Saab’s make or break future seems to reside on the backs of two Chinese companies and the red hot Chinese car market, but can Saab find its saviour in China? The proud Swedish brand has been producing cars since 1944 when it made its first automobile went into production as the Second World War was winding down, Saab made a smart move as the automobile became the big thing to own in the late 40’s and 50’s, this set a precedent for the rest of the century and the early 21st too. Although by the early 21st century Saab automobile was in a pickle, some blame GM’s heavy handed ownership for taking away the uniqueness that made Saab’s tick, but it was obvious that without GM’s cash injection then Saab would have gone down in the 90’s. GM used its own platforms that were shared with Opel vehicles to keep development costs down at Saab, of course car fans criticised GM for making Saab bland – as if a 3.0T front wheel drive car is anything but bland. In 2000 GM spent 125 million USD turning Saab into a wholly owned subsidiary of GM which lead to the Saab 9-3 being born in 2003 in a bid to turn Saab around, of course GM were unable during this time and put Saab up for sale in 2008.
GM reported that 27 buyers, including BMW, Fiat and Geely were interested in the brand; the Swedish government were not interested as they felt the people had voted them into power for support schools, hospitals and kindergartens – and not ailing car factories. In late 2009 BAIC took over the intellectual property rights and production equipment for the previous generation Saab 9-3 and Saab 9-5, the deal included three vehicle platforms, two engines and two transmission systems which warranted a 197 million USD purchase order. BAIC’s plans were to create a new “Beijing Brand”, although the project seems to have run into minor troubles along the way with various project leaders leaving the company or being sent to other departments, even Beijing’s Chairman Wang Da Zong ran into trouble over the lengthy time consuming project.
Dutch company Spyker took over Saab in early 2010, the company has a racing car past but does not have a healthy history of turning a profit, the biggest issue at hand for Saab and Spyker were paying back its long line of suppliers, the local Swedish companies were interested in keeping Saab alive and had a genuine interest in helping the company get back on its feet, foreign suppliers seemed more keen on getting their cash in the fastest way possible and at any cost.The best solution for Spyker was to look to China for answers, after all the Chinese market is now the world’s biggest but didn’t have any sort of Saab presence – under GM’s management Saab had 8 dealerships in China, but GM were more interested in promoting Cadillac than it was odd ball Swedish cars that were past their prime, although Saab’s are a regular site on Shanghai’s roads, and they certainly do stand out in a sea of boring business-black Audi’s and Buicks.
According to a recent article in the June edition of the Chinese magazine Automotive Observer, GM and Saab were in talks with Chinese companies for over 18 months, of course this culminated with Hawtai suffering from premature ejaculation and signing an MOU with Saab prior to actually gaining any sort of government approval, Saab pulled out of the deal citing Hawtai’s inability to live up to contractual obligations, and Hawtai said it pulled out due to the state of the Saab factory. Automotive sales group Pangda jumped into the fray and sent Saab an order for over 300 cars and sent 30 million Euro’s a few days later to say they were good for more cars if Saab could make them, production resumed, everyone was happy and Victor Muller was once again called a hero for saving Saab by the Swedish press. Pangda had grand plans for Saab in China, they wanted to push Saab up to Audi, Mercedes and BMW levels in the Chinese market, of course the Chinese government are pushing to procure more Chinese branded cars over the next five years and it is expected that they will be driving Volvo’s instead of Audi’s, but could they be driving Saab’s as well? Pangda hopes to make Saab’s in China, but with Pangda being a car dealer and not a car manufacturer it was unclear as to how they would attain their car building ability, perhaps in the dealership shops?
Enter Youngman. Youngman were apparently in talks with GM in late 2009, a German automotive consulting company were tasked by GM with the sticky issue of helping them rid their books of Saab. According to Automotive Observer Youngman was one of the first Chinese companies to talk with GM regarding the sale of Saab, in their recent article on Saab’s Chinese activities they talk with a Youngman insider who reveals that Youngman were mostly interested in the Saab brand, and seemingly not so interested in saving the company: “We just want the brand, if we’re talking about the future then self developed vehicles are our future, there’s no meaning in joint ventures.”
Automotive Observer also revealed that Youngman top management were highly surprised when Hawtai came onto the scene with a big offer that Saab obviously could not resist whilst it is in dire straits, according to AO’s report Youngman’s offer to Saab was no-where as big as Hawtai’s offerings. Youngman’s negotiating policy seems to revolve around the “waiting for them to be half dead, half alive” according to AO’s insider, but that policy might have been too slow for Saab, especially as other Chinese companies such as Hawtai were chomping at the bit to get a slice of a Western automotive company and propel themselves to automotive world fame, ala Geely when it took over Volvo. Youngman were disappointed when the Hawtai deal came around, but found themselves back in action when Pangda approached them with the possibility of making Saabs in China. The biggest loser in the Saab-saga seems to be China Automotive Imports, the company originally tasked with bringing Saab’s into China, when Pangda signed the importation deal with Saab the China Auto Imports deal was promptly torn up, although the company will keep 5 Saab dealerships in China, but Pangda will take on at least half of the future dealerships.
When Pangda signed the framework agreement with Saab on May 16th the National Development and Reform Council (NDRC) jumped into action, the NDRC is China’s all powerful rubber stamp ministry that is tasked with overseeing foreign M&A’s, the NDRC brought together a group of industry CEO’s to warn them not to be competitive behind each other’s backs, and to openly discuss their plans, otherwise they could be cheated which would result in a loss for the industry as a whole. Of course it was widely speculated that the members of this group included BAIC, SAIC and other members of the Chinese car industry that rely on GM’s platforms for its operations. BAIC makes the last generation Saab 9-3 and 9-5 platforms, whilst SAIC produces the Epsilon II platforms for its Shanghai-GM venture where the platforms are used under Buicks, and now Chevrolets. As one industry insider put it to Automotive Observer: “those that really want to buy don’t bullshit, they wait and watch, and then they reach out. In the end Saab could end up under BAIC management”
BAIC were also shocked at Saab’s sudden reach out to Hawtai, BAIC were in talks with Saab and GM since 2009, when they bought the Saab IPR for roughly 200 million USD at the end of 2009 it was widely thought that this was a water test by BAIC before they went whole-hog and bought the company, after all BAIC had been on a major spending spree in the previous few months snapping up Chongqing and Guangzhou based automotive suppliers and manufacturers, Automotive Observer wrote that BAIC’s fluent English speaking chairman Wang Da Zong jumped on a flight to the USA when he learned of the Hawtai deal, he wasn’t too happy with a local Beijing based minnow trying to muscle in on BAIC’s deal and professed his dissatisfaction straight to GM top brass in person.
Pangda’s plans for Saab’s Chinese production clearly indicated that they would partner with a third company, now it has been announced that Pangda has taken the production capability to Youngman, the first entry into the original talks. Although Pangda have already announced that the three way deal will take place, but it seems they have not yet done the social engineering to get the official government okay which is usually a death knell for those companies that announce their major M&A plans ahead of receiving approval, although with Pangda and Youngman willing to invest in Saab they stand a better chance of gaining a government green light for the deal. Youngman’s desire to grab the brand only seems like a worrying jump to the past, SAIC waited until MG-Rover was cold and very dead before moving into scrape the corpse clean and they launched the Roewe brand two years later. Could Youngman be stalling for time to repeat SAIC’s tactics? There is a strong possibility. Youngman’s own car making projects are picking up speed with around 3000 cars sold in May 2011 under the Lian Hua brand which they used after their Europastar brand failed to resonate with Chinese consumers, of course this also upset Lotus as they themselves wanted to use that brand when they launched in China.
On the surface it seems that the three way tie up maybe a win-win situation for all parties involved, Saab has the models and the design capability, Youngman has the production capability, and Pangda has the sales ability to take cars from the factory to the consumers. Youngman cannot design a car (see their own Lotus L7 for proof – One widely known British journalist described it as “a crappier Proton, if such a thing could exist“), Saab cannot make cars in China without a partner and Pangda cannot make money if it lacks a product to sell and service. Saab’s future is likely to be in China, but the greatest worry for Saab may well be undeclared ulterior motives from its partners.
