One of the first goals for Saab's new owners will be to reopen its shuttered Swedish assembly plant.
Facing imminent collapse, Saab has agreed to a fire sale that will give two Chinese companies complete control of the Swedish automaker – thought the deal must still be approved by Chinese regulators.
The 100 million Euro – or $141.4 million — purchase price is a fraction of what the two new owners had originally offered for a significantly smaller stake in Saab, but the company appeared to have few other option, with a court-appointed administrator ready to force the troubled firm into bankruptcy.
Saab becomes the second Swedish automaker to fall into the hands of the Chinese, following Ford Motor Co.’s sale of its former Volvo subsidiary to China’s Zhejiang Geely Holding Group Co. in early 2010.
The new deal means “a much stronger future for Saab,” proclaimed Tim Colbeck, CEO of Saab’s U.S. sales subsidiary, during a conference call Friday morning. Colbeck said that efforts will begin almost immediately to re-open the automaker’s primary assembly plant, which has been idled by financial problems since March.
Under the new agreement, Saab will be taken over by a consortium formed by Pang Da, China’s largest automotive retailer, and Zhejiang Youngman Lotus, an aspiring Chinese automaker. The purchase price is a fraction of the $352 million the two had originally offered to acquire just a 53% combined stake in Saab from its parent, Swedish Automobile.
But completion of the deal has been repeatedly delayed while Chinese regulators ground ahead with the review required under that country’s byzantine business rules. Colbeck said Saab anticipates that under the revised structure approval could come more quickly since the deal “should be more favorable to the Chinese.”
The newest deal is set to expire on November 15 if the Chinese don’t give it their approval by then.
That led one source close to the deal to suggest that once the Chinese realized Saab had little options left they simply chose to drag their feet. “It was in their best interests to sit it out and wait so they could get a lot more for a lot less,” suggested the source asking not to be identified because of his relationship with Saab.
Exactly how things will change for Saab remains to be seen. The current management will be replaced, including current CEO Victor Muller, once a “suitable replacement” can be found. Muller, a one-time Dutch mergers-and-acquisitions attorney, rescued Saab from closure, in early 2010, purchasing the maker from parent General Motors – which was preparing to shut the Swedish subsidiary down.
“I have had no life in the past two years… My job was to save the company. I think I achieved it,” said Muller in a European conference call.
But his own company, originally known as Spyker Automobile and later as Swedish Automobile, didn’t have the cash to maintain operations, especially when things got off to a slower start than anticipated. That shortfall led a number of key suppliers to boycott the maker’s Trollhattan, Sweden assembly plant in late March. It has operated for only a few days since then. And without new product to sell Saab’s financial problems only worsened.
Last month, it convinced a Swedish appeals court to allow for a voluntary reorganization, a step short of bankruptcy under that country’s laws. But the administrator has since told the courts he wanted the current protection lifted – which would likely have forced Saab into insolvency, as several other deals the maker was working on did not seem likely to resolve its cash flow issues.
Saab will meet with suppliers on Monday hoping to negotiate a reopening of the Trollhattan plant. While Colbeck said there is no set date for production to resume the goal is to get things back into operation as soon as possible. The same is true at a Mexican GM plant where production of Saab’s new 9-4X crossover has been on hold since last month.
“We just have to get the brand back on track,” conceded the American executive, acknowledging that all the negative headlines have sent potential Saab buyers scurrying to other brands. It will take a significant marketing effort to convince the public that Saab has survived and will be around to support them.
If the new Saab takeover wins approval the Chinese will then own the entire Swedish auto industry. That’s a significant development for both countries. While China’s national automotive market is now the world’s largest, domestic makers like Youngman Lotus and Geely have grand ambitions to expand onto the world stage. That has proven difficult, so far, using their own brands so they’re hoping that their new European subsidiaries will make the process a little easier.
“I have had no life in the past two years… My job was to save the company. I think I achieved it.”