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 may catch flack for this, but… I don’t actually agree with the primary argument the author is trying to convince us of– that the main reason Youngman wants Saab is for the brand. Yes, I absolutely agree, the image is strong and Pang Quingnian is on record saying how much he admires the company. However, it’s more a bonus than the primary motivation that they want the company. Youngman’s senior executives have been quoted as far back as June explaining that they’re in this deal for the technology, and what that entails. I’ll have a much, much longer article… Read more »
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.
I think Saab is attractive for some other reasons. China has huge prospective oil import bill and pollution problems. Electric cars or hybrids represent a solution to that, as well as technologies to reduce fuel consumption from gasoline engines. Saab has an actual and prospective technology capacity in that field – turbocharching of small compact engines, electric propulsion technology, eXWD, and with the right investments into R&D, might be among the or at the top in the automotive world some years down the road. Furthermore, think about China in a longer term perspective. China has roughly 3 tr USD of… Read more »
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.
BINGO. This wasn’t very much different that the previous attempt, and still would mean an unacceptable tech transfer. The Chinese (and VM) need to get serious and stop trying to do an end-run around IP rules. Just posted at noon, EST on the WSJ: STOCKHOLM (Dow Jones)–General Motors Co. (GM) will not approve any of cash-strapped Swedish car maker Saab Automobile’s new proposed ownership structures, a spokesman said late Saturday, dashing hopes the company would have an agreeable deal on the table before a Monday hearing on the car maker’s ongoing creditor protection. “Saab’s various new alternative proposals are not… Read more »
mike, if I read the article on the same e-mail at gp.se, the whole looks rather different. It is GM’s spokesman James Cain who, entirely on its own initiative, wrote in an e-mail that went out to a number of receivers, including GP. Cain refers to the district court hearing which shall be in Vänerborg on Monday and also refers to the various proposals for ownership structure, which circulated recently and that would provide an opportunity for China Youngman to become a financier / owner in the background. Mr. Cain has decided to send e-mail to different people telling them… Read more »
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.
Actually GM has not effectively paid back all the money that was TAKEN from US taxpayers. GM is still into the US Treasury (aka US taxpayers) to the tune of at least 25 BILLION dollars, as has been well documented, possibly a lot more, depending on the amount of previous losses GM is permitted to write off on its tax liabilites vs. the normal amount of losses it would have been able to write off, had it gone through a conventional bankruptcy procedure. http://money.cnn.com/2011/11/18/news/companies/gm_bailout/index.htm Despite all of the hemming and hawing by GM apologists, at the present time the US… Read more »
My statement was “GM is on track to repay the government early.” No one has said that they “have effectively paid back all the money.” That was your leap. 😉 And if you read further down the story, you’ll find this: Adam Jonas, auto analyst with Morgan Stanley, has set a $45 target price for the stock and says under the best-case scenario it could go as high as $68. He said the company’s strong competitive position in the U.S. and China and its improving balance sheet leaves it well positioned for further gains in the next year. “The first… Read more »
It is quite a stretch to say GM is on track to “pay back the government early” when it is based on a few analysts “projection” of a future stock price. Historically, it has been a long long time since any GM “bulls” were right about anything related to GM stock. If you listened to GM “bulls” in the middle of the last decade, you would have lost your shirt. Their track record is not good, to say the least. Although, even then, you would have made out better than the poor folks who held GM bonds, and who got… Read more »
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
Dreadnought: I was one of the idiots who listened to the GM bulls a few years back—-and lost a lot of money when their share price dwindled to nada before they started begging for money (and unfortunately, got it, again, at my expense since I pay taxes). I’m not sure how experienced Mike is at investing—-but with a little research (very interesting that he quoted someone at Morgan Stanley), he’ll find that quite often, stock prices are bid up by those well informed “analysts” whose firms end up making millions steering investors to garbage stocks. Dreadnought’s “rich irony” paragraph effectively… Read more »
Dreadnought, Angelo: Via an IPO and subsequent sales of some of its stake, the US has recouped half of its investment in GM…and that’s despite the ongoing European debt crisis that sent nearly ALL major markets reeling over the past year. GM sales have generally outperformed estimates, even with the Euro mess brewing. The fact that Saab is still producing the 9-3 on the Epsilon I is far from a validation of the BAIC deal; if anything, it just proves my point. It’s only slightly less antiquated than the old 9-5 platform, and is completely outclassed by lower-priced competitors. It’s… Read more »
Mike: The current Mondeo on the EUCD platform is only a year older than the Opel/Vauxhall Insignia on Epsilon II. (2007 vs. 2008). The brand new Land Rover Evoque is also built on EUCD. It is a hot and much praised vehicle. In fact they are actually selling ABOVE MSRP in my neck of the woods, so it’s just not accurate to characterize the EUCD platform as some antiquated, nearly-worthless tech.. I don’t disagree that the 9-3 is old tech at this point-my argument is that GM cut Saab off at the knees in 2009 by selling the 9-3 tooling… Read more »
Jeff, your point about the tech being the sweetest part of the deal is completely on-target. The Chinese have likely realized that the hodge-podge of small and medium car companies don’t have the resources to invest in R&D or trivial things like safety. The Chinese auto marketplace is where the US was during the early 20th century when there were a couple dozen automakers exploring different designs and technologies (including electric!) and they eventually consolidated into five big ones, and later shrunk to three. The Chinese can’t wait 30 years for domestic companies to produce decent cars (think Hyundai); they… Read more »
They know that many people are waiting for the opportunity to buy new cars of the brand. I have purchased two saabs 9-3, but I would like to buy the new griffin blue TTiD with automatic transmission now with optimising the performance of the Hirsch. Which other brands have such fans who do not buy another needed their cars because they are waiting. Dream also of 9-4 x. This movie with him on the snow …Happy holidays! I hope that the Court understands that the program will repair much more creditors than the liquidation of the assets of and for… Read more »
They know a properly run SAAB could become very profitable. All they need is a sufficient/huge investment to put in a wide model range and VERY smart people to run the company. They got to go all in right away in order to lift this plain off the ground. Approvals from all parties ASAP and hundreds of millions into the company immediately so they can start building cars not just push paper. BTW the US dealers need the 9-4X or they’ll be gone. Diesels will keep Saab afloat in Europe. Pay GM and all the other suppliers in advance next… Read more »
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”
My opinion is that YM will put the money in an Swedish account, so they can show the court that they are willing to pay, but the money won’t arrive at a Saab account till the court decides if the current reconstruction process should be continued or not. Why, just because YM can’t put all the money needed for paying all the debts yet, as they may be waiting for the NDRC to say YES to the new deal. So, yes they wan’t to protect their investment they’ve done till now, but no, they don’t want to invest more money… Read more »
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.
No I am not. But: After 7 months of intense negotiations with several propositions, binding MoU’s and contracts, always invalid for various reasons shortly afterwards, 3 months of reconstruction, a mountain of debt and big amounts needed to restart, several stakeholders opposing for various reasons at some point in time, and salaries not paid for November and for December: What do you think a normal judge will think? The longer this farce lasts, the less the chance to find a solution for creditors. Above all if the administrator gives these views as well. It is the creditors interests, not the… Read more »
People in mainland China don’t want to buy a mainland Chinese brand. They are ok about buying a Taiwanese Chinese or Singaporean Chinese product, though. They just don’t trust their own designs and cutting corners. People in China have great brand loyalty. That is why Buick is such a hit. In the 1920’s, Buick was among the best cars in the world, much like today’s BMW. In the 1920’s, if you were a Chinese bigwig, you drove a Buick. Then in the 1950’s to 1980’s, Buicks could not be imported into China, which is a good thing because Buicks were… Read more »
Derek: 1950s and 1960s Buicks were not junk—-where are you getting that information/impression? I’d say they became junk in the early 1970s—-around the same time the EPA came into being—-and the two events are connected. And I’m not even making a judgment about the EPA—-just that Buick’s cars (along with nearly all American cars) couldn’t keep up with the regulations—-engine performance became choked and dismal, body rust was pronounced—-later, trying to keep up with fuel economy standards and marketplace demand for fuel efficiency made their cars even worse. But in the 50s and 60s, they made some very good cars—-many… Read more »
…………………………. I start to realize what type of self confidence GM have. Basically none and the do not understand the market or the customers at all (or just hope that thier customers do not know anything at all about us up here in the north). No. I am not working at Saab (I left 8 years ago) but we still have one Saab in the family. I do not think at all that this is typically american but I start to think is it typically GM, I know quite a few from US and I do have daily contacts with… Read more »
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?
My feeling is that the customer decides in the end (old an new) and I feel hthat the bad will of letting Saab die for the reason of protecting year shareholders shorttem as GM states (which I do not believe) is the case. The only value you could bring to your share holders is delivering what your customers want to have and I do not see what value it would bring to GM to bring SAAB down (It will take year and year for SAAB even with possible money from Youngman and even a big investor.(heavy investments in cash to… Read more »
Well, you guys hit the nail on the head. GM, over the last 30-40 years, has been dismal and so poorly managed, it’s almost beyond belief. They went from being the world’s largest and most profitable corporation (no, not car corporation—-but largest company, period) to begging taxpayers for money (and unfortunately, in the opinion of many, got that prop-up). At issue here is that if tiny Saab is purchased by a Chinese company, and succeeds—-it exposes GM (AGAIN) for the incompetent group they are. This is about ego. Kill the brand or let it die—-so GM’s damaged image doesn’t become… Read more »
Why could Ford let Volvo go? Because Volvo and Ford weren’t producing cars that directly competed in the same segments in the same markets, despite the Lincoln/Mercury attempts. Volvo was always positioned as a premium Euro brand, while most Ford models are wisely positioned and priced a notch lower. And as a bigger producer and a stronger brand, Volvo was more valuable to Ford as a marketable asset than Saab is to GM. Best analogy: A star player is worth more in a trade than a third-string benchwarmer. Someone at GM has done the math and decided that Saab is… Read more »
what goes around comes around, mark my words.