Press Release: Agreement with Hawtai terminated

Spyker and Hawtai Motor Group continue discussions about funding and strategic partnership yet earlier agreement terminated

Zeewolde, The Netherlands, 12 May 2011 – Spyker Cars N.V. (Spyker) announces today that Hawtai Motor Group Company Limited (Hawtai) and Spyker terminated the agreement by and between Hawtai, Spyker and Saab Automobile AB (Saab Automobile) with respect to funding and strategic partnership. However, discussions are ongoing.

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Reassuring Hawtai

Alright, this isn’t easy for me to post but I’m going to at least get it out there so that there’s a record of it. SvD has an article describing the deal with Hawtai (English translation) as a framework that could Hawtai could easily walk away from. And according to SvD, they were none too happy with their recent visit to Trollhättan.

“After Hawtais delegation visited Saab’s idle factory in Trollhättan at the end of last week it is said that they have been aghast at how bad the situation was. They then demanded tough renegotiations with Victor Muller. If not Hawtai and Saab can be agreed before the deadline for contract expires at 14 days may be over the affair.”

SvD doesn’t name sources, doesn’t explain what part of the situation they were upset about, and doesn’t try to give any explanation of the terms of renegotiation. Then they proceed to explain how other companies like Great Wall and Youngman, two companies who had been working hard for months to ink a deal with Saab, are angry that they weren’t the ones to snag Saab.

“We were extremely disappointed and upset,” said one of Youngman’s management team who will speak on the promise of anonymity and continued, “We have a written contract with Spyker that they could not negotiate with any other Chinese company before we were done. Still, one day before Hawtai agreement we had with them. We took it for granted that they would follow the rules.”

I’m not going to defend the Spyker management for seeking alternatives, but if it truly had taken months to get due diligence done on a deal and Hawtai was able to come to terms over a weekend, perhaps it was Youngman who was dragging their feet.

Furthermore, if Saab is in such demand that others including BAIC think it’s worth fighting publicly over missing out on the deal, I think it’s wise that Hawtai appreciate the value of the deal they just won.  I’m sure they know this though, and hope they come back to the table if true. We’ll find out in the next few days.

If you want actual information about the sales process, not speculation from players who are probably trying to break the deal up for unsavory reasons (competitors, inside players making moves, etc.), Rick Kranz comes through big in a blog post at Automotive News. In it, he has actual quotes from Monday night’s meeting at the 9-4X Press briefing from Victor Muller himself. I’m posting them below because they’re extremely important to understanding how valuable a commodity Saab is, and why SvD’s story doesn’t add up to me.

Homework: “In September we put together a working group to inventory the Chinese market. That related to importation, potential partners for distribution, potential partners for manufacturing. We have been at it for half a year.”

Brand: “They are extremely keen on brand. They are more susceptible to brand image than any nation I know. Brand sets you apart. It says something about you.

“The Chinese are running around with their new Armani suits with the label on the outside. Nobody would do that in Europe or America. We would say, hey, you forgot to take off your label. No so in China.”

Volvo: “China is proud of acquiring Volvo because finally the Chinese have managed to acquire what they perceive to be a Western European superbrand.

“Hawtai’s taking a stake in Saab is like a supernatural performance, and the Chinese will embrace Saab.”

Strategy: “I had a pretty good negotiating position. I positioned what I could sell as a stake in the last premium, independent, European car company. If you do not get this one, you are not going to get a position in Audi. You are not going to get a position in BMW. You are not going to own Mercedes, or maybe they will.

“We had people clamoring at the door. If you don’t get this one, you are done because there won’t be another one.”

Players: “That was pretty much in the last phase when we were down to three, all of which made offers you could not refuse.”

Deal: “I was actually negotiating with three at the same time in the same hotel. I could write a movie.

“I was working 24 hours a day, working three rooms with three different parties. Honestly, making the best deal here, walking to the next room, saying, ‘This is what I can do.’

“And I was in a hurry, too, because I had to get it done. I slept 5 hours in 70 hours.

Skills: “I was a mergers and acquisitions lawyer in my previous life. That is my job, making deals, making sure things happen. It is not very interesting to negotiate. It is the results that count. The rest is irrelevant.”

Future: “The Chinese are very, very smart. I have worked with them for 25 years. We can learn a lot from them. I am always inspired when I leave China. I know this is China’s century, and we are just here to watch.”

I do think some of the details of their story might be true, including ongoing negotiations to iron out details, Victor flying to China for continued meetings, or even shopping other deals if they think it’s possible. But let me reiterate in plain language: I don’t think Hawtai is foolish enough to let this deal fall through, it’s too valuable for them at this point. The brand hardly registered in the minds of Chinese consumers before they tied up with Saab, for €150 million the PR from the deal is almost worth it on its own (obviously they’re getting a lot more than that for their money, including a stake in what will be a very profitable European automaker soon). Feel free to read the article and comment below, but try to keep it rational and please think twice before you press the submit button. Otherwise just wait until concrete information backed up by multiple independent sources emerges, speculation has proven to be anything but helpful through this process.

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So we know the story was true, but now we also know the context which VM made those comments to the reporters. If anything gives me reassurance it’s that Saab is in demand in China, it’s this.

Reason For Hope From Just Auto

Proving that the United States press is substantially more fair and reasoned than the Swedish press, Glenn Brooks has an excellent analysis for Just Auto about Saab’s next steps, and why he thinks they have more than a fighting chance. Alright I’m teasing, but really, even though I’ve read about 80-100 articles in April alone about Saab’s situation, I’ve found none besides those that I or my fellow writers at SU (including Swade) have written that accurately depict the real picture Saab faces going forward. They’re not some crappy automaker with no reputation, they’re Saab damnit, and the sooner people stop looking down on them and realize just how good they are, the sooner they can get back to doing what they do best, making the best all around cars for your money on the planet.

Glenn thinks Saab needs a new PR strategy, pronto:

“…the first priority for Saab ought to be a worldwide PR initiative, to simply point out via one high-profile campaign that the company is alive and well. But the idea would have to be simple, striking and logically, push the firm’s underdog status. Recent history suggests that this could work as long as it was slickly executed and able to catch the imagination of social media networks in the largest global markets.”

We at SU agree, and if you’ve picked up in the last few weeks, we intend to show our community’s vision for what Saab’s message should be. We’ll be announcing a Saab Ad Contest 2.0 soon which should be every bit as fun and even more engaging than the first. No matter what your ability level may be with Photoshop or Final Cut Pro, you’ll be able to contribute your own vision. It’s going to be fairly involved, but it should also be extremely rewarding, and once all the details are ready to be announced, I’m sure it will give the creative types among us an outlet to channel some energy which may actually go a long way towards changing public perception about Saab.

Back to Glenn’s piece, he agrees with us at SU who feel that Hawtai is an excellent fit for Saab.

“Hawtai is itself a firm that likes to go against the grain, in much the same way as Saab was once famous for doing. It might not build cars with wraparound glazing and fan-pattern alloy-wheels inspired by features of Viggen fighter jets, but its decision to focus on clean-diesel technology in a country where use of the fuel for passenger cars is starting to take off, was visionary. Indeed, the firm, which is controlled by the entrepreneur Zhang Xiugen, has tried to stay out of the limelight, in a way that contrasts with its larger rivals BYD, Chery Auto and Geely. Yet Hawtai is arguably far more worthy of positive publicity as it tries to quietly get on with the business of growth and innovation.”

In the piece that I’ve been working on about Hawtai all week, I can firmly say that the leaders at this company have made all the right plays to be where they are in the market. The choice of Ordos, for instance, was brilliant. It aligned the Chinese government’s interests with Hawtai’s. You can read more about it in my piece due out later this week (sorry that it’s been delayed ;)).

Coming back to my first sentence of this post, Glenn wraps up his take on how the press should regard Saab now.

“Just as they rightly did when Geely first showed an interest in buying Volvo Cars or indeed when a loss-making Dutch supercar maker declared its interest in Saab 16 months ago, elements in the Swedish media are raising questions over a potential foreign white knight…Yet as well as demanding answers, the media must also give both Saab and Hawtai breathing space.”

Right on, Glenn.

Yet so long as the firm has the funds to help Saab grow in the medium term, what Hawtai built or did not build in 2010 is not something that really matters. What does, is the potential for a tight manufacturing and distribution alliance using Hawtai’s underutilised but ultra-modern plants. Powertrains might also follow, especially as Saab seeks to replace its current GM-sourced engines and gearboxes. As just these few examples show, the sceptics are wise to ask questions, but they should keep an open mind too.

Booya. As far as I’m concerned, this article is a slam dunk. It’s nice to be able to finally link to someone else on the net who is willing to do his homework and give the Saab story some reasoned analysis. If you’re looking for quality auto journalism, keep an eye out for what Glenn Brooks has to say.

Victor Muller’s Essential Optimism

A lot of positive press has come out of the 9-4X test drive that took place over the last four days in the Capital of what will be its largest market, the United States. Journalists impressions are forthcoming, but from what I’ve heard most were impressed and consider it a true competitor in its segment. We’ll certainly be covering all of their accounts in great detail here in the next few days. But in the hours since the reporters packed their bags and went home to write their articles, it appears that the first waves to be felt from the event are more about the management and company itself than the products which it sells. In regards to this, I’d like to take a minute to debunk and rectify what I see as a fair bit of sensationalism.

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First Gear: Peking to DC

To start everyone’s Monday off, I gathered the stories that are kicking of our week of Saab news.

Getting the bad press off our chests first, ChinaCarTimes.com has an article up about why they think the Saab-Hawtai deal is going to fail. For every point they raise, I have a response that pretty well shoots it down. When they project out that Spyker is going to continue bleeding money at last year’s rates, they ignore the progress they’ve made and how much further along they are on their way towards getting to the break even point. Never once do they mention Antonov. And their pessimism about China approving the deal doesn’t take into account the ties between Hawtai and Bank of Beijing, let alone their new factory in Ordos. They do have a pretty good summary of the background though, including the names of the players at Hawtai and the tangled web that exists between GM, BAIC, and SAIC. I’ve been working on an in depth analysis piece about Hawtai over the weekend and I’ll have it up sometime midweek that helps everyone understand the bigger issues and why I’m much more optimistic about a deal (hint: one of the answers to Saab’s issues is in Mongolia).

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Also in China, spotted outside a Westin hotel you can see a 9-5 next to it’s possible distant cousin, a Hawtai B35 (Hyundai Santa Fe with a Cayenne face). Other outlets are saying it’s a dealer– it’s not, it’s a hotel.

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Finally as we speak, the media is test driving a fleet of 9-4Xs around the suburbs of Washington, D.C. as part of the second leg of its reviews. They should have some great weather so expect a slew of great reviews in the next few weeks. That coincides very well with deliveries of the 9-4X, which should be showing up in dealers in mid to late June– only five or six weeks away!

SU Mythbusters: Chinese Partnerships

This is the start of a series I plan on doing from time to time that will debunk common perceptions about a particular topic of interest to Saab. I’m sure you all have had to counter someone’s claim that Saab is bankrupt, was killed off by GM, or maybe that it’s part of a communist scheme to take over the auto industry (I kid you not, I’ve heard that now twice). We at SaabsUnited aim to give you the tools to shoot down those crackpot theories with real data, backed up by research and facts to prove that Saab is not only in a great position to capitalize on years of development, but already succeeding on their turn-around as an independent automaker.

This inaugural article intends to show that Chinese partnerships, joint-ventures, and even part ownership is not only common in the auto industry, but a necessity if a brand intends to compete in the global market. In the wake of Sweden’s Chinese Ambassador’s Lars Fredén’s initial report on Hawtai, I feel it’s more important than ever to explain the hard facts about China’s auto industry (stay tuned for a post tomorrow that goes more in depth into Hawtai in a much more holistic fair way than you’ll see from Mr. Fredén’s letter home). In January 2009 for the first time ever, China became the number one consumer of cars in the world, and went on to take the title for the entire year. Can you guess what the number one automaker in China in 2010 was? Some domestic automaker you say? In fact, the Volkswagen Auto Group had the highest sales in 2010, when one combines VW, Audi, and Skoda sales, a staggering 1,886,902 cars were moved on Chinese soil. Hot on their heels is General Motors, who between Buick, Chevrolet, and Cadillac sold 1,052,434 units. To that end, nearly every single automaker in the US has representation in China through a joint-venture. The last two exceptions have been Jaguar/Land Rover and of course, Saab. To their credit, JLR have been in talks with Great Wall Motors and expect China to be their third largest market in the next few years. What this all means is that you can’t be a player in the global auto market without a Chinese partner. Saab’s deal with Hawtai motors shows that it takes the changing landscape very seriously.

A person familiar with Saab, Nick Reilly, who is head of GM’s International Operations in Shanghai, told thetruthaboutcars.com just how up to speed China is in terms of auto production.

Many Chinese plants are more modern than U.S. plants, where modernization clashes with unions. Reilly agrees:

“Their rate of progress in terms of technology, innovation and quality improvements is really remarkable, and we are totally underestimating the technological advances they are making. The gap has completely shrunk. It is a tenth of what it was and a quarter of what we expected it to be. I think everybody thought we had 10 or 15 years before China became competitive, and that is just not true.”

Here’s a quick snapshot of each major automaker and their Chinese partner, by sales in 2010. For those who knew little about the Chinese auto market before this week, let these statistics be your wake up call.

Volkswagen Auto Group (SAIC-SVG/FAW): 1,886,902

General Motors (SAIC): 1,052,434

Hyundai-Kia (Beijing Hyundai Motor Company-BAIC): 1,036,036

Toyota (Guangzhou Automobile Industry Group – Guangqi Toyota Automobile): 775,245

Nissan (Dongfeng-Nissan): 681,360

Honda (Guangzhou Automobile Industry Group – Guangqi Honda Automobile): 646,355

Peugeot-Citroën (Dongfeng, but soon to be Chang’an): 373,366

Ford (Chang’an): 304,103

Suzuki (Chang’an): 275,672

Mazda (Chang’an)225.378

BMW (Brilliance): 62.550

Mercedes-Benz (BAIC, BYD 2013+): 58,382

Jaguar/Landrover (in talks with Great Wall Motors): 26,114

Volvo (owned wholly by Geely): 17,090


For skeptics looking for a background on each automaker’s connection to their Chinese partner and additional analysis and insight on the Chinese market, find out after the break.

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The Day After the Hawtai Deal

Yesterday was a big day for Saab. They gained a critical partner that not only helps them stay alive in the short term but also helps them establish a strong foothold in the largest auto market in the world. To say it was a big day for Hawtai would be an understatement.  And it was an even bigger day for Hawtai, who gets the most valuable commodity of all in its home market– credibility. They scored the deal that a dozen other automakers wanted, which should give them new respect among consumers and competitors.

So how will Saab turn the tide of bad press, skeptical consumers, and financial uncertainty?

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