost certainly consume the next 2-3 years of investment.

Mark
Member
4 years 10 months ago

I was just saying whatever Saab would like to build in China will likely have to be non GM IP. That being the case, it will probably hasten the abandonment of existing models that utilize GM IP. If Saab’s buyers want to manufacture a range of Saab models in China, that’s something they will have to face.

Chris Hansel
Member
4 years 10 months ago

Jeff;
Well spoken, many here would like to blame GM for everything. GM will agree to something here, just as they did before.,and for the same reason, they do not want Saab’s blood on their hands. Who is the real enemy? That very arrogant isolated view that if “we build it they will come” . Well they built it, and the world didn’t come. The Chinese will trash that thinking ASAP, and correctly so.
Take Care
Chris

74StingSaab
Member
4 years 10 months ago

Well said Till, as always.

johna
Member
4 years 10 months ago

Wishful thinking:

GM has the clout to lever Muller & Antonov back in.

Saab232
Member
4 years 10 months ago

I don’t consider Antonov wishful thinking, we were down that road before.

Here’s wishful thinking. GM knows Victor has a plan B, and their initials are NSC. And they make this whole China thing go away before GM ever has to make a decision about it?

That’s wishful thinking!

mikes1929
Member
4 years 10 months ago

So who is on board with going to Detroit to start “Occupy GM”? Lets start the revolution!

davidgmills
Member
4 years 10 months ago
How about occupying some European Company that can actually buy Saab outright and quit all of this hodge podge purchase bs. Way too many cooks in the kitchen. Meanwhile my 2011 9-5 is still in the shop after 62 days for repairs that my insurance company said should take 8 days to fix. The body shop has no idea when the remaining parts will get here. Even a Saabophile has a limit on patience. And the dealers here who can’t sell cars can’t make money fixing them either. Forget production. Unless Saab quickly gets its parts supply line going nobody… Read more »
adams
Member
4 years 10 months ago

BMW … Saab AB …

Procyon
Member
4 years 10 months ago

GM is a dangerous adversary.

davidgmills
Member
4 years 10 months ago
Most companies that are owed $300 million + usually are. Frankly, I am beginning to think it is in GM’s best interest that Saab go under and GM knows it. Probably should have taken their losses two years ago. I can’t see how this sale to Saab has helped GM in any way. Frankly, GM did a much better job of keeping an adequate supply of parts and had Saab gone under when in GM’s hands, I think parts would have continued to be available in the US. Now it seems like no Saab cars are getting fixed.
Jeff
Member
4 years 10 months ago

I get how pissed you are about your Saab’s condition David. I will personally do my best to make sure your 9-5 gets the parts it needs. Just a little more patience man. Saab will be viable again soon.

davidgmills
Member
4 years 10 months ago
Strange as it may seem I’m not that pissed. I’m lucky I have a spare car or I probably would be pissed if I was having to lease one. What I am is concerned. Concerned that Saab will never be stable enough in the US to feel like Saabs can be reliably fixed in a timely manner. GM did a lot to build up the Saab brand and Saab dealerships in the US and they are quickly going out of business. And we are predicted to go into another major recession after really not getting out of the last one.… Read more »
EuroDriver
Member
4 years 10 months ago

GM’s only inspiration is the profit motive. Getting rid of another “competitor” would be in their best interest. IF Saab does get into China, I highly doubt they will ding the GM stats in China. But for every person that would’ve bought a Saab in China, that would be one less GM car sold. Yes, I know that there are more competitors, I’m hypothetically speaking.

Bravada from GMI
Member
4 years 10 months ago

The “shares” GM holds in Saab are “preferred shares”, they are a debt instrument. They are not converted into Saab shares, but rathe entitle GM to a fixed dividend and prinicpal repayments until 2016. This instrument is a form in which “Saab paid for itself”, or actually the 326 million that was not paid in cash, but deferred, in part depending on Saab’s future profitability.

Jeff
Member
4 years 10 months ago

Yep, and what GM really controls is the technology and suppliers. No GM approval means no production, period.

SaabSouth
Member
4 years 10 months ago

I think this is where the Chinese have screwed themselves. In the previous deal they were buying a controlling interest in SWAN now they are buying 100% of Saab AB not SWAN, this gives more power to GM and VM knows it……..

Toby K
Member
4 years 10 months ago
I do not understand the cross shopping argument that GM might have concerns about-it like comparing Nissan to Audi-I would never buy GM its Saab Volvo, Jag or the german kit for me-I am not alone in these thoughts, GM never figure, I would estimate this to be a ratchet to milk the deal in their favour-but any real impact for GM? The chances are slim. They will ofcourse continue to provide and benefit from their IP that Saab already has for some time to come, as volumes increase irrespective of the market. Frankly the only analysis which puts GM… Read more »
jgwich
Member
4 years 10 months ago

GM will always be the problem. They have no interest in saving SAAB. They have no feelings like “SAAB was our child. We have still responsibility for them.” No: SAAB is only a competitor. Sorry, this is the only realistic perspective. Look at Opel. They are still a member of the GM family but they are not allowed to sell cars in the growing markets or on the US market . Why should they helb SAAB?

davidgmills
Member
4 years 10 months ago
They bought Saab. They owner financed the sale of Saab. They are still owed $326 million dollars on the sale of Saab. Would you just piss off $326 million if you were them? I really get tired of the GM bashing. Yeah GM didn’t help Saab as much as it could have or should have but GM obviously has had its own serious financial problems for 15 or 20 years. Maybe GM should have never bought it in the first place and maybe Saab would have gone under 15 or 20 years ago. But GM did some very good things… Read more »
Chris Hansel
Member
4 years 10 months ago

+1

Peter Gilbert
Member
4 years 10 months ago

When you see how many people live in China and SAAB were to compete with GM then look how many more GM components would be in those cars! The problem is the UAW Union and their GM HQ at at 1600 Pennsylvania Ave.

Chris Hansel
Member
4 years 10 months ago

Spoken like a true believer in the tea party, a.k.a, the party of no. Is it possible you are American?
I would not want to confuse you with a neo- confederate, that would be unkind.

PPSwiss
Member
4 years 10 months ago
I just hope that GM will consider only the business reasoning with this whole Swan/Saab/PaDang/Youngman-Lotus deal – which can only be: what is better: losing everything now, or getting something back later……..what would they get out of the liquidation of Saab? and in comparison: what would they get out of a change of ownership? Anything else should be left completely out of the equation. At the end of the day, it’s going to boil down to that – hopefully. About Saab being a competitor: GM should be comparing themselves to and targeting the German competition -> Saab’s role is to… Read more »
davidgmills
Member
4 years 10 months ago

Well, all the niche automotive companies in the US are long gone. It is very hard to be a niche player in the automotive business because you really have to rely on your competitors or their suppliers to help you produce your own product.

I am not sure how much sense it makes for GM to keep hoping that a niche player will ever be strong enough to pay GM back the $326 million it is still owed for selling Saab.

Mark
Member
4 years 10 months ago

Had GM shuttered Saab like it planned, it would’ve probably kissed goodbye to more than $326 Million.

davidgmills
Member
4 years 10 months ago
GM has the right to do whatever it wants to with its assets, of which Saab was one. It shut down Oldsmobile, Pontiac, Saturn and Hummer. It sold Saab because it finally found a buyer. But the buyer just didn’t have enough financial resources to make Saab viable. Technically, since Saab is now in default, GM as owner of all of these shares which are really debt, has the right to foreclose on Saab, and to sell off whatever assets of Saab that are left. So maybe GM could get some of the $326 million still owed to it back… Read more »
KaiC
Member
4 years 10 months ago

‘And then there is those shares GM still has in Saab, worth $326 million.’…..
The $326million(VM did not paid) is now worth 6million.(in this Saab/Pand da/Youngman deal)
GM signed a deal about the intellectual property rights with Saab in 2009.It was declared GM had the right to share the technique of the new engine ,turbo,vehicle,safety even the technique Phoenix platform till 2014.So GM have their benefit in Saab.They are also the suppliers of Saab parts. GM absorb the the technique and build the Buick brand and kill the OPEL brand and let Saab be…..That is what has happened these years.

davidgmills
Member
4 years 10 months ago

Wrong. The $326 million in shares were really a loan; they were not regular shares.

KaiC
Member
4 years 10 months ago

You said right .I just want to say something for this sentence
β€˜And then there is those shares GM still has in Saab, worth $326 million.’…..(see this above in the article).

In this Swan/Saab/PaDang/Youngman deal the $326 million were cut to 60million(sorry for my mistake with the previous amount ) .

Moody Saaber
Member
4 years 10 months ago
Little Red Riding Hood Fairy Tales of Charles Perrault Once upon a time in the middle of a thick forest stood a small cottage, the home of a pretty little girl known to everyone as Little Red Riding Saab. One day, her Mummy waved her goodbye at the garden gate, saying: “Grandma is ill. Take her this basket of cakes, but be very careful. Keep to the path through the wood and don’t ever stop. That way, you will come to no harm.” Little Red Riding Saab kissed her mother and ran off. “Don’t worry,” she said, “I’ll run all… Read more »
Jeff
Member
4 years 10 months ago

There are two uncannily smart comments on this page. Yours and one other. I’m impressed.

TurboLover
Member
4 years 10 months ago

oh my, it is the Bavarian conection. :-0

Khrisdk
Member
4 years 10 months ago

The Illuminati or those other guys?

TurboLover
Member
4 years 10 months ago

lol πŸ˜€

TurboLover
Member
4 years 10 months ago

I take that back. The other smart comment is about the advantages in buying big white birds

Allan B
Member
4 years 10 months ago

Yeah, could somebody savvy please explain it to those of us at the back of the class? πŸ™‚

Khrisdk
Member
4 years 10 months ago

Sometimes it is nice to stay in the back of the Class whilst the learned and outspoken up front makes suggestions.. πŸ˜€

spacy
Guest
4 years 10 months ago

.
I suppose the greater problem for GM, is it’s other contractual obligations to the Likes of BAIC.

When GM sold the OG 9.3 & 9.5. those deals would now be infringed if YPA have access to Current 9.3 & 9.5 as many parts are still GM.

Even if GM wanted to help, they may not be able to because of other deals done since Saab was sold to VM.

The other point, which I have not see mentioned [unless I missed it] is the use of the Saab name….by YPA..!!

Jeff
Member
4 years 10 months ago

Even I forgot about that, though since we haven’t heard it mentioned as an issue I’m not sure that it is. Anyone on the Swedish side know?

Pedro
Member
4 years 10 months ago

I think the statement by GM’s spokesperson is actually quite simple and straightforward: GM won’t compromise its business relationships in China, period. The logical consequence is that GM has to at least consult with their Chinese partners before making a decision.

Let’s wait.

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