Beijing Auto's Swedish tie-up may be backdoor to tech

By helping a Swedish sportscar maker in its bid for Saab, Beijing Automotive Industry Holding Co. may have found another way to get what it wanted in its failed bid for General Motors Co.'s German unit, Adam Opel GmbH: access to the same advanced GM technology that drives cars from both Opel and Saab.

Beijing Auto's bid for Opel was rejected by GM in July, as the companies failed to resolve differences over intellectual property rights.

Turned down once by GM, which owns both Opel and Saab, Beijing Auto has struck a deal to take a minority stake in Koenigsegg Group AB and help Koenigsegg close the funding gap it needed to buy Saab.

However, tough negotiations could be ahead.

Brands across GM's empire tend to use the same kind of vehicle underpinnings. For example, Saab's 93 and 95 sedans are built on comparable Opel models, the Astra and the Vextra/Insignia, said John Bonnell, JD Power's director of forecasting for Asia Pacific.

The cars share the same basic construction and have similar engines and transmissions.

To be sure, it remains unclear what kind of access Beijing Auto would have to Saab technology as a non-controlling minority shareholder of Koenigsegg, but Koenigsegg's deal with GM for Saab could conceivably end up giving Beijing Auto backdoor entry to the same technology it had sought in its Opel bid.

"In the negotiations they're going to have to address that question," Bonnell said. GM is "going to hold onto their intellectual property as best as they can."

But with a binding agreement already signed between GM and Koenigsegg, it may be harder for GM to block the Chinese company???s participation in the transaction and indirect stake in Saab.

Bonnell said it won't be an easy path for Beijing Auto to gain access to GM's technology. "If GM wanted to keep them from buying Opel technology, they're going to try to keep them from doing it with Saab. The devil is in the details."

GM signed a binding agreement with Koenigsegg in August to sell loss-making Saab.

"As part of the proposed transaction, GM and Saab will continue to share technology and services during a defined time period," GM said in a statement Thursday. "This hasn't changed." The statement didn't comment on Beijing Auto's role in the deal.

A person close to Beijing Auto said Wednesday that while the tie-up between Koenigsegg and Beijing Auto is still being worked out and is "very complex," the Chinese auto maker is interested in producing Saab vehicles for Koenigsegg in China and wants to acquire technology for its own brand.

The agreement between Beijing Auto and Koenigsegg is expected to be finalized later this year.

Saab has a negligible presence in China currently, selling about 750 imported vehicles last year, out of 9.4 million autos sold industry-wide.

The companies have released scant details about the deal, but Koenigsegg said last month it needed around $425 million in financing to satisfy its business plan for Saab.

Officials in Beijing Auto's public relations office declined Thursday to comment further on the deal.

Beijing Auto has joint ventures with Hyundai Motor Co. (HYMLY) and Daimler AG (DAI) to produce and market cars in China. Its unit, Beiqi Foton Motor Co. (600166.SH), is a leading commercial vehicle maker in China.

While China has enjoyed robust passenger vehicle sales growth of 37% in the first eight months this year from a year earlier, analysts say it is inevitable that growth will more closely match gross domestic product growth in the long run.

The Chinese government encourages consolidation in the industry.

Beijing Auto sold 580,000 vehicles in the first half this year, and is targeting sales of 1.13 million for the full year. It is aiming to increase sales volume by a third each year, reaching 2 million units in 2011.

By comparison, JD Power expects Saab to sell 56,913 vehicles globally this year, compared with 92,382 in 2008 and 123,497 in 2007.

Beijing Auto wants "to get bigger and stronger, and to match up with the giant auto groups in China," said Tony Liu, a senior vice president at market information provider Sinotrust. "They're aware that to be in the automotive business in the long run, they have to have technology and their own brand products."

While larger rivals such as SAIC Motor Corp. (600104.SH) has the Roewe sedan and China FAW Group Co. has cars such as the Red Flag and Besturn, Beijing Auto has yet to mass produce its own brand passenger car. It unveiled its own models at the Beijing Auto show last year, and plans to launch sales next year, Liu said.

China is a strategic market for GM. The U.S. auto maker recently set up a third vehicle-making joint venture with China FAW Group Co. to produce light trucks.

Sales of its passenger auto and minivan joint ventures with SAIC and Wuling rose 50% in the first eight months this year from a year earlier to 1.11 million, in stark contrast to the weakness in markets in the U.S. and other developed countries. GM expects its sales in China to rise by more than 40% for the full year.