Thoughts regarding GM’s statement about Chinese ownership…

So it’s Friday again and we get news that could make us worried. In this case it is not that surprising. I for one did never expect that GM would just give green light without having a deep thought about it. They know Youngman from the sales process in 2009 when they showed up to take over the Saab brand, albeit without the intention to save the company.

While of course I don’t exactly know about the reason for that statement there are a few issues that could make the negotiations about a sale to Pang Da and Youngman difficult. I don’t want to jump on conspiracies here like GM wants to extinct Saab. This would make no sense since GM earn quite some money from license fees, supplying parts and building the 9-4x without facing a serious threat in sales.

A quote from the WSJ article TimR published earlier:

β€œGM would not be able to support a change in the ownership of Saab which could negatively impact GM’s existing relationships in China or otherwise adversely affect GM’s interests worldwide,” said GM spokesman Jim Cain.

So what are GM’s interests worldwide? The first thought would be that it is about the IP featured in the Saab models. While we don’t know what is featured in the next 9-3 I believe we could say that the IP featured in the current 9-3 and 9-5 is no longer that exclusive that it would justify such a move by GM. The elder 9-3 was even sold to BAIC. I think we can rule that out for the current models.

Second thought: in China GM is pretty successful. A big seller seems to be the Buick Regal. Being a sister model of the 9-5 GM may not want too much competition here. They even banned Opel from going to China, which, from a global strategy where to position the different brands may make some sense. But there may be more than that since I don’t think the 9-5 would be a huge threat for the Regal in the near future.

My third thought is about the current partnership that exists between GM and SAIC, who both hold equal shares in the joint venture Shanghai GM. It may well be that their contracts contain certain clauses that deter GM from allowing other brands to use the same IP as in Shanghai GM in China. It would also explain why Opel can’t expand to China, and it would of course apply to Saab, too. And it would be the toughest case to negotiate because the NDRC would most likely not interfere here. They may even be the ones who asked for such a clause.

To paint a complete picture of how complex this situation is you also have to keep in mind that GM as a big supplier to Saab may not be satisfied with the payment plan Pang Da and Youngman are going to offer and want to put some pressure on them. And then there is those shares GM still has in Saab, worth $326 million. Those shares could be converted into SWAN shares in 2016 if I remember correctly but what is that worth if SWAN is no longer the owner of Saab? I haven’t read anything about that issue yet. But I could imagine that GM would like to sell those shares at some price. There were those rumors a while ago that they offered those shares to VA for a discount price.

You may weigh those issues by yourself and make your own conclusion. But remember that those are just my thoughts and to me there is no room for conspiracies in here. I am pretty sure this flat out about business interests or obligations.

So am I worried now? Not really. Those problems were foreseeable for SWAN and their Chinese partners. We learned that getting approval from GM is the job of SWAN, if not to say Victor. He is surely one who knows how to handle GM. And in addition to that, he did never show up without a backup plan. And I have a feeling that this time will be no exception from the rule.

70 thoughts on “Thoughts regarding GM’s statement about Chinese ownership…”

  1. Nice sum-up, Till, thank you! Do you think that Saab support convoys with the message “GM – please approve the Saab sale” would be of any help this time? It most certainly helped last time Saab’s future was dependent on a decision by GM.

    • It depends how free GM can decide this time. I believe we have to trust the involved parties to handle that. No need to loose faith though.

      Please stay seated and buckled up until the rollercoaster has reached the final parking position.

    • Not yet JH, if at all. If that time were ever to come, we’ll let you know πŸ˜‰ Like I said before, when all the info is out there, you may be thanking GM.

  2. how about getting back [not going backwards] a clientel that fit the saab gm actually fearful of product that they bulldozed under or is it just another case of corporate arrogance!

  3. I have a feeling that today’s Saab on playing the game, not playing.
    That GM has problems to accept the thought of fear of being ousted by Saab. GM has probably no choice but to say yes to Saab / Youngman / PangDa.

    And speaking of nothing, I was at my local dealer yesterday. He was responsible for Peugeot but said that Saab was actually one of the good car. He even brought Saab Peugeotand said that Saab was one of the best cars on the market. Which of course I already knew, but the fun of a Peugeot salesman to say so.

    Saab will survive.

    Eric Sweden

  4. The loan won’t be converted into shared. SWAN has to pay the loan back. There is no option to convert it into shares (the loan already exists of shares, in Saab).

  5. As you said, we have no idea what IP is in the new 9-3 but my guess is that given that it won’t even have a GM sourced engine and the platform is so heavily modified that Saab can call it it’s own, perhaps not a lot but what do I know? Makes me wonder if Saab would consider dumping all of it’s GM sourced products like the 9-5, 9-4x and current 9-3, stay shut down, focus on the 9-3 and get a completely fresh start with only one model. Is this completely crazy? I know there are dealers, etc, but it’s not like anyone is selling anything right now anyway? Might be an opporunity to completely clean house and start over.

    • I don’t think Saab would do anything as drastic, but I do think it will move much quicker to replace the NG9-5 and the 9-4x than it originally planned. Getting them away from GM IP and onto the Phoenix platform would allow some Chinese production to occur without obstacles from GM.

      • GM isn’t as bad a partnership as everyone makes them out to be here. As I look back in retrospect, they’ve been incredibly patient and good to Saab’s interests during and since the original sale. Saab certainly would like to consolidate on Phoenix, but reaching breakeven and launching the new 9-3 will almost certainly consume the next 2-3 years of investment.

        • I was just saying whatever Saab would like to build in China will likely have to be non GM IP. That being the case, it will probably hasten the abandonment of existing models that utilize GM IP. If Saab’s buyers want to manufacture a range of Saab models in China, that’s something they will have to face.

        • Jeff;
          Well spoken, many here would like to blame GM for everything. GM will agree to something here, just as they did before.,and for the same reason, they do not want Saab’s blood on their hands. Who is the real enemy? That very arrogant isolated view that if “we build it they will come” . Well they built it, and the world didn’t come. The Chinese will trash that thinking ASAP, and correctly so.
          Take Care

    • I don’t consider Antonov wishful thinking, we were down that road before.

      Here’s wishful thinking. GM knows Victor has a plan B, and their initials are NSC. And they make this whole China thing go away before GM ever has to make a decision about it?

      That’s wishful thinking!

    • How about occupying some European Company that can actually buy Saab outright and quit all of this hodge podge purchase bs. Way too many cooks in the kitchen.

      Meanwhile my 2011 9-5 is still in the shop after 62 days for repairs that my insurance company said should take 8 days to fix. The body shop has no idea when the remaining parts will get here. Even a Saabophile has a limit on patience. And the dealers here who can’t sell cars can’t make money fixing them either.

      Forget production. Unless Saab quickly gets its parts supply line going nobody in the US will buy Saab again. This is much worse than when GM shut down Saab. At least we could still get parts.

    • Most companies that are owed $300 million + usually are. Frankly, I am beginning to think it is in GM’s best interest that Saab go under and GM knows it. Probably should have taken their losses two years ago. I can’t see how this sale to Saab has helped GM in any way. Frankly, GM did a much better job of keeping an adequate supply of parts and had Saab gone under when in GM’s hands, I think parts would have continued to be available in the US. Now it seems like no Saab cars are getting fixed.

      • I get how pissed you are about your Saab’s condition David. I will personally do my best to make sure your 9-5 gets the parts it needs. Just a little more patience man. Saab will be viable again soon.

        • Strange as it may seem I’m not that pissed. I’m lucky I have a spare car or I probably would be pissed if I was having to lease one. What I am is concerned. Concerned that Saab will never be stable enough in the US to feel like Saabs can be reliably fixed in a timely manner. GM did a lot to build up the Saab brand and Saab dealerships in the US and they are quickly going out of business. And we are predicted to go into another major recession after really not getting out of the last one. And this recession has been a depression for both the housing and auto industries. It is hard to be optimistic about any buyer that does not have several billions of dollars. The last thing Saab needs is another buyer with weak financial strength.

  6. GM’s only inspiration is the profit motive. Getting rid of another “competitor” would be in their best interest. IF Saab does get into China, I highly doubt they will ding the GM stats in China. But for every person that would’ve bought a Saab in China, that would be one less GM car sold. Yes, I know that there are more competitors, I’m hypothetically speaking.

  7. The “shares” GM holds in Saab are “preferred shares”, they are a debt instrument. They are not converted into Saab shares, but rathe entitle GM to a fixed dividend and prinicpal repayments until 2016. This instrument is a form in which “Saab paid for itself”, or actually the 326 million that was not paid in cash, but deferred, in part depending on Saab’s future profitability.

  8. I think this is where the Chinese have screwed themselves. In the previous deal they were buying a controlling interest in SWAN now they are buying 100% of Saab AB not SWAN, this gives more power to GM and VM knows it……..

  9. I do not understand the cross shopping argument that GM might have concerns about-it like comparing Nissan to Audi-I would never buy GM its Saab Volvo, Jag or the german kit for me-I am not alone in these thoughts, GM never figure, I would estimate this to be a ratchet to milk the deal in their favour-but any real impact for GM? The chances are slim.
    They will ofcourse continue to provide and benefit from their IP that Saab already has for some time to come, as volumes increase irrespective of the market.
    Frankly the only analysis which puts GM on a sticky wicket is one of paranoia rather than busines sense.

  10. GM will always be the problem. They have no interest in saving SAAB. They have no feelings like “SAAB was our child. We have still responsibility for them.” No: SAAB is only a competitor. Sorry, this is the only realistic perspective. Look at Opel. They are still a member of the GM family but they are not allowed to sell cars in the growing markets or on the US market . Why should they helb SAAB?

    • They bought Saab. They owner financed the sale of Saab. They are still owed $326 million dollars on the sale of Saab. Would you just piss off $326 million if you were them?

      I really get tired of the GM bashing. Yeah GM didn’t help Saab as much as it could have or should have but GM obviously has had its own serious financial problems for 15 or 20 years. Maybe GM should have never bought it in the first place and maybe Saab would have gone under 15 or 20 years ago.

      But GM did some very good things for Saab in the US. It set up a good dealer network which was deplorable before GM took over. It is quickly becoming deplorable again. When GM had it, it consistently produced cars and sold cars. Not so after GM sold it. I could always count on getting parts when GM owned it. Now I can’t. Things are much worse for Saab in the US after GM’s sale.

      Sometimes just doing the basic shit well is better business plan than being way out front in terms of technology.

  11. When you see how many people live in China and SAAB were to compete with GM then look how many more GM components would be in those cars! The problem is the UAW Union and their GM HQ at at 1600 Pennsylvania Ave.

    • Spoken like a true believer in the tea party, a.k.a, the party of no. Is it possible you are American?
      I would not want to confuse you with a neo- confederate, that would be unkind.

  12. I just hope that GM will consider only the business reasoning with this whole Swan/Saab/PaDang/Youngman-Lotus deal – which can only be: what is better: losing everything now, or getting something back later……..what would they get out of the liquidation of Saab? and in comparison: what would they get out of a change of ownership? Anything else should be left completely out of the equation.

    At the end of the day, it’s going to boil down to that – hopefully.

    About Saab being a competitor: GM should be comparing themselves to and targeting the German competition -> Saab’s role is to be a niche-player……

    I expect, that we shall see about end of Jan 2012, whether the production line actually restarts. Till then we can but sit back and enjoy the ride listening to U2’s helter skelter…..or: keep calm and carry on…

    • Well, all the niche automotive companies in the US are long gone. It is very hard to be a niche player in the automotive business because you really have to rely on your competitors or their suppliers to help you produce your own product.

      I am not sure how much sense it makes for GM to keep hoping that a niche player will ever be strong enough to pay GM back the $326 million it is still owed for selling Saab.

        • GM has the right to do whatever it wants to with its assets, of which Saab was one. It shut down Oldsmobile, Pontiac, Saturn and Hummer. It sold Saab because it finally found a buyer. But the buyer just didn’t have enough financial resources to make Saab viable. Technically, since Saab is now in default, GM as owner of all of these shares which are really debt, has the right to foreclose on Saab, and to sell off whatever assets of Saab that are left. So maybe GM could get some of the $326 million still owed to it back by selling off whatever assets GM has liens on. Technically, it probably could take Saab back which is what usually is part of a seller financing deal. If it can take Saab back, it may think it is best to shut it down and sell what ever parts of it can be sold.

          But I don’t understand your point. GM gave Saab a chance to make it by selling it. It obviously hasn’t worked and it obviously has the right to recoup as much of its interest in Saab as it can.

  13. ‘And then there is those shares GM still has in Saab, worth $326 million.’…..
    The $326million(VM did not paid) is now worth 6million.(in this Saab/Pand da/Youngman deal)
    GM signed a deal about the intellectual property rights with Saab in 2009.It was declared GM had the right to share the technique of the new engine ,turbo,vehicle,safety even the technique Phoenix platform till 2014.So GM have their benefit in Saab.They are also the suppliers of Saab parts. GM absorb the the technique and build the Buick brand and kill the OPEL brand and let Saab be…..That is what has happened these years.

      • You said right .I just want to say something for this sentence
        β€˜And then there is those shares GM still has in Saab, worth $326 million.’…..(see this above in the article).

        In this Swan/Saab/PaDang/Youngman deal the $326 million were cut to 60million(sorry for my mistake with the previous amount ) .

  14. Little Red Riding Hood
    Fairy Tales of Charles Perrault

    Once upon a time in the middle of a thick forest stood a small cottage, the home of a pretty little girl known to everyone as Little Red Riding Saab. One day, her Mummy waved her goodbye at the garden gate, saying: “Grandma is ill. Take her this basket of cakes, but be very careful. Keep to the path through the wood and don’t ever stop. That way, you will come to no harm.”

    Little Red Riding Saab kissed her mother and ran off. “Don’t worry,” she said, “I’ll run all the way to Grandma’s without stopping.”

    Full of good intentions, the little girl made her way through the wood, but she was soon to forget her mother’s wise words. “What lovely liggonberries! And so red.”

    Laying her basket on the ground, Little Red Riding Hood bent over the liggonberry plants. “They’re nice and ripe, and so big! Yummy! Delicious! Just another one. And one more. This is the last. Well, this one Mmmm.”

    The red fruit peeped invitingly through the leaves in the grassy glade, and Little Red Riding Hood ran back and forth popping liggonberries into her mouth. Suddenly she remembered her mother, her promise, Grandma and the basket and hurried back towards the path. The basket was still in the grass and, humming to herself, Little Red Riding Hood walked on.

    The wood became thicker and thicker. Suddenly a yellow butterfly fluttered down through the trees. Little Red Riding Saab started to chase the butterfly.

    “I’ll catch you! I’ll catch you!” she called. Suddenly she saw some large daisies in the grass.

    “Oh, how sweet!” she exclaimed and, thinking of Grandma, she picked a large bunch of flowers.

    In the meantime, two wicked eyes were spying on her from behind a tree a strange rustling in the woods made Little Red Riding Saab’s heart thump.

    Now quite afraid she said to herself. “I must find the path and run away from here!”

    At last she reached the path again but her heart leapt into her mouth at the sound of a gruff voice which said: “Where are you going, my pretty girl, all alone in the woods?”

    “I’m taking Grandma some cakes. She lives at the end of the path,” said Little Riding Hood in a faint voice.

    When he heard this, the wolf (for it was the big bad wolf himself) politely asked: “Does Grandma live by herself?”

    “Oh, yes,” replied Little Red Riding Saab, “and she never opens the door to strangers!”

    “Goodbye. Perhaps we’ll meet again,” replied the wolf. Then he loped away thinking to himself “I’ll gobble the grandmother first, then lie in wait for the grandchild!” At last, the cottage came in sight. Knock! Knock! The wolf rapped on the door.

    “Who’s there?” cried Grandma from her bed.

    “It’s me, Little Red Riding Hood. I’ve brought you some cakes because you’re ill,” replied the wolf, trying hard to hide his gruff voice.

    “Lift the latch and come in,” said Grandma, unaware of anything amiss, till a horrible shadow appeared on the wall. Poor Grandma! For in one bound, the wolf leapt across the room and, in a single mouthful, swallowed the old lady. Soon after, Little Red Riding Hood tapped on the door.

    “Grandma, can I come in?” she called.

    Now, the wolf had put on the old lady’s shawl and cap and slipped into the bed. Trying to imitate Grandma’s quavering little voice, he replied: “Open the latch and come in!

    “What a deep voice you have,” said the little girl in surprise.

    “The better to greet you with,” said the wolf.

    “Goodness, what big eyes you have.”

    “The better to see you with.”

    “And what big hands you have!” exclaimed Little Red Riding Saab, stepping over to the bed.

    “The better to hug you with,” said the wolf.

    “What a big mouth you have,” the little girl murmured in a weak voice.

    “The better to eat you with!” growled the wolf, and jumping out of bed, he swallowed her up too. Then, with a fat full tummy, he fell fast asleep.

    In the meantime, a hunter had emerged from the wood, and on noticing the cottage, he decided to stop and ask for a drink. He had spent a lot of time trying to catch a large wolf that had been terrorizing the neighborhood, but had lost its tracks. The hunter could hear a strange whistling sound; it seemed to be coming from inside the cottage. He peered through the window and saw the large wolf himself, with a fat full tummy, snoring away in Grandma’s bed.

    “The wolf! He won’t get away this time!”

    Without making a sound, the hunter carefully loaded his gun and gently opened the window. He pointed the barrel straight at the wolf’s head and BANG! The wolf was dead.

    “Got you at last!” shouted the hunter in glee. “You’ll never frighten anyone again.

    He cut open the wolf’s stomach and to his amazement, out popped Grandma and Little Red Riding Saab, safe and unharmed.

    “You arrived just in time,” murmured the old lady, quite overcome by all the excitement.

    “It’s safe to go home now,” the hunter told Little Red Riding Saab. “The big bad wolf is dead and gone, and there is no danger on the path.

    Still scared, the little girl hugged her grandmother. Oh, what a dreadful fright!”

    Much later, as dusk was falling, Little Red Riding Saab’s mother arrived, all out of breath, worried because her little car had not come home. And when she saw Little Red Riding Saab, safe and sound, she burst into tears of joy.

    After thanking the hunter again, Little Red Riding Saab and her mother set off towards the wood. As they walked quickly through the trees, the little girl told her mother: “We must always keep to the path and never stop. That way, we come to no harm!”

    The End

  15. .
    I suppose the greater problem for GM, is it’s other contractual obligations to the Likes of BAIC.

    When GM sold the OG 9.3 & 9.5. those deals would now be infringed if YPA have access to Current 9.3 & 9.5 as many parts are still GM.

    Even if GM wanted to help, they may not be able to because of other deals done since Saab was sold to VM.

    The other point, which I have not see mentioned [unless I missed it] is the use of the Saab name….by YPA..!!

    • Even I forgot about that, though since we haven’t heard it mentioned as an issue I’m not sure that it is. Anyone on the Swedish side know?

  16. I think the statement by GM’s spokesperson is actually quite simple and straightforward: GM won’t compromise its business relationships in China, period. The logical consequence is that GM has to at least consult with their Chinese partners before making a decision.

    Let’s wait.

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