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.