Last week autonewschina.com featured an interesting piece written by their managing editor, Yang Jian. It gives a few insights how Saab is seen from a Chinese view. It also indicates that Youngman’s interest in Saab in not that fresh, they already looked at the brand for quite a while.
Why are the Chinese so keen to acquire Saab?
Yang Jian | 2011/12/16SHANGHAI — Once again, liquidation looms for Saab Automobile AB as a Swedish court decides whether to end the company’s credit protection.
And once again a Chinese suitor — this time Zhejiang Youngman Lotus Automobile Co. — is trying to save the brand.
This week, Youngman wired $5 million (32 million yuan) to pay Saab’s immediate tax expenses. Earlier this year, Pang Da Automobile Trade Co. paid 401 million yuan to buy a fleet of Saab vehicles.
But why are these companies so keen to acquire the deeply troubled Swedish brand? The answer is that Pang Da and Youngman understand the value of a global brand.
Supported by cheap labor, Chinese companies can make products at very low cost, but they are still weak at brand-building.
Weak brands are especially problematic for domestic Chinese automakers because nearly all the global automakers have entered China.
As president of China’s largest auto dealer group, Pang Da President Pang Qinghua knows the importance of a strong brand.
Pang Da sells imported Subarus in China. Pang Qinghua knows that even a second-tier global brand such as Subaru commands more respect among Chinese consumers than a domestic brand.
That’s why Saab attracts him, and that’s why he wants to buy it. “As a brand that has been around from 1947, Saab has a rich cultural heritage and many unique attributes,” he told reporters during an industry forum in October.
Youngman — originally a bus manufacturer — likewise is dying to acquire a strong brand.
In 2006, the same year that Youngman began producing cars — company President Pang Qingnian cast his eye on Saab. In 2009, he contacted Saab to express his wish to invest, only to be turned down.
“Saab is a global brand and China is a large market,” Pang Qingnian told journalists after signing the acquisition deal with Saab last month. “It is pretty sure that we’ll use it to explore the Chinese market.”
China’s government also has learned to appreciate a strong brand.
In 2010, Beijing overruled Sichuan Tengzhong Heavy Industrial Machinery’s bid for General Motors’ Hummer brand. But a year later, the government happily blessed the Saab deal.
Behind its attitude change is the government’s recognition that the Chinese automakers must build their brands.
Because of their poor images, domestic brands are losing market share in China to global rivals such as Volkswagen and GM. Moreover, they are years away from competing successfully in Europe and the United States.
Zhejiang Geely Holding Group Co.’s acquisition of Volvo has shown that a Chinese automaker can manage a foreign brand. Now the government believes that other domestic automakers might profit from Geely’s example.
But Chinese automakers must move quickly. As global automakers recover from the recession, they have become increasingly protective of their technology.
Opportunities to scoop up a distressed global brand are quickly vanishing. This explains why Pang Da and Youngman are making a last-ditch effort to rescue Saab.
Yang Jian is managing editor of Automotive News China.
I agree very much on your points.
I would go so far as to saying that Youngman is dependent on a successfull deal with Saab to survive itself in the current developments in China, and also that Youngman might even in the longer run become a subdivision in one of the state controlled car manufacturers, even though they own Saab.
But then again I might be wrong 🙂
Jeff,
this is just what I thought.
ANC has also forgotten to say that the Chinese government has recently increased the taxes on foreign cars only to protect the local brands.
So, it is less a brand interest than a technology interest.
But, the problem is YM can neither get the brand nor the technology, say, in 3-5 years.
Any help Saab can offer during this period?
Just an image, it may have bigger effect to some of the Chinese though.
Saab can offer their entire tech department as long as they keep their hands off GM IP
May be.
If Saab cannot survive without GM IP at the moment, how can YM achieve it?
Don’t be that sensitive, I was just saying Pang Qingnian may have the emotional tie to Saab as well, beyond all those business rationales.
Could very well be, But I doubt that emotional ties has much say in modern business.
There is a lot of JV going on around Saab, focused on tech that is not connected to GM.
eXWD is an example. The EV tech is as far as I know also GM free,
Apart from that I think the Chinese are very patient people. That’s one of the reasons their culture has existed for about 4000 Years
Which is why I can’t see GM going along with this. They have been too quiet on this, probably hoping to run out the clock, and not look like the ultimate bad guy.
If Saab makes it beyond Monday, and at some point the structure of whatever financing deal with ym gets formally announced, I think GM ‘s hand gets forced – resulting in that they will pick up their ball and go home.
Rock and hard spot.
Hopefully they will just go home. 😉
scand,
if GM picks up their ball and goes home, they will do it because they feel like doing it and not because they are forced.
If the new plan is something similar to the rumours, Saab ownership structure won’t change, and thus GM will have no reason for not liking the contract.
If by “it’s own initiative” , they mean James Cain, then I would find that surprising. Spokesmen for large corporations never do things solely on their own decision.
The brand is the reason. The technology will be “old technology” soon enough. The brand has been around for 60 years. They want the brand, IMO. That, and the dealership network that is already in place, which would be expensive to replicate and very difficult for a Chinese manufacturer to establish in North America. If they could manage to secure the Saab brand and sell smaller, less expensive cars in the U.S., within a few years, they’ll be very profitable, even without GM clones.
Angelo,
any technology will be “old tech” sooner or later. But YM knows about the tech to come and not the current GM tech. 😉
Agreed. And regarding your comment about GM not being forced—-you are right. It’s amazing to me, because in 2009, they were on their knees, crawling around blindly, a disgraced organization. Here we are a couple years later, and they’re acting like arrogant roosters. Goes to show you what happens when failures are propped up.
How is protecting your company’s intellectual property “acting like arrogant roosters?”
Last I checked, GM is profitable, is on track to repay the government early, and is planning to institute profit sharing with union employees.
One other thing-the Ford EUCD is not old tech. Along with the current Volvo S60, it is also still used by the current Mondeo, and also by Land Rover’s brand new Evoque, among others
Youngman promise funding
Google trans from Ttela.se
“The negotiations in Stockholm between, among others, Rachel Pang and Muller should have continued yesterday, with a view to the ownership settlement previously agreed which will also be presented at Vänersborg on Monday.
related..
Youngman is reportedly declared themselves able to arrange financing until then”
Then it becomes very difficult…Without November salaries actually paid, forget about it.
Then is certainly sounds like a chicken or egg proposition. It’s difficult to blame Youngman for not throwing money down a hole that might be a rat hole. I hope a deal can be arranged to give them confidence—-if not outright assurance—-that they aren’t throwing money away.
michael,
are you one of the judges of the court?
Ok, I accept that YOU think that it is very unprovable that the judges would agree to that, but judges are still people and not a pile of software that takes decisions on, and only on, the input they receive.
Maybe because Ford is not a loser-deadbeat company like GM?
Maybe because Ford realized that cutting off their former Volvo customers at the knees was not a good business practice, while the usual short-sighted jackasses at GM can’t see that doing the such a thing to their former Saab customers is a bad practice?
what goes around comes around, mark my words.