Wow. What a day.
In the event you’ve been living under a rock for the last 12 hours, the Koenigsegg Group have backed out of what was humorously called a Binding Share Agreement, at around 5pm Swedish time [yesterday]. They cited unacceptable risks due to a lack of time and difficulty getting all parties together as their main reasons, without being too specific as to what that all referred to.
People have been getting pretty emotional in comments. On a normal day, I’d probably get involved and try to quiet the tone, but this isn’t a normal day. As long as the blue language is left at the door, people should be allowed to vent some feelings with the requisite amount of respect.
There’s been a lot to chew through and I’ve been chewing like a dog with a dinosaur bone. Here are a few of my own thoughts on different matters. Just my thoughts. Some educated and some not.
It ain’t over…….yet
I can’t imagine any larger hurdle than this, but I don’t believe that the fat lady has sung just yet.
I do believe, however, that Koenigsegg’s announcement yesterday was the real deal. It was not a ploy or a negotiating tactic. Both Koenigsegg and GM issued press releases saying that the deal between them was over. Whatever open language CvK might have used in statements can be attributed to his lack of media savvy.
I guess there are three basic options for Saab now. Those are:
- sale to another party
- retention by GM as a going concern
- wind up and close.
My personal belief is that the first option is the one that GM will persue. Maybe I’m living in hope, but let’s do this by process of elimination.
Winding Saab up and closing it just doesn’t make any sense. They have a lot of money sunk into this brand in terms of new models and sunk costs from this year. Then there’s the dealer agreements and franchise laws, which must still have some sort of effect even after GM’s bankruptcy.
Retention by GM could be possible (today’s events have proven that anything’s possible) but I personally think (hope) it’s unlikely. First, they gave a clear undertaking that they would sell Saab when they were bought out by the US government. It was a condition, as far as I can tell.
“But they reneged on Opel” I hear you say. Well, going through the recount of the whole situation in the Detroit News yesterday, the Opel deal was never mentioned as a condition for the massive government assistance GM got in the US. It was something they would try to do, but they always intended to retain a large stake and it’s pretty clear now they wanted to keep it all along.
So that leaves option #1 – selling Saab to someone else.
The process of selling Saab to Koenigsegg Group has taken a long, long time because the Keonigsegg Group were very green and had a lot to organise in terms of funding, loan applications, negotiations, etc. A deal with someone who’s already got turnaround experience, who’s already got funding in place, would not need to take anywhere near as long as this took.
Is IS possible, if the buyer is out there.
A lot of people want someone to blame for this, and many are settling on Koenigsegg. I can understand that and certainly, they must shoulder their fair share of the blame.
I’ve spent the day reading a lot of stuff and talking to a lot of people, though, and what’s emerging is a picture of a group who had individual capabilities, but who perhaps failed to gel and trust one another. The relationships weren’t there and for some of the key players, the experience wasn’t there, either.
I’d go a little easier on CvK if I were some of you. He was the public face of this bid, but he wasn’t the initiator and he wasn’t the money man, either. Mark Bishop kicked this thing off (before he took himself out of the deal) and the main investment people involved are believed to be Augie Fabela and Dmitry Zimin. Those two guys have huge experience in international business, Eker and CvK less so. Combine these guys with a Chinese investor they probably don’t know that well and an uncertain government process involving the EIB and the EU and you have a potential house of cards that unfortunately realised its fate.
If someone’s going to make a call on when to pull out, it’s going to be the money men. It might have been CvK’s call, but the percentages aren’t in his favour, IMHO.
I believed in this deal and I wanted it to come through. Everything I discussed personally with Saab people in Sweden led me to the belief that it was going to happen.
They passed every hurdle. They ticked every box, no matter how unlikely the goal looked. The only things remaining were the OK from the EU and the guarantees from the Swedish government – both of which looked 99% assured at this late stage.
That’s why no-one saw this coming. Not the people at Saab, the unions, the journos…… no-one who’d been following this deal closely knew this announcement was coming today.
Plenty of people had their doubts about KG’s experience and funding. Some might have expected Saab to fail in 2-3 years time, but no-one saw this coming today.
Whilst I believed in the deal and I wanted it to go ahead, I do want to harken back to something I wrote back when Koenigsegg Group were chosen as the preferred bidder for Saab.
I still have my reservations, though, and they come down to the people inside of, and the people backing the Koenigsegg Group.
When you buy a house, the deal is usually contingent on two primary elements: the price you’re willing to pay and the conditions you’re willing to provide. If two purchasers are offering the same price and one offers more attractive terms (shorter settlement, no sale of their existing home, etc) then that person will usually win the prize.
It’s my fear that Koenigsegg won this bid with conditions that place them – and Saab – at some risk. Whether it be the price they paid or the conditions they offered, I’m just worried that they’re stretching themselves thin.
This is NOT any sort of “I told you so” because I’ve been as shocked as anyone about this.
But people who are looking to apportion some blame for this falling over should look to those meetings in Geneva, where General Motors selected Koenigsegg Group as the preferred bidder over Merbanco and Renco (BAIC should have been there too, but they left and chased after Opel).
GM had a bid recommended to them by Deutsche Bank that most likely involved much more favourable conditions, but it’s turned out to be one that couldn’t be completed.
I’m no fan of GM, as many of you know already. But GM have indeed been a good owner to Saab this year in terms of supporting them through this sale process.
They do, however, have some questions to answer now as to the buyer they approved. Don’t hold your breath on that one.
GM’s board will meet early next week and Saab will be at the top of their agenda. it’s their regular scheduled monthly meeting and it comes right after Thanksgiving, which is Thursday this week with a customary holiday taken by many over the weekend.
I guess we’ll know more by Tuesday or Wednesday next week.
Until then, I really hope there’s a lot of work behind the scenes so that that board meeting is held with a background context of something other than Saab’s doom.
I, for one, do not believe that GM would sell Saab outright to BAIC. I don’t think they’d be able to put together a suitable package. BAIC would want the whole lot and GM would want to keep some of their proprietary tech away from them. It might be wishful thinking once again, but I just do not think GM want to go there.
When the news broke about Koenigsegg withdrawing this morning, one of the first things I did was shoot off an email to Christopher Johnston at Merbanco. I posted his reply in one of the earlier entries today, but i’ll repeat it here.
We are quite sad to hear the news. We remain fans of the brand and team at Saab. Under the right circumstances, would be pleased to look at stepping in and applying our experience to help.
I hope that GM meeting next week might include a look at crafting those ‘right circumstances’ so that a favourable outcome can be reached for all concerned – including you and me, the consumers.