Decision Week – Continued

This is the morning after here in central Europe. I did not get too much sleep as I have been chatting with people from different time zones until I literally fell asleep besides my MacBook. The renewed “no” from GM has been a hard hit for Saab and all who are close. We’re surely in high danger of running out of time but still, this does not have to be the end for our tiny Swedish carmaker. Rest assured that Victor is still pushing to explore all opportunities excluding giving up.

The biggest problem right now is time. Reconstruction is in a critical phase. Fresh funding is badly needed to pay salaries and to fund the company for the next few weeks. This would be Youngman’s part and I am not really sure if they don’t want to take the risk of investing even more or if they have certain restrictions from for example NDRC not to put more money in until a successful deal is reached. The fact that they continue to work on a solution and that they are obviously willing to step back in their share shows that they are pretty dedicated to getting a deal done.

GM’s reaction on the proposal was to an extent predictable though I had not nessesarily expected it. Just after the 100 % deal had been rejected there was a say that 19,9 % was the maximun ownership change GM would allow. In total. That means all parties who want to invest just get a piece of that 19,9 %. Not much given the huge investments the partners were going to make. So the recent plan included a “neutral”, pure financial investor, the unnamed Chinese bank as an attempt to ease up GM’s mind.

Sadly, this was not successful and as Jeff hinted in his recent post, several sources indicated that Youngman are now trying to find a solution where they stick to convertible preference shares which would allow them to inject cash but keep them out of the ownership structure. These shares could be converted to regular shares as soon as Saab doesn’t need GM IP anymore. If you ask yourself why this was not on the table earlier – Youngman sure wanted to be more directly involved into Saab as they are likely to invest huge sums. You can’t blame them for that and at least they are still working on solving the situation.

Some may wonder why Victor stated that the original 54 % plan had better chances to get an approval from GM if the barrier is at 19,9 %. At least it would have been a better starting point for talks. I tend to believe that the 100 % takeover plan caused huge irritation at GM and put the intentions of Pang Da and Youngman in a bad light. So now GM sticks to its hard position and wants to see its requirements fulfilled. Victor said that he had warned the parties to try that 100 % thing but they did not believe him. Now it looks like at least some of the involved parties got it and really work hard to find a solution.

Just in case I did not mention this before – Mr Lofalk, please be so kind to face reality, read your job description and start to work for a viable solution for Saab. Would be very much appreciated by a number of people.

On a personal note – I like the fact that the community still uses GM’s facebook wall to air polite requests to let Saab live. But I urge everyone to stay polite, even if that seems hard now. Same goes for the Saab rallies that are being planned on facebook for the 11th. Show your support for Saab, don’t make it an event driven by hate towards someone. Two years ago the Saab community has shown that it can support the brand it loves in a civilized manner. Please make that happen again.

29 thoughts on “Decision Week – Continued”

  1. I just hope that you are right with your article here, till72.
    It is just good to see that there are still some people that see some light at the end of the tunnel.
    But the big question will be: how can Saab gets freed from GM TODAY?
    Only so new plans can be made.

  2. For sure there are ways to structure a deal to circumvent all potential traps and objections, if there is a real willingness and capacity to invest. Only restriction: Do not violate any existing contracts with GM, not just formally, but even in the sense and understanding of the contracts, and pay out all other creditors incl. EIB. If GM should not deliver parts to THN, they might be fined to pay huge sums on breach of contracts from their side, although after long processes.

    Probably that is the way to go, and it might show GM their limits and get them reasonable.

  3. There is no time anymore to negotiate with a party that always says NO,so a decision must be taken now by one or more parties who can invest the needed funds to keep Saab alive.
    When the company can be saved there is time afterwards to work on claims.
    But if some parties just are interested to wait till everything did come to a final end; the discussions with GM must continue.

  4. Just picked up this report over on Chinese Car News. The bit that surprised me was the mention that the Pheonix platform is also part of the key technology covered by the agreement with GM!

    If this is the case then, if Saab has a future, GM will probably be involved for a substantial time to come! Do we really know what technology GM has a veto on? I think a lot of assumptions have been made but outside of those directly involved I don’t think anyone here really knows. For example about the agreements with American Axle; I think this project was probably also started pre SWAN! These are not projects and technologies that appear overnight. Considering the period since GM officially sold Saab and the situation over a large portion of that period I don’t believe that there is anything yet where GM does not have a veto over!

    • As far as I know the PhoeniX platform is 100% owned by Saab, but it is fitted with GM (and BMW) bought hardware so to get rid of that would require a redesign.

  5. The decision time is now! I don’t understand the following: If Youngman wants to get hold of the so-called preference shares, which are as far as I understand virtual shares, more like a promise that in e.g. three years-time they will be converted to the real ones, why in hell do they need GM approval?
    The ownership structure is unchanged and if there are “lunatics” ready to inject cash without getting some shares, it’s their problem, not GM’s.

  6. Will Saab be free from GM IP if they build the new cars on the Phoenix platform on components that doesn’t involve GM IP or will they be free the day when they don’t need any more spare parts for older Saabs that has GM IP in them? If it includes spare parts then it will take forever before Saab is GM IP free.

    • I would say that providing spare parts for older cars is not the issue. I don’t think that the license on the current 9-3 isn’t such a big issue as it is older technology due for replacement.

      My guess is that the discussions are around;
      1. The 9-4X is purely a GM product (only GM parts built in GM factory).
      2. The Phoenix platform is part Saab technology and part GM technology. My guess is that certain parts are GM high tech and some parts are GM low tech (brakes, air bags etc?) are low tech. Replacing some of the stuff can be done rather easily but I think that some GM high tech stuff will be part of the Pheonix platform unless they want to add a year or so to the development.
      3. The 9-5 is a newer product with alot of GM technology and Saab want to keep building that.

      So we must consider GM a long term supplier of Saab parts and it would be very unwise to mess up that relationship!

      • I guess that he is obliged to by the law. Otherwise he might get prosecuted for risking any remaining money in the company…

        We shouldn’t forget that Saab have a multi billion SEK debt to suppliers, employees and financial institutes.

        • SAAB still has some time to finalize the deal I guess few more days. If you remember the reconstruction was “terminated” even the last time before the MoU for 100% Chinese ownership.
          What I am worried is NDRC. Are the Chinese government ready to support this “shady” deal, with Youngman injecting money and not getting any shares?

        • By “process” I mean a scenario where the Chinese have the ability to transfer cash – but not when the reconstruction has ended…

      • Well, it will take almost a week for the termination to come into effect. After that Saab is not protected from bankruptcy, but it does not imply that Saab would immediately go bankrupt. It depends on the creditors.

  7. I feel behind the project are many political issue.
    The GM got a lot of benifit from China, both SAIC and BAIC. And either of them are fear about SAAB alive from China.
    So, the GM got support form these two parties to stop the issue.
    Both PanDa and Youngman has to find out more real power-man to force those group’s( included GM, cause they are the real one that got margin from the Country.)
    Otherwise, the porgram of SAAB is more dangerious now or any delay again.

  8. Nobody seems to want this to work apart from VM and the Chinese. GM do not want it and the Swedish government want Swan out of the picture. The only way this can work is for Youngman to pump in money for a 19.9% share on the basis that they take over the company at a point in time. I feel the end is very close for Saab now , as much as it hurts me to say it.

    • It is all about willingness and capacity to invest, the due diligence done by those willing to invest into Saab as well as about exact formulation of existing contracts. None is clear to outsiders such as me or probably all of us. Financial engineering then might be able to convert the various constraints into a capital and balance sheet construction, which fits all the existing limitations for their life span, but also allows for desired long-term ownership structure. Obviously time is running out quickly, but those M&A specialists of investment banks are able to work day and night, and there are not many deals right out there. If really a few days are left, till bankruptcy will be declared, it is no problem to come up with a final solution before.

  9. Dear all,
    Being a Saab driver for many years I always had the impression of being part of a greater whole. Owning a Saab leaves you with the feeling of being part of a club of fellow Saab drivers. Most people who bought a Saab will continue to do so. Hopefully for many years to come.
    For this reason a plan came to my mind:
    Why, if we are so eager to keep Saab alive, should we not buy a stake in Saab? If there are, for example, over a million proud Saab owners willing to donate a substantial amount of let’s say € 100,-. A contribution of 100 million could be made. Maybe this all comes too late. Maybe it’s not possible. But did anyone ever gave this a try?
    Any suggestions/ideas?

    • You can buy Swan shares, of course, but that won’t put any money into the Saab cash register since you would pay your money to the share owner.

      Moreover, there is only a limited minority of the total issued share capital available for trading at the AEX exchange. For a 100 million euro or USD you could buy all of Swan/Saab today and still keep enough in your pocket not to have to worry about your financial future until your dying day. The problem, however, is where you buy them.To spend such an amount on Swan shares, you would have to buy substantial blocks of shares- well, actually all the shares, given that the current market capitalization (value of all shares based on present share price) is less than a 100 million- from major shareholders such as VM himself (Tenaci), Mubadala or various offshore investment vehicles (possibly owned by Vladimir Antonov) but even that wouldn’t improve the cash situation at Saab itself, unless the sellers would be willing to re-invest the proceeds of the sale into Saab direct.

      Another prohibitive factor is the sad fact that the present value of Swan shares is much lower than at the time when all those investors bought the shares. By selling now they would have to absorb a huge loss on their intial investment. I kind of doubt they will want that because they are now speculating on the basis of a takeover of Swan/Saab and hope for a substantial rise of the share value when/if this happens.


  10. I have a feeling that, even if this idea came to fruition, the amount raised would fall short of the theoretical total and would, in any event, quickly disappear “down the plughole”. And wasn`t a similar suggestion made months ago? Sorry to seem negative, but I am daily becoming more despondent.

  11. Slightly OT, but nevertheless connected with the dire financial straits in which SAAB finds itself, my dealer tells me that Hirsch are not supplying SAAB at the moment. So I can`t order my leather upgrade. However, Hirsch tell me that they are setting up a new accounting system with dealers which should be operating in the near future – so, some good news, then.

  12. If the 500 pound gorilla in the room says, “I want no more than 19%” Why on earth are deals flying around with anything else? It doesn’t seem that difficult. Give them what they want and move on. There is obviously way more going on because this doesn’t seem too hard. All these deals do is raise and crush the spirits of people who count on this company to succeed.

    I find it amazing that the Swedish Gov’t won’t help its own and am further amazed that they continue to keep Lofak in his position.

    Talk about rock in a hard place. The only chance of survival hinders on a country that blatantly attempts to steal secrets from the country whose company holds all the cards. Glad my name is not Victor.

    I hope and pray time doesn’t run out on Saab..

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