Roughly once per month—and every month since February 2010—Saab almost goes out of business. With greater frequency, news is delivered of collapsed funding deals or imminent labor strikes or unpaid suppliers having conniptions, and often all three combine to cause any given week's production stoppage in Trollhättan. The ongoing saga is rife with eleventh-hour savior deals, often involving a heretofore anonymous Chinese company that promises to inject cash into the foundering Swedish automaker.
How can a person make sense of this mare's nest of failed business plans and on-again, off-again partnerships? We're here to help.
The Background: Goodbye, GM
Saab's first brush with death was in late 2009/early 2010, when General Motors said it would shutter the brand entirely if a suitable buyer couldn't be found. Talks with a number of companies went nowhere, and a deal that looked like the real thing with boutique sports-car manufacturer Koenigsegg fell apart in November 2009. Finally, in early 2010, GM reached a deal to sell Saab to Spyker Cars, a Dutch company that manufactured a total of 36 high-end, hand-built supercars in 2009.
It was a messy negotiation. GM threatened to cancel the deal entirely unless Spyker's main investor, a 34-year-old Russian billionaire named Vladimir Antonov, completely cut ties with the company. He was suspected of connections to organized crime in Russia—his father, Alexander (and Spyker’s CEO at the time), had even been shot seven times in early 2009 in an apparent assassination attempt. Antonov responded to GM's demand by writing a page-long op-ed in the New York Times accusing European and American businesses and governments of "national prejudices."
Ultimately, Antonov left—he'd reenter the negotiations later—and the deal went through, with Spyker paying $74 million in cash and $326 million in what were called "redeemable preference shares"; the latter means that GM retained a piece of the company that Spyker promised to buy back for face value, plus interest, at a later date. Think of it as a mortgage, and GM was the bank.
Independence for Saab! Barbary Pirates Attack
After the United States declared independence from Great Britain in 1776, American merchant ships could no longer fly the British flag. This was a huge problem for American traders; hoisting the Union Jack was an international symbol that the most powerful navy in the world had your back. Pirates off of the coast of Africa trashed the Yankee merchant fleet, ultimately leading to the creation of a powerful American navy and the first Barbary war.
What's this got to do with Saab? Going independent—even if it's from a negligent or oppressive parent like GM or the British Empire—sucks. The stats for 2010 were a disaster for Saab, which struggled to convince shoppers that its warmed-over old models were worth taking the risk of huge depreciation and, if the company went out of business, having nobody to handle warranty repairs.
Only 5445 Saabs found homes in the U.S. during 2010, and just 31,696were sold worldwide. Compare these disastrous numbers to BMW's 5-series, of which 39,488 examples were sold in 2010 in the U.S. alone.
Still, Saab's execs can claim several scores for 2010. In September, the company announced that it had entered a deal with BMW to use the German company's turbocharged 1.6-liter four-cylinder engine (from Mini Cooper S fame) in future models. Another arrangement was inked to develop electric and hybrid all-wheel-drive systems with American Axle, a major industry supplier. Finally—and most important—the company brought a new 9-5 sedan to market. We said it was "awfully expensive for a Buick LaCrosse," but it was the first non-tumbleweed to blow into Saab showrooms in many years.
No Money, Mo' Problems
A year of dismal sales and a lack of cash from investors came to a head early this year, when it was clear that Saab couldn't pay the bills—let alone invest serious money in developing new models. The company lost $107 million in the first three months of 2011 alone, and it's seriously in debt: Saab owes $312 million to the European Investment Bank and millions more to suppliers, contractors, employees, and General Motors. This means that production has had to be halted several times; ironically, the only Saab in production for several days was the 9-4X crossover, which is built by General Motors in Mexico and then sold to Saab.
This spring has seen a number of attempts at rescue packages. In April, it appeared that the Swedish government would allow Vladimir Antonov to buy about a third of Saab for $45 million. He backed out on the deal as new Chinese investors came to the fore. One such company was a small automaker from the Middle Kingdom named Hawtai. That company would have injected the equivalent of approximately $216 million for a chunk of Saab, but less than two weeks after it was proposed, the Chinese government scuttled the deal.
During April, May, and June, production has stopped and restarted no fewer than three times. For what should be a large-scale industrial operation, this is something of a disaster. In the meantime, this meant that buyers were more reluctant than ever to commit on a Saab, and those who were willing to take the plunge had small stocks to choose from. American dealers moved only 93 new Saab 9-5s during May; the Audi R8 sold better.
The Plan Now
In early June, Saab's management made preliminary deals with two Chinese firms; these plans are on the table as of today, but the final paperwork hasn't yet been signed. One of the investors is called Zhejiang Youngman Lotus Automobile Company, a relatively small manufacturer in China. That company would own a stake in the brand, in the Chinese distribution, and a big piece of a joint venture to build Saabs in China. The other buyer is a large Chinese automobile distributor, Pang Da Automobile Trade Company. It, too, would own a piece of the brand, would have the largest minority share in the company's Chinese distribution, and a small piece of the manufacturing operation.
This does not, however, mean all of Saab's problems are solved. For one, the deals haven't yet been approved. But even if they go through within the next few weeks, Saab has a cash shortage right now. The company received an emergency order to purchase 582 vehicles just this week from an "undisclosed" Chinese buyer, which is willing to prepay for the cars, thus pumping $18.4 million into Saab's bank accounts. Fishy? Absolutely.
To help shore up short-term finances, Saab also is working on a deal to sell its Trollhättan factory to a Swedish real-estate company and then lease it back. This, too, needs to clear some regulatory hurdles, but it's expected to go through and will be worth $46 million to Saab.
A pretty picture? Absolutely not. A popular poker aphorism is that a player needs only "a chip and a chair" to win—eventually. If Saab can tough it out until money arrives from these Chinese investors, its day-to-day money crises may be over. Then it just needs some new products and to turn a profit. Easy stuff, right?
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Source: http://blog.caranddriver.com/car-and-drivers-guide-to-what-the-heck-has-happened-is-happening-and-will-happen-with-saab/
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