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GM and the bidders

February 13, 2012 in Editorial

On this weekend a rumor surfaced that Mahindra may not make a bid for Saab because GM won’t grant any licenses to them for the current Saab model range. At first look this gives the impression like it was a rumor put together from bits of what happens in the past and conclusions of how things could happen now. After all this may also be a try to get Mahindra talking as they were pretty quiet recently. But those indiand do usually not speak while they are working. I don’t know if this is what makes them so successful (just look at the worldwide network that Mahindra has in various branches) but I have to admit that I like this attitude. Thus, even if I don’t believe this rumor for now, I would find it very sad if Mahindra would seriously leave the bidding process because of GM’s behaviour. I would have seen them a a pretty good fit for Saab since they have a blank spot in their automotive portfolio above Ssangyong. Saab would even come with a hurt but still existant worldwide distribution network – something that Mahindra would surely long to have.

Nevertheless it made me think. There was something in all these things we got to hear over the past weeks but I did not really get it. While many of us (even me sometimes) tend to see GM as a spoilt child that is obsessed by beating up those who might become successful besides it I always try to understand their behaviour from a business point of view. In the end GM is just another company that is driven by shareholder value. So, pushing all stereotypes and prejudices aside, there must be some kind of logic in this.

Let me start this with a short look at the sales process in 2009. There were a lot of parties rumored to be in the process but what we knew about were Renco, Merbanco and Koenigsegg, who then were chosen by GM for final negotiations. As they left Spyker showed up, reached the status as preferred bidder and then finally struck the deal. One of the much rumored big players that did not make it to the finals was Fiat who then ended up with a stake in Chrysler. From today’s view and looking at their strategy I’d say that it is quite likely they were in there. And I am pretty happy that they left – or were told to leave – if I look at what they are doing to Lancia at the moment. Badge engineering at its best.

Over the past months we saw PangDa and Youngman trying to get a stake in Saab. We heared about lots of possible deals, from the 54% stake in SWAN to a 100% takeover of Saab and some adaptions of those. GM blocked all of those but it is said that the original deal is one of the rare occasions where they would have agreed. We all know that did not help and Saab had to file for bankrupcy.

What we are facing now is a bidding process with five players: Youngman, Brightwell Holdings, Mahindra, an European car manufacturer and a Swedish consortium. We can’t really judge the I think when it comes to Youngman we can be pretty sure there will be no agreement with GM. Brightwell Holdings on the other hand have always been stating that they are in talks with GM and feel pretty optimistic to succed. Then yesterday the rumor came up that Mahindra may back out because GM won’t license to them. A contradiction? At first but on a second thought not at all.

The key is that GM won’t make any deal with a car manufacturer. Not in 2009 and not today. You may want to argue about Koenigsegg and Spyker but those are to small to be considered car manufacturer in GM’s scale. But Mahindra would be a big player that could be a threat to GM in emerging markets in Asia. Youngman could be that, too, but in addition to that they may have lost a bit of credibility for GM during all those plays in the negotiations last year. Another reason for the protective stance of GM towards a Chinese owner may be SAIC, who are just about to revive the Shanghai premium brand in China. Autonewschina.com said it may be based on the platform od the Buick Regal – they would surely not want someone else to come to the market with a similar car if they can have their say.

So does that mean that a company like Mahindra will leave the process? Not nessesarily. As Youngman showed there may be opportunities to get by GM if you are creative enough. If such an idea can be viable depends a lot on your financial power to bridge the time with few production and on the real timeframe for the development of the next 9-3 and further models on the Phoenix platform. In the end, this of course gets back to financial strength, too. So a big player could surely find a way to get Saab back on track even without or with less support from GM. Still, the road would be even tougher than if you could restart with the existing portfolio.

I believe we get more answers within the next two weeks. So please stay seated and buckled up until the process has reached its parking position.

53 responses to GM and the bidders

  1. Perhaps we could get together again (those gatherings are cool, and I do not mean the temperature) with big signs saying “don’t give up Mahindra, we want to pay you hot cash for new Saabs you will build” (well perhaps “don’t give up”, as the more verbose full quote wouldn’t quite fit on stickers and banners).

    BTW, did anybody go in-depth into the business plan submitted by VM to the bankruptcy court when they were looking for creditor protection? So far it’s the only business plan we have seen for Saab (that is, one that contained numbers). I am sure it is in many ways unrealistic, but perhaps we could collectively see whether chaging the plan to reflect reality would make Saab a reasonable investment?

    • Don’t you think we’d better wait for a while with stuff like that until Mahindra have provided at least some info on what they will or won’t do? So far they haven’t even confirmed or denied that they are one of the bidders or even that they are interested.

      BTW, I agree on those meetings beeing cool.

      Ivo

  2. I`m getting rather fed up with the oft repeated phrase “within the next two weeks”. When will someone involved in these discussions inject a sense of urgency and get things moving QUICKLY!

    • I can understand and sympathise with Tony,s comments. It seems we have been hearing those words, ” next 2 weeks ” for almost 12 months! Yes, I know there have been so many unexpected twists and turns but those few words do seem to resonate with me I have to say.

  3. Tony, despite all urgency there is no use in a quick solution that brings is back to where wie are now within two years. But it looks like the end of february seems to be a crucial date.

  4. I have come to the firm conclusion that whatever happens to Saab from now on it would be completely out of our interests or concern (I mean for the Saab community/owners). Whatever happens from now on it will totally not relate to us.
    Sorry, but everything else is just mumbo-jumbo and nothing more!
    Unfortunately, the Saab company we all knew and value has passed away months ago. And the sooner we believe it, the better would be!

    Every buyer interested in acquiring Saab now , has their own plans and interests in mind! I am not naive to believe what they say. Whatever they do, they do it for their own purpose only and nothing else.

    Youngman wants to acquire technology and start building cars in China
    Brightwell wants to acquire technology and start a national brand in Turkey
    Mahindra wants to acquire technology and start building new models elsewhere,
    etc, etc.

    Sorry to disappoint some of you but let’s face the reality.

    • As much as I agree with all you’ve said, it’s not to say that whoever buys Saab wouldn’t produce a car that’s worthy of the name. As I said the other day, we might still see the ng900/9-3, and that alone might make it worth it..

      On another note re: the article. If GM allow anyone to licence anything I’d be very surprised. It’s not looking likely – good sense tells us that they have absolutely no interest, whoever the bidder may be.

      • As I said the other day, we might still see the ng900/9-3, and that alone might make it worth it..

        Seriously?

        Didn’t that model perform horribly in crash testing?

    • The reality is that there are still at least two bidders (last news from the receivers indicated at least five) who want to continue Saab as an ongoing concern.

      “And the sooner we believe it, the better would be!” …why?

      Regardless of what their plans are, it is interesting to keep an eye on the development. Besides, it isn’t uncommon that sometimes businesses and people go through with what they set out to do. Several of these have said they want to get production going again. They have nothing to gain by not telling the truth.

      I don’t see the receivers blocking a high bid just because the bidder hints at a future outside Sweden. (and if continued production in Sweden was a firm criteria, they would formulate a penalty clause of some kind)

    • Of course the bidders would like to have production close to their home market. That does not exclude production in the west.
      The want for technology cannot easily be resolved without people to develop that technplogy. Transferring that knowhow is not done instantly either.

      The biggest threat is not that the bidders want to get production and R&D at home. The biggest threat is that the clever guys and gals are getting other jobs.

    • It is a little blund to say that the Saab we knew has passed away.
      As long as the Saab people develop a car according to the Saab spirit, it will be a Saab nomatter who pays the bills or even what badge is on it. I’m sure our love for the brand goes further than the brand name. I thought it were the cars and the philsophy behind them that made us drive them. The people at Saab are all very proud people and very proud of what they are able to do. I can’t imagine them saying ” Now I’m going to design a very bad seat because the badge on the car doesn’t say Saab anymore”. No, they will keep doing their best at what they do and that is what we have always respected them for!! This shouldn’t be different in the future!!

      • I agree that the Saab we knew is gone forever. In fact, I don’t even know if that is debateable—-seems like a fact, not an opinion—-the last incarnation of Saab is gone forever, no doubt about it. If there IS a “new” Saab in the future, it will not look anything like the company that just went bankrupt. Here’s the thing: If things fall into place with the right buyer (Mahindra?), a new Saab can emerge that is far healthier than the previous Saab has been for decades—-with a full product line—”boldly going where no Saab has gone before!” Seriously, my vision would be for a new owner to do their best to support current Saab owners with parts and service, while introducing a new line of Saab cars, including small sport utes. The lower priced, more generic offereings could be assembled in low labor cost nations. The Swedish Saabs can be the ones that are much closer to the original mission. I know that for many, this is a compromise that doesn’t sound “pure” enough. But realistically, if we can have some higher volume cars to be the bread and butter, spiced with higher end offerings—-it can be a “hybrid” showroom that is the only profitable way to go. Another approach would be someone like BMW buying from above—and keep Saab “pure” but positioning them a little below their own brand on the corporate ladder. I think either approach can work. The approach that I don’t see working is if a company of investors squeezes just enough out of their piggy bank to start up production—-and offers one or two models, roughly priced from 35K to 55K—in other words, if history is repeated, I fear that history will be repeated.

        • This is the way I’ve been looking at this too. Even in the middle of reconstruction, the key to success was a committed and well-funded owner that understood the brand and could take Saab to a better place than it has ever been before. Entering bankruptcy might turn out to be the best thing for a brighter future for Saab but it is hard to imagine how that can happen with the loss of former employees, the distribution and dealer network, etc.

          We are likely to find out shortly!

  5. I have been following this saga since its beginnings.
    Things are now certainly looking dire. GM, as you have rightly pointed out, are the lynchpin in all of this and they have taken their bat and ball and gone home. Except for us SAAB fans who are still hoping that the game is still on, despite the obvious, that the lights are off and the gates are swinging in the breeze.
    Optimism is a fine attribute but soon we all have to face up to some realism too. That in itself is getting hard to face up to.
    And no, I am not selling my two 5s.

  6. saab fans getting very twitchy me thinks !!!

    • At least that might mean we’ve passed the “bitchy” phase! No more finger pointing please ladies and gents. We’ve heard it all!

    • Yes we are. It’s really hard not to as nothing of real fact is filtering down to us – the fa

      • And now to continue…. The fans, the paying customers. I believe we are all just a bit tired of sitting in a dark cupboard and desperately grasping onto any information that does come our way. I also do believe there will be some revelations by the end of February, it’s just difficult to continue to wait with no useful information to keep us going. But undoubtly, we will continue to wait as there is not much else we can do. And I for one will not turn my back on the SAAB brand.

  7. With all respect but I think Saab should get entirely away from any business from GM !! Please read the news on Opel and you realize who they are and how they behave. I do not blame them but I do not have to like their way of business either. Another important aspect is that a potent other car company, may be able to build up new Saabs by their own, so why they should need GM. There were already some contracts with BMW on the small turbo, so I guess many car companies that do not have this arrogant attitude from GM would like to make a deal if they simple make money.

    Importantly, there are at least four to five Japanese and European (Subaru, Mitsubishi, Mazda, Suzuki, Renault, Peugeot, in some aspects even Fiat) brands to those Saab would perfectly fit as their premium brand. So, clearly the time asks for visionary people that cut any boundaries with GM.

  8. http://webfarm.bloomberg.com/news/2012-02-12/saab-dealers-driving-to-maserati-with-unfolding-bankruptcy-cars.html

    Realistically, a stand alone Saab dealer with a good service department and staff (like International Saab in Falls Church, VA) needs to ponder their future. I know that northern Virginia is without a Suzuki dealer—-not sure why. If that franchise is available, maybe they should consider it. Otherwise, these places become used car lots??? Or they go away? Or in this case, Maserati!

  9. It’s not over until the last bidder has left the building.
    I think we will know by the end of February.

    Just a thought.

  10. This has been a roller coaster ride for all of us for the last few years, and the stress is killing me! But as they say, “It ain’t over till the fat lady sings”. We need to stay focused without paranoia -and Till72 helps by always providing balance, thanks!

  11. Unfortunately the only thing that will make GM sit up and take notice is another “I won’t buy from GM” campaign, only on a larger scale. If GM perceives that it would be more costly for it to let Saab die rather than let it survive, it will cooperate.

    Letting Saab live is not competition for GM. Which of us in our right minds would choose to buy a GM car over a Saab? If Saab is lucky it might some day manage to sell 150,000 cars a year. GM sells around 8 million world wide. I do not accept that Saab is in any way competition for GM. If GM forces the death of Saab, it has see that it could be a costly PR nightmare for it. Regrettably that is the only real weapon we have.

  12. I have written actual letters (rather than e-mail) to CEO GM & Vauxhall (UK), left questions for the Whitehouse & President- in terms of foreign policy and how other countries view the US. The GM website allows you to leave messages (requires facebook / twitter account) – and many Saabites are doing so very regularly. I trust you are all keeping up the public pressure – you never know, it may pay off!

  13. Markac has a point. GM are on a down-hill slide. Their electric car has had a safety issue causing a major PR problem – unfortunately they may be sensitive to Brightwell’s & Mahindra’s electric car plans. SAAB demonstrations are causing a smaller problem. They had to be bailed out by the US Taxpayer recently. They had to have a major re-structuring programme. VW and Hyundai are closing in on them in sales terms. They are sensitive and pressure on the US establishment may really help.

  14. I have a hard time believing that Saab can survive without the GM IP. It would take well over a year to produce a new vehicle and by then the distribution and support network would be gone. A private equity shop(Brightwell) would most likely buy Saab and then start selling off pieces to strategic buyers, and most likely make some money at that.
    I am afraid GM is the fat lady and she keeps singing, some of us just don’t want to listen. I hope I am wrong.
    JTMav

  15. JTMav, lets focus on now and not the future. It seems to me that:
    The Swedish Government owns the current parts supply – an income & will deal.
    SAAB Aerospace own the SAAB name and 200 consulting engineers (ex SAAB) & will deal.
    There is apparently a platform which can be put into production without much effort for an income
    There is a new platform not too far from completion
    There is a world full of automotive suppliers waiting to do business in the current downturn
    The future is an electric platform and SAAB are already in it
    In global terms, the amount of money needed to get SAAB into a business is equivalent to about the bonus of 10 world class bankers.
    We need to focus on the value of things to people, not money specifically. Is GM involved in any of the above? The game is very much in play, it’s the players that need to be skilful. However, these forums may end up arguing about what is a “real saab” in future.

    • I really don’t think Brightwell has the resources to restart production without GM. They are a Private Equity shop, I have a lot of familiarity with these types of investors, most of the time they are not long term operators of any of the companies they buy. Either they buy and flip or they buy, split up and sell off pieces. Maybe that’s why Brightwell is more positive on the discussion with GM. It would seem that focusing on now that realistically only a current manufacturer of cars can make Saab a viable entity. Without GM that becomes a lot tougher proposition. I think the amount of money is considerably more than 10 world class bankers. I am not trying to be the skunk at the picnic but I think healthy discussion rooted in reality is why we post here.
      After 5 Saabs and almost 20 years with the brand no one is rooting harder for Saab to survive.
      JTMav

      • Brightwell is no Cerberus or some other run-of-the-mill private equity shop, I think. They say on their website exactly what they do with businesses they acquire. They buy an ailing or cash-short business with some green aspect (that’s their specialty) and an, in their eyes, good chance of becoming profitable again. They turn it around, fatten it up and then either sell it to a major operator in the same type of industry at a suitable profit or go public with it. Lots of money to be made in this way of doing it. Just imagine how much some automotive moloch would be willing to pay for a profitable Saab with steady production and sales figures, its outstanding engineering and R_D capacity and its innovation potential. But, if the company they buy is a big one, such as Saab, there is also a lot of (venture) capital required. Brightwell say they have enough but remain mum as to their sources, some of us have doubts. The difference is they know and don’t tell, we don´t know but do tell. Loudly, sometimes too much so.

        Still, the major driving force behind Brightwell is a highly respected and succesful businessman, dealmaker and inventor who has a very strong reputation as a builder, not as a breaker. So far, none of their investments has been broken up and sold piecemeal, all of them are alive and kicking AFAICT. So I don’t believe BH are another KKR or whatever it is they used to call asset strippers but who are known as private equity venture capitalists these days. Yes, Brightwell will probably sell Saab in the end and, if they have done everything right, at a huge profit but they probably won´t do it before it´s solidly back in the black. So let’s be fair and give them a chance. Even if they aren’t another Mahindra, they may still turn out to be a very good parent to Saab.

        Ivo

        • +1, Ivo. As usual, your thoughts are well presented.

        • I appreciate your view, however it would seem hard to accept that they have the funding to accomplish such a goal. To turn Saab around and fatten it up is an extreme challenge. When was the last time they were a profitable company? Without the usual synergies an existing auto manufacturer could exploit it’s even more of a long shot. You’re right they are no Cerberus but there is a great lesson to be learned by the Cerberus experience at Chrysler. This isn’t venture capital type of investing, this is distress investing, much different from venture(think Facebook). Distressed tactics are very different from venture. Coming out of bankruptcy actually should make it a bit easier, I just don’t see how the numbers add up. Cerberus had deeper pockets than Brightwell and they got their ass kicked. Granted timing is different and Saab is not Chrysler but I still can’t see how a financial sponsor gets this done. BMW or Tata that works, but this is a real long shot.
          JTMav

          • All good and well, my friend but how do you know that Brightwell don’t have access to that kind of resources? Youngman would have to borrow heavily from the Chinese state, banks and whoever else to get the deal done and develop Saab. Wehave no doubts that they can. Why couldn’t Brightwell do the same -Turkey is rather afflush with money right now- or borrow from affluent private sources?

            Ivo

            • PS: like mr. Achmed said before, automotive operational and marketing expertise can be (re-)hired.

              Ivo

            • Well there’s a lot of speculation here by all of us, maybe they will have several hundred million euros to re start production and maybe the Turkish Govt wants to help but we are all just guessing, including me. I have no direct knowledge of their resources, I only know that outfits like Brightwell have some limitation that another car company wouldn’t have. Given GMs posture, Brightwell maybe the only one they will consider. I am just suspicious of both of them. I could see GM give them a wink if the long term plan was to unwind the operations and sell off the pieces. I hope not. Ito I am hoping you get to say I told you so.

              JTMav

      • Brightwell is capable to re-start production. It has resources. At least they didn’t tell to world, “we will ssave Saab”, they don’t talk everyday about Saab but they work hard to place acceptable bid to save Saab. I trust Alphan Manas, he knows what’s to do..

        No other bider acceptable because China, India, Brasil are countries of GM interests. Think about.

        Positive thinking, be patient.

  16. How is GM’s situation any different than Ford’s when Ford sold Volvo to Geely? GM should focus on putting out a great product of its own rather than spending its energy fighting to keep their old technology out other automaker’s hands.
    Ford has done extremely well lately because they are putting out great vehicles. GM should take note & do the same.

    • I totally agree with this. What makes GM behave in this way when Ford could be so pragmatic in the sale of Volvo to Geely. And also when they sold Jaguar/Land Rover to Tata. There was no talk of “you can’t build a Volvo now you’ve bought it!” There are still parts being interchanged today between Vovo and Ford. The 2.5 litre engine from Volvo is used in Focus ST and Mondeo and I’m sure there are various parts and components going the other way. Ford acted in a grown-up and adult way; GM are the spoilt child – “If I can’t have it, no-one can!”. They haven’t just taken their ball home, they have let the air out of it as well!

      • A reminder that it took 2.5 years of lobbying by Greely before Ford agreed to sell it to them. Saab hasn’t got the luxury of that time (and Youngman only had 4 months to try and persuade GM. That wasn’t long enough).

  17. Let us just pray that the new owner will have money enough to start the NEW SAAB based on the Phoenix platform and has enough to start with the production of the existing Saab 9-3 that can be built and sold without the blessing of GM.
    Saab will only be again Saab if all existing links with GM will be broken.
    Get away from this company and go your own way; hat is what the new owner will have to do.
    By he way, there will be better companies to close a deal with then with this arrogant company in Detroit.

    • Agreed ! I am tired reading arguments pro and contra GM. Those people have shown since 2009 that they are not interested in Saab. IMHO the negotiations whether to include GM parts or not are useless for a long time, wasted time. And always GM acts the big shot. At last one should leave this substituted American plant alone I am not interested in GM, what they are doing now and what they will do in future ! The goal has to be a GM-free Saab based on the phoenix platform.

  18. Let us all hope for the best, at least not for Trollhätten and the workers.
    According to P4Väst, there will be a statement from the recievers tomorrow at 0900.

  19. Might it be productive for everyone to post a comment on the gm facebook wall (and wherever else) and kindly remind them that the world is watching, and then ask them to let SAAB do their thing? After all, gm no longer owns SAAB.

  20. GM has no intention of letting anyone help Saab.

  21. In all likelihood, it is this type of behavior which caused GM to want to kill SAAB off rather than let any second-or-third-world interests take over:

    http://it.slashdot.org/story/12/02/13/0158207/best-practice-travel-light-to-china

    Not that I think SAAB has much GM IP to steal that can’t be had by simply buying a Corvette, a truck, a caddie, and a buick and reverse 95% of the IP GM is afraid of “losing” but due to human nature’s tendency to fear, loathe, and blame I can’t say that I blame GM’s fearfulness. Plus, they KNOW they fudged up with SAAB by skimping on power levels and interior materials. All it takes is more leather and more durable interior coatings/paints and a bit more power and SAAB would have had cars taking the market by storm.

    SAAB’s success would embarrass GM executives who kept SAAB reined in.

  22. There’s more hot air in this thread than a Lunardi. But I like it :-) If you are of the opinion that Saab is dead, you have not been paying attention. If you are convinced this or that bidder lacks the resources to rescue Saab … well, you can’t possibly know that. But all this gassing is understandable. Look: I’m doing it, too. None of us really has a clue what is actually going on. Interesting speculations from Till72 all the same. His last sentence sums it up. I am keeping my seatbelt fastened.

    OT .. more hot air … while cruising home in my 9-3 this evening after a job I heard a radio advert for Volvo in the UK. It began in Swedish and then explained “In Sweden, we have 56 words for snow …” and it goes on to say that’s why Volvo know how to make great cars for winter weather like the XC60 and XC90. A simple, attention-grabbing advert full of Swedishness and sang froid, and emphasising other core brand values of sturdiness, safety, and superior harsh-weather prowess. In other words it does everything Saab should be doing when it gets back up and running. A few subtle differences are all that’s required. Look at how similar BMW, Merc and Audi advertising is – German-ness, engineering excellence, power, aggression, prestige – but with subtle distinctions. That’s the way forward. Core brand values focused on the cars.* No more smug, woolly lifestyle statements please, Saab.

    * And please, for God’s sake, only shout about turbocharging when there is really something to shout about (an amazingly efficient, high-performance unit made possible by some super-duper new type of turbo) otherwise button it because that really is a lot of useless hot air.

    Rant over, I am going for a cup of tea.

    AB

  23. “It is been reported that we are in discussions with Brightwell, but categorically, we do not discuss with them. We do not discuss with anyone,” James Cain said to local Trollhättan newspaper TTELA.
    “We have received requests to have a dialogue from several third parties, but we have not begun discussions with anyone,” said Cain.

    Strike one against Brightwell, they are not being truthful. This is pretty much normal operating procedures for PE firms. And if you think GM is not being truthful, I can’t see what upside there is to them looking obstinate.

    If Saab does die it’s squarely on GM. They are being pretty transparent of their intention. Why a small company like Saab would pose a threat to GM is above my pay scale, but I guess it was ok for them to get a bail out but not Saab.

    JTMav

    JTMav

  24. GM link I mentioned earlier.
    http://apps.facebook.com/gmautoshow/?ref=ts
    You do need to be logged in to facebook / twitter / Youtube to leave posts.

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