SAAB WATCH 2011 : GM questions China deal

11/07/11 - The developing deal between Swedish Automobile and Chinese investors, a deal that would resurrect Saab from its current financial coffin, may be dead on arrival. According to an article on Reuters.com this morning, GM is considering killing the deal that would send Saab over to Chinese automotive companies Youngman and Pang Da. The deal, worth 100 euro million, has until November 15th to be accepted by a slew of invested parties. One of these is General Motors, who as the former owner of Saab, still holds some preferred shares in the Swedish company. The company has been reported as being indifferent to the state of Saab, but rather concerned with their own role in this changing of chairmen.

It was reported late Friday that GM would deny the option for Chinese investors to take control of Saab if it meant that it would affect their interest in China and beyond. The reason being, is that GM still provides several components and services to Saab Automobile and if the deal went through, the American auto manufacturer could be replaced by a Chinese counterpart. That would hurt GM where it matters to them most; their wallets. Anticipating this, GM has made it clear Friday, they would consider turning down the sale.

This morning, Kevin Wale, president and managing director for GM's China operation, reiterated GM's statement to Reuters in a phone interview. He was quoted as saying, "It doesn't make sense for us to support any change that might adversely affect us. We use global architectures and those global architectures are used in a number of products we make at SGM." SGM or Shanghai GM is GM's Chinese branch that the company has worked furiously to build up over the past few years.

While it makes fiscal sense to be worried about the deal, rejecting the sale could very much end Saab all together. In that case, GM would lose that aspect of their production either way. Still, this could be a tactic implemented by GM to strike a side deal with Pang Da and Youngman Lotus. By voicing their concerns publicly, GM may be greasing their wheels in a way that could get a contract in place between the Chinese investors and GM to continue their service to the Saab name.

This move is not that different than what Saab's current owner, Swedish Automobile had done two weeks prior to the deal. Feeling vulnerable by the Chinese insistence to buy out control of Saab, Swedish Automobile announced they would end the agreement between them and the Chinese. As we all know, that lasted for about three days, until Saab announced the deal would send Saab to China in exchanged for a fair price on the bankrupt manufacturer.

For now, GM is firm in their position. Whether this will stay as is, will be revealed no later than the 15th of the month, when the deadline to make the sale is set to expire. One thing is for sure, however. Saab's future is still up in the air.

Tyler Baker; OSM Writer

( Source - Reuters.com )

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SAAB WATCH 2011 : The Journey East

11/01/11 – Welcome to another update of One Stop Motors continued coverage on Saab Automotive’s developing story.  Ladies and gentlemen, it’s time for SAAB WATCH2011!  The East Coast is currently being blanketed in a snowy blizzard, but it appears as though on the Eastern Hemisphere, it’s raining money.  Reported today on Bloomberg.com, the Chinese investors who have arranged a deal to purchase the Saab brand from owner, Swedish Automobile NA, have gotten the blessing from Swedish courts to keep Saab protected from creditors.  This will allow them to restructure, redistribute and realign as they start to resemble an actual company for the first time in a long time.  Of course, this has everything to do with Chinese companies, Pang Da Automobile Trade Co. and Zhejiang Youngman Lotus Automobile, who are set to invest $844 million (610 million euros) into the Swedish car manufacturer over the next several years.   This pledge, according to Bloomberg.com, has satisfied courts and coaxed them into extending the companies protection.

In an immediate move, Pang Da and Youngman will be providing a bridge loan of 50 million euros to keep the company afloat while it reorganizes.  Unfortunately, this is only the good news.  The bad news comes to 500 to-be-determined Saab employees who will lose their jobs over budget cuts.  Saab’s current Chairman, Victor Muller, was reported saying, “But we have a lot of work ahead to even get the investment approved, and Saab has suffered tremendous damage to its brand and supplier base that must be overcome.”  His optimistic words at least somewhat implies Muller may not be in that wave of 500 who lose their jobs.  Still one thing is certain, nothing is really certain.  Saab is stuck waiting on the investment from the Chinese to be approved by the appropriate channels.  Until then, there is still a looming potential for a breakdown in business.

The Chinese have also outlined a plan that would use their $844 million to make Saab profitable by 2014.  According to Bloomberg.com, Saab’s new plan hinges on their expectation to sell 35,000 to 55,000 cars next year.  By 2014, they expect to sell 130,000 to 150,000 cars.  This may be a gross overestimate seeing as Saab hasn’t sold over the 100,000 mark since 2007 (then owned by GM).  Last year they only sold 32,048 and the year before that, 20,905.  2011 wasn’t that great of a year either, with the assembly line shut downs and the bankruptcy spectacular.  Having damaged their relationship with everyone but the Chinese (which they almost ruined last week), it will be interesting to see how Saab fares in the next year or two.  Until then, they are alive; leaner and meaner, but alive.

Tyler Baker; OSM Writer

( Source : Bloomberg.com )

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