On Chinese Partnerships

Unless your F5 key isn’t permanently stuck to your keyboard, you might not have heard that Saab is in talks with three Chinese manufacturers with the aim of an immediate cash injection. What exactly is the Saab management team trying to negotiate? According to Bloomberg, there are at least three goals:

  1. Get quick cash to restart production
  2. Gain access to the Chinese market to sell and market their vehicles in a more direct way
  3. Joint-venture with a Chinese company to produce Saabs in China.

On the first point, Saab has come up with various plans, all of which have either dragged on due to complications with the EIB, GM, or any number of other factors. A joint-venture with a Chinese manufacturer can bring with it an immediate liquidity injection through a sale or licensing of technology. This mutually beneficial arrangement helps Saab survive and allows the Chinese company access to world class engineering, safety, and AWD technology that could catapult it ahead of its competition. If you’re not familiar with the new rules of the auto industry that Victor Muller likes to talk about whenever he gets a chance, they have changed. By leveraging their superior technology, Saab can be a power player in the segment which gives them clout.

While many of you might loathe the fact that Saab might be selling out to the Chinese, lets think longer about just how beneficial such an arrangement could be. On the second point of access to the Chinese market, Saab could immediately have access to a dealer network in China. Companies like BMW, Audi, and even Buick fare extremely well among Chinese consumers because they carry with them a certain mystique and reputation for being better than domestic brands. Saab could naturally stand apart and has a great chance of doing well in China, but without proper distribution channels, they don’t have a shot. By elevating a partner domestic brand in China, they can also help to kill off some of the competition on the lower end of the segment (think Chevrolet, VW), while leaving Saab to compete against premium brands. This lets each company chase their own niche.

On the third point of producing Saabs in China, my stance is that if Chinese production is good enough for Mercedes, BMW, and Audi, it should be fine with us. As much as I’d love my car to originate from Sweden, the truth is if you read a label on a new Saab you’ll see that parts are sourced from all over the world already. So long as Saab engineering and management stays in Sweden and the company keeps its headquarters and spiritual identity in Trollhättan, I could care less where my car is built so long as it trumps the competition in quality and style. If you’ve been keeping track of Swade’s adventures in Sweden over on Inside Saab, you’ll see that he recently attended a meeting with suppliers and engineers that helps cement these jobs in Scandinavia by investing in new innovation for weight reduction. That said, all indications are that any production in China would be intended for the domestic Chinese market, something that makes a lot of sense given that they’re now the largest auto market on earth.

With those main points addressed, let’s focus on just who the background of these automakers.

 

Read moreOn Chinese Partnerships

Safe to buy a Saab in Sweden

Vi Bilägare today posted a summary of the potential pitfalls of buying a Saab in case the sky is falling.

First up they cover the warranties:

The warranty is a contract between the buyer and the resaler. This is entirely independent on whether Saab continues its existance or not.

Second issue is spare parts:

Among the most important assets that will befall the government should Saab not be able to repay the EIB loan is the spare parts business supplying parts to the 1.5 million Saabs rolling around all over the world. It will remain a profitable business for at least ten years, which translates to good availiability of parts for the consumer

The third issue discussed is the second hand value:

For Swedish business customers, this has been solved by the dealers who now guarantee the residual values. For private buyers there exists no such guarantee. But we must keep in mind that it was the OG 9-5, a completely outdated model that was struck the hardest during last years residual value turbulence. The residual values of the new 9-5, especially the new combi shipping this summer, will most likely stand more firm in a worst case scenario.

So, in conclusion: If you really want to make sure you have everything covered, then just buy an extra Saab.

Smart Marketing: Small Moves Add Up Big

I’ve been meaning to post this one for a while, but life has kept me pretty busy and I wanted to devote the necessary time to give this article the respect it deserves. A few weeks ago on twitter I noticed some pictures of a sleek new 9-5 Aero with some huge custom painted wheels.

Sure it’s a sweet ride, but the tweet that accompanied it is what really caught my attention.

Read moreSmart Marketing: Small Moves Add Up Big

Notes from Spyker’s Quarterly Results (and News Snippets)

Spyker’s Quarterly results were released this morning, and several details we already knew about were covered. Sadly as Rune covered earlier, Saab had an operating loss of €79 million and a €72 million net loss. This compares to last year when the operating loss for the entire year was €140 million.

On China:

We have opened up alternative routes to fund the company mid- and short-term including but not limited to discussions with Chinese car manufacturers, the discussions with some of which had already been ongoing for several months. We are hopeful that these discussions will result in a solution very shortly so we can resume production. We will make it our top priority to restore the confidence of our suppliers, dealers and partners and apologize to them as well as to our dedicated employees for the disruptions that occurred.

Keep in mind as Tim confirmed exclusively last night and the Wall Street Journal elaborated on this morning, Saab is in talks with three Chinese automakers– Great Wall Motor Co., China Youngman Automobile Group Co. and Jiangsu Yueda Group Co.

On the debt:

We have made a serious endeavour to carve out the Saab owned real estate from the collateral Saab provided to the National Debt Office (NDO) as security for the € 400 million loan from the European Investment Bank (EIB). By reducing the collateral value by € 67 million that loan would be reduced by no less than € I20 million to € 280 million. In spite of consent from NDO we have yet to reach agreement with EIB on the terms of their consent to this transaction.

Saab’s current cash position:

The total cash position amounts to € I29.9 million and comprises € 35.I million free available cash and € 94.8 million reserved cash (escrow for pensions, tooling payments and other items related to business operations).

Saab’s official statement about the supplier stoppage and cash crunch:

Due to tight liquidity at the end of QI 20II caused by seasonally low sales volumes (to the extent that these were not fully off-set by cost reductions and working capital improvements),  heavy investments in product  launches and future product development, the Group’s  cash position is tight and therefore continues to be monitored very closely by Management. To ensure adequate liquidity both in the short term and for the remainder of this year, Management is currently  raising funds from current  shareholders  and pursuing various initiatives to improve the Group’s  liquidity and strengthen the Group’s  balance sheet going forward,  including – but not limited to – below Saab Property  transaction.

The EIB provided a € 400 million loan to Saab Automobile as a project finance facility for funding of certain development projects. This loan is guaranteed  by the Swedish National Debt Office (NDO). At the end of QI 20II, € 2II million was drawn under this facility, leaving € I89 million as undrawn facility. Saab Automobile has reached agreement with the Swedish government  and the NDO to release collateral pledged to NDO in return  for a reduction of the guarantee amount from € 400 million to € 280 million. Saab Automobile intends to enter into a sale and lease back agreement of its Trollhattan based real estate to refinance this released collateral by selling shares  in Saab Automobile Property AB (Saab Property) to an investor. If this transaction  is to be completed Saab Automobile will still be able to draw up to € 280 million from the EIB loan, a € 29 million drawdown  is expected  during the beginning of Q2. The intended sale and lease back transaction of Saab Property  is subject to approval of the EIB, which has been granted on conditions not yet acceptable to Saab Automobile. Saab Automobile is still in discussions  with the EIB on these conditions and at this time it is unclear if and when  it can complete the Saab Property  transaction.

Also according to the previously mentioned WSJ article:

Spyker said its first-quarter earnings before interest and tax was a loss of EUR79.4 million and reiterated 2011 will be a loss-making year.

“It is unclear at this time what the consequence of the recent production stoppages and funding issues will be for our full year 2011 forecast but it is realistic to assume that realizing our 80,000 cars sales forecast is no longer feasible,” Muller said.

Ironically, the company said March had been the best month in terms of sales since Spyker acquired Saab in February 2010.

Spyker still is awaiting approval from the European Investment Bank to release collateral for loans so that it can ease its liquidity crisis. The company hopes to sell and lease back Saab’s real-estate assets so that it can raise cash.

“The talks with the EIB progress very slowly and I have no idea when a deal will be reached,” Muller told Dow Jones Newswires.

The collateral backs state guarantees to secure up to EUR400 million in EIB loans. Spyker wants to repay the EIB loans so that it is free to pursue its own strategy.

Muller expressed his regret for the disruption. “We will make it our top priority to restore the confidence of our suppliers, dealers and partners and apologize to them as well as to our dedicated employees for the disruptions that occurred,” he said.

 

Full text of the quarterly statement after the break, tables to follow. For the PDF version, click here.

Read moreNotes from Spyker’s Quarterly Results (and News Snippets)

A man’s got to do, what a man’s got to do.

I saw lately the film Kim Novak badade aldrig i Genesarets sjö, a film adaptation of the novel with the same title from Håkan Nesser, on the TV. It is a Swedish film and is situated in Sweden in the 60’s. The main figure, Erik, and his brother, Henry, kept repeating this sentence: A man’s got to do, what a man’s got to do.

Later I learned that this sentence is usually associated with John Wayne who used it in the John Ford western Stagecoach.

Nonetheless I think it is a good title for the Editorial of our good friend and SU commenter till72.

If you want to know what he thinks a man’s got to do, continue reading after the jump.

Read moreA man’s got to do, what a man’s got to do.

Saab at the Mille Miglia 2011

Yes, it is a year since the Mullers (father and son) and the Jonssons (father and son) terrorized the Italian roads between Brescia and Rome. Last year Victor Muller was driving a Saab 93 from the Museum and Jan Åke Jonsson was driving another 93 (the grey one in the picture), but this time the car did not belong to Saab but to a friend.

But the grey 93 tried to be stronger than an Italian house and failed. So I wonder if we will see this grey car once again at the Mille Miglia.

Now its time for the 2011 Mille Miglia starting on the 11th of May. Will Saab attend once again, and if, who will run the cars this time?

Read moreSaab at the Mille Miglia 2011

Press Release:- Swedish National Debt Office Allows Vladimir Antonov As Shareholder In Spyker

Please read our coverage of the NDO press conference from earlier, but here is the press release from Saab Media. Hear what Victor and Vladimir are saying about the good news after the break.

Trollhättan, Sweden: Spyker Cars N.V. (Spyker) confirms the announcement of the Swedish National Debt Office (NDO) to allow Vladimir Antonov as a shareholder of Spyker.

Read morePress Release:- Swedish National Debt Office Allows Vladimir Antonov As Shareholder In Spyker

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