Pang Da– The Day After

Now that the dust is settling, a much clearer picture of the agreement between Spyker and Pang Da is emerging. As we know, Pang Da (or Pangda as it is sometimes referred to) is the largest vehicle distributor in China comprising over 1,100 dealers which specialize in sales and service of over 49 brands. This includes many of Saab’s direct competitors, including Mercedes-Benz, Audi, Subaru, Volkswagen, Honda, Toyota and Hyundai. The first leg of the deal involves a €30 million purchase of 1,300 Saabs. The second leg marks a new direction for the group, and gives them an interest in promoting Saab above all the other brands they sell, a seat on the soon to be renamed Swedish Automobile’s board. What’s interesting to note is that in only one day, they recouped their entire stated investment and then some, as their shares today rose 4.1% on the Shanghai Composite Index, outperforming the market. It’s a sign of confidence in the deal and the investor confidence is a way of showing regulatory bodies that the private sector believes in the deal.

There have been a number of editorials written in the last 24 hours, most explaining why they think this deal not only makes sense, but is a better arrangement than the Hawtai deal. Of course there’s others, namely from a guy named Bertel Schmitt from thetruthaboutcars (who freely admits his initials spell BS), who is so convinced of his facts that he saw it to write two editorials about Saab’s new partnership. So in order to understand what the facts are, let’s break down the situation using facts we have heard from first person sources, namely Victor Muller himself.

Step 1: €30 million transfer to Saab to purchase vehicle inventory and restart production immediately.

According to interviews like the one Victor had with SVT, the money should be transferred immediately and production should be up very soon.

“I think we can be up and running within a week. It may take a little longer,” Muller told SVT.

I’ll take that to mean “Once money has been transferred, I think we can be up and running within a week..” and that he didn’t preface the statement because he’d been talking to 20 reporters all day. He has our email if he’s interested in correcting me. 😉

As Bertel rightly points out, to transfer funds out of China, government approval is needed. However, since Victor has stated that the funds will be paid out immediately, there is reason to believe that Pang Da has the money in accounts that are able to make the transfer right away. After all, a company with a three quarters of a billion dollar IPO should have more than one financing lever available. If Victor’s right, it won’t be long until we hear that the money has been transferred to Saab’s accounts.

But that’s not the end of the story regarding production. Saab will also be issuing an additional 1,000,000 shares from their GEM fund credit facility (think of it like a high risk credit card) to raise an additional €3-4 million. Add to that their €30  million loan from Gemini, and an additional €29.5 million from the EIB loan (which is presumably for something environmentally friendly related), and you have a creative accounting solution that should allow the production to start. But wait– according to several sources, multiple suppliers are demanding more clarification on Saab’s business plan before they resume deliveries. Hopefully an agreement can be worked out for COD and production can start up immediately, and we’ll wait until we hear positive word from FKG and the like (Saab’s suppliers’ union group). If all those pieces are in place, Saab has a huge stream of orders ready to complete and sell to dealers, which should further raise cash and stem losses.

2. €65 million transfer from Pang Da for a 24% equity stake in Spyker Cars (Swedish Automobile)

This is where it could get tricky. Saab needs this mid-term financing to continue to operate for the next year if the Antonov approval drags out. According to Schmitt of TTAC, a self-described Chinese auto market specialist, the deal isn’t likely to go through. He doesn’t cite very many credible reasons why, he just mentions the failed Hummer deal between GM and Tengzhong as proof that deals shouldn’t go through, but ignores the clear differences between the two companies. He also believes that GM won’t sign off on any of the new arrangements because Saab uses so much of GM’s IP. Again, he either hasn’t read up on the Phoenix platform’s eschewing of most of the GM parts bin or has decided to make up his own facts. Clearly, there are hurdles with this part of the deal, where Saab is allowed to produce cars in China under a MJV with Pang Da and another partner. Where it gets interesting is in an actual expert analysis, by ChinaCarTimes.com, who fills us in on Pang Da’s existing manufacturing partner.

Another intriguing part of the joint venture with Saab is the plan to put Saab’s into production in China, essentially forming a 50:50 joint venture with Saab. Now how can Pangda make cars? They are a dealer group, they are good at selling, maintaining and fixing cars, but they have no car making experience at all. But they do have a friend that does make cars – enter Beijing Auto Industry Corporation, aka BAIC. BAIC and Pangda recently signed up to create a joint venture that would see them each as 50% stake holders, this new company Beijing-Pangda put forward a plan to Subaru to create a three way company in China with Subaru as a 50% shareholder and BAIC and Pangda both taking a 25% share in the company.

I’m much more inclined to believe the folks at ChinaCarTimes than TTAC. Whether or not BAIC was the lead that pushed for Pang Da in the first place we might not know for some time, but it’s clear that they would make sense as a partner with Saab to produce Saab branded cars. Victor is still shopping around for just the right partner, but suffice it to say Saab’s existing dealer network around the world could prove to be a very valuable asset in securing needed long term financing as part of such an arrangement. Let’s hope that rabbit turns out to be the healthiest and fattest one Victor has yet to pull out of his magic hat.

Friend of SaabsUnited Glenn Brooks went a step further in his column at JustAuto yesterday.

You have to admire Spyker’s Victor Muller. A lesser man might have thrown in the towel many months back but his seemingly marathon efforts to strike a deal with a Chinese firm to save Saab appear to have paid off….

On balance, betting against the energetic and determined Mr Muller’s chances of success is definitely not a wise move. His track record at finding financing is excellent, the recent problems with Hawtai notwithstanding (and how interesting it is that neither firm has trashed the other over the failed financing fiasco – Hawtai and Saab may still be talking about other projects). Let’s hope that Victor Muller has at last secured the right partner for Saab: there are a lot people who need him to make this new deal stick.

Amen, Glenn.

30 thoughts on “Pang Da– The Day After”

  1. If Saab is to be producing cars in China via a joint-venture Chinese company, will it have the means to protect against theft of intellectual property? Or will it be competing against faux-Saabs in a few years time?

  2. Now VM made his job (lets hope it is not bubble again) all others should do something extra in their efforts. I mean unions, suppliers and Swedish gov. (100% sure if they did push little bit VA case we could avoid this s..it situation). If one start to make problems all efforts will be gone. Let hope there is left some pride in Sweds (not want to offend nation but start to move) to make final effort that this deal pass as Saab can finish its mission.

  3. I´ve seen some articles “double counting” the Chinese money of € 30 million. Therefor it is important to state, that the purchase of 1,300 Saabs, for € 30 million includes no financing money for SAABs “normal production”. It´s a prepaid purchase order, and all the money is gone for SAAB, when the purchase order leaves the factory, (except for the profit (or loss?) from selling 1300 SABs at an average price 208 000 sek or $ 33 000, which depends on models and equipment included in the order, figures which only SAAB knows).

    The Chinese money of €30 million can thus not be included as help for SAAB to finance the remaining part of SAAB production,. The remaining points in this new Chinese deal will likely (at least in my opinion) take the rest of this year to sort out.

    So this Chinese deal will not help SAABs short term financing problem next six months for producing the remaining orders. And in my opinion the deal “might be or not be a bubble”, but in any case the purchase order is very good for SAAB (if prices are profitable). We probably know the “Chinese answer” at best at the end of the year, when Chinese Authorities hopefully start making their decisions regarding this deal.

    Antonov is, as I now have stated here many times, still the only financing source left for “normal SAAB production”. This Chinese deal changes nothing for the SAAB financing for next six months.

    • That’s why this is called a short term solution. It gets the factory started back up and at least there’s a semblance of continuity for the workers. It buys Saab time to secure other funding and throws an obstacle in the way of the EIB trying to delay approving Antonov as an owner.

      • I read your summary above, which is correct. My only concern today is following:

        The key question is SAABs possibilities to pay suppliers. Even if € 30 million has left China and is in a Swedish bank, the question still is: Can SAAB now use all these €30 million for paying suppliers?

        The “normal” business situation (at least for me has always been for LARGE prepayments, which certainly the Chinese prepayment is), that you can only take out certain % of the money from them, when certain stipulated conditions regarding the actual order has been completed.

        That has also been standard procedure since decades in many lines of businesses. I find it hard to believe that a Chinese company, after only a few days negotiations, would pay €30 million to SAAB without such conditions. It´s a way (maybe the only way) to secure that their money is used to nothing else, than production of there own specific purchase order.

        I might be wrong about this, but when something looks to god to be true, it normally isn´t

        • Nissi,
          what you are saying is that when a customer pays for his car, Saab uses this money to pay for the parts used in this car.

          This is not the case, nor for a private customer, nor for Pang Da.

          Pang Da has paid upfront only because they know that otherwise Saab won’t be able to start production, and even Pang Da knows that this is the only important thing now.

          BTW, Pang Da will buy more than 2.000 cars from Saab, but only if Saab does exist to be sell them.

  4. Do not want to sound like conspiracy frik but there should be much deeper reason for EIB (together with Maud) not to allow VA to enter Saab and secure at least mid term survival. Does somebody needs this factory for production other brand (maybe Gelly ?) and enter to EU market. No one want to buy car produce in China but if we looked Koreans after they made factory in Slovakia their sales explode in EU.
    I hope that our faith is not wrriten before in dark corridors of Maud ad EIB but my fear is that even VM with all his efforts and power to find money will not satisfy before wrriten script. Hope I am wrong but like many comments before I made Swed should make pressure to Maud as politician are changing direction only if wind is against them. Lets make wind strong enough.

    • I do believe Maud et al. are only lost in the woods between the government’s libertarian stance and the fluctuating public pressure. If Maud had a ready solution for the factory, she would have long revealed it as a personal success and pushed for its implementation.

      I also don’t think anybody has enough means to corrupt the EIB regarding their decisions. If that was the case, VA would have long greased enough palms to have the deal go through. They are simply quite lost, because they have financed the Saab projects in quite different circumstances, and it is difficult to follow Saab and see through the various parties’ intentions.

      All in all, I do believe Saab needs more clarity now. Again, I’d love for Spyker Cars to outdo Fiat in terms of investor relations’ presentations.

      • I feel like the EIB understands what’s going on with the complex transactions– what they’re missing is a basic approval of VA as a legitimate owner. He’s submitted independent investigations that have been performed on him, his family and his companies, he’s sat down for interviews with the Swedish NDO. What more do they need from him? There’s something that no one is telling us.

        • I do not think this is the case. This was a problem for the Swedish authorities to underwrite the loan, or rather carry on underwriting it when VA came into the picture. EIB does not seem to have a problem with Antonov, but rather assessing whether they should continue financing Saab or not, and whether their loan is adequately secured.

          EIB probably does not want to be accused of blindly financing a sham scheme when it collapses, or propping up individual businesses rather than realizing their statutory goals. At that moment, nothing is clear about Saab and hence a bureaucratic organization like EIB is completely lost as to what they should do.

          I still believe more clarity in information and a sound, detailed business plan with realistic goals Saab is comitted to meeting (and is able to meet) would be in order to placate all parties and move on from a state of uncertainty towards fulfillment.

          • Whatever decision the EIB reaches, it will be a political one rather than a financial one. Don’t forget that the bank is wholly owned by the EU member states, including Sweden, and its express purpose is to promote various European political agendas.

        • If I understand this correctly from what EIB and GM has published, the missing part for EIB is GMs written approval as shareholder in SAAB, according to some written clause in the takeover deal or the EIB-bank loan.. Antonov must thus act and make a deal with GM. If not Antonov could be out of the picture

          When GM publishes that an agreement on SAAB has been made with Antonov and that all obstacles regarding Antonov as an owner has been removed as far as concerns GM, the remaining approvals from EIB and Government can be given.
          but today
          EIB has publicly stated they are waiting on GMs written approval,
          GM at the same time publicly stated that they are working on it, but with no hurry.

          It is obvios GM wants to sell their shares in SAAB and that the only possible short term buyer of GM shares is Antonov, Maybe he still does not have the money available for the price asked, I believe the figure mentioned was 800 million SEK for GMs Shares (and GMs approval of Antonov).

          It´s ridiculous to blame EIB, “Maud” or the Swedish Government for these delays, but I can understand that´s part of the blame-game performed by some parties.

          It´s quite simple. Money talks. GM wants money for letting Antonov in as share owner of SAAB.

          • Apparently GM was suprised of EIB’s requirement for them to approve anything, and they did it overnight last time when requested. I do not believe they are a hurdle in any way. They seem to want to have the trouble taken off them and not get involved with the Saab debacle again. The present management has not, for the most part, been involved with the transaction and simply want to have the status quo of Saab helping out with production volumes for some components sustained.

  5. I have read that the production of 9-4X in Mexico is fully subscribed for 2011. How many cars does that mean?

  6. I understood that Saab needs 90 million to pay the suppliers. At the moment they have 60 (Gemini & Pang Da). They are still missing the 29 million from the EIB.

    And the suppliers mentioned multiple times that they have not received any money or negotiated new terms with Saab. When the suppliers are paid the negotiations have to start and once every supplier is ok with it the suppliers can restart their own production and rehire the people they fired. And Saab can only restart when all suppliers start delivering again. You need all the parts to produce a car.

    I find it very optimistic to say that this can be done in 1 week. Especially because the suppliers stated multiple times that is would take at least 2 weeks from the moment the money is in their accounts. And at this moment Saab does not have 90 million to pay suppliers.

    • We don’t really know do we?
      I think VM has been far in the rabbit hole to pull them out of his hat.
      We may still be surprised

    • Gunnar Brunius (production and purchasing manager) is quite optimistic that the production will resume next wednesday since the money comes today. He (and his team) will start to negotiate with the suppliers today – personally with the bigger ones and via e-mail with the rest.

      I have no reason to question Mr Brunius – like I haven´t had any reason to question anyone at Saab for that matter.

    • If they really need this VM had made an higher deal with Pang Da.
      Not a single supplier had relly fired people – they were listed for beeing fired if the crisis continues.

      Some suppliers have already paid -we know from the news. Saab gets money from the april sales also – (hey around 3000 cars were sold)

      the 90 million is pure speculation

      • No speculation…

        Muller thinks the start of production is still a matter of “several days”. For that step is ninety million would be needed. The thirty million investment from Gemini is now waiting in Trollhättan. The thirty million of the new Chinese is expected within a few days and finally an appeal is made ​​to the loan from the European Investment Bank for the remaining thirty million. That is according to Muller ‘very soon’ made​​.

        http://www.autoweek.nl/autonieuws/16654/Pang-Da-nieuwe-partner-van-Saab

    • Has anyone from Saab, or with inside knowledge, ever confirmed this amount? I have seen figures between 30 and 150 million Euro.

  7. the 90 million what was mentioned one week ago were not really debts.
    saab has to pay the suppliers and pay the materials and parts for the ordered cars…. as you know the suppliers want cash. and the problem is saab gets money with the sale of the car.

    they have to finance 2 months of production fully

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