On this weekend a rumor surfaced that Mahindra may not make a bid for Saab because GM won’t grant any licenses to them for the current Saab model range. At first look this gives the impression like it was a rumor put together from bits of what happens in the past and conclusions of how things could happen now. After all this may also be a try to get Mahindra talking as they were pretty quiet recently. But those indiand do usually not speak while they are working. I don’t know if this is what makes them so successful (just look at the worldwide network that Mahindra has in various branches) but I have to admit that I like this attitude. Thus, even if I don’t believe this rumor for now, I would find it very sad if Mahindra would seriously leave the bidding process because of GM’s behaviour. I would have seen them a a pretty good fit for Saab since they have a blank spot in their automotive portfolio above Ssangyong. Saab would even come with a hurt but still existant worldwide distribution network – something that Mahindra would surely long to have.
Nevertheless it made me think. There was something in all these things we got to hear over the past weeks but I did not really get it. While many of us (even me sometimes) tend to see GM as a spoilt child that is obsessed by beating up those who might become successful besides it I always try to understand their behaviour from a business point of view. In the end GM is just another company that is driven by shareholder value. So, pushing all stereotypes and prejudices aside, there must be some kind of logic in this.
Let me start this with a short look at the sales process in 2009. There were a lot of parties rumored to be in the process but what we knew about were Renco, Merbanco and Koenigsegg, who then were chosen by GM for final negotiations. As they left Spyker showed up, reached the status as preferred bidder and then finally struck the deal. One of the much rumored big players that did not make it to the finals was Fiat who then ended up with a stake in Chrysler. From today’s view and looking at their strategy I’d say that it is quite likely they were in there. And I am pretty happy that they left – or were told to leave – if I look at what they are doing to Lancia at the moment. Badge engineering at its best.
Over the past months we saw PangDa and Youngman trying to get a stake in Saab. We heared about lots of possible deals, from the 54% stake in SWAN to a 100% takeover of Saab and some adaptions of those. GM blocked all of those but it is said that the original deal is one of the rare occasions where they would have agreed. We all know that did not help and Saab had to file for bankrupcy.
What we are facing now is a bidding process with five players: Youngman, Brightwell Holdings, Mahindra, an European car manufacturer and a Swedish consortium. We can’t really judge the I think when it comes to Youngman we can be pretty sure there will be no agreement with GM. Brightwell Holdings on the other hand have always been stating that they are in talks with GM and feel pretty optimistic to succed. Then yesterday the rumor came up that Mahindra may back out because GM won’t license to them. A contradiction? At first but on a second thought not at all.
The key is that GM won’t make any deal with a car manufacturer. Not in 2009 and not today. You may want to argue about Koenigsegg and Spyker but those are to small to be considered car manufacturer in GM’s scale. But Mahindra would be a big player that could be a threat to GM in emerging markets in Asia. Youngman could be that, too, but in addition to that they may have lost a bit of credibility for GM during all those plays in the negotiations last year. Another reason for the protective stance of GM towards a Chinese owner may be SAIC, who are just about to revive the Shanghai premium brand in China. Autonewschina.com said it may be based on the platform od the Buick Regal – they would surely not want someone else to come to the market with a similar car if they can have their say.
So does that mean that a company like Mahindra will leave the process? Not nessesarily. As Youngman showed there may be opportunities to get by GM if you are creative enough. If such an idea can be viable depends a lot on your financial power to bridge the time with few production and on the real timeframe for the development of the next 9-3 and further models on the Phoenix platform. In the end, this of course gets back to financial strength, too. So a big player could surely find a way to get Saab back on track even without or with less support from GM. Still, the road would be even tougher than if you could restart with the existing portfolio.
I believe we get more answers within the next two weeks. So please stay seated and buckled up until the process has reached its parking position.