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Glimmer Of Hope From The East For Saab

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Glimmer Of Hope From The East For Saab

Don’t Hold Your Breath Though; China Green Light Looks Unlikely

Saab’s seemingly inexorable slide to oblivion seemed to have been saved by news from China that two of its companies are about to seek government approval to buy more than 50 per cent of the stricken Swedish company.

Don’t be too sure though. Chinese government approval is no foregone conclusion.

China watchers have deduced that it might not be interested in a small niche-player like Saab, when it really wants its companies to buy big players which can compete globally. The mooted deal, under which Pang Da Automobile Trade Co and Zhejiang Youngman Lotus Automobile would buy 53.9 per cent of Saab for €245 million, might not pass the criteria which which apparently requires take-over targets to be global players bringing big branding and engineeering reputations. Wannabe niche players need not apply, and especially those saddled, like Saab, with the reputation as a loser with weak-to-say-the-least finances.

Don’t forget, an earlier deal this year with Hawtai was hailed as the company’s saviour, but this crashed and burned after 10 days.

The latest news from Beijing suggested that the Pang Da/Zhejiang deal would be presented to China’s National Development and Reform Commission in the next two weeks. Another application would also have to be made to the Ministry of Commerce. But when the deal was first proposed in June, it was criticised by Automotive News magazine as doomed to failure because Saab was a dying brand, which would add little value to an industry already plagued by too many inefficient, tiny players.

Michael Dunne, president of China based industry consultancy Dunne & Co Ltd, agreed.

“Saab has been on the ropes for years,” Michael Dunne, said. “It’s always been a quirky, niche brand that appeals to a narrow strand of loyal consumers. I’m not sure how much brand punching power Saab would offer a Chinese firm,” Dunne said. He said though that if the Pang Da deal dies, there is one last hope – Beijing Automotive Industry Holding Co, which paid $200 million for some of Saab’s old platforms in 2009. “BAIC had a chance to buy the company earlier and decided against it. The feeling then was that it could build its own brand into something more substantial than Saab. If the price and terms now become super attractive, then you could see BAIC coming back for the brand,” Dunne said.

Before the latest news from China, many industry experts were reciting the last rites over Saab. Automotive News’ Edward Lapham, in an article headed “Why Saab’s failure looks inevitable”, said all that’s left for the quirky brand is a Viking funeral. Saab unions, tired of their members’ wages being delayed, threatened to file to declare the company bankrupt. Saab owner Swedish Automobile of the Netherlands announced a first half loss of €202 million this week compared with red ink totalling €21.9 million a year earlier. According to Bloomberg News, Saab was close to arranging a €110 million loan to pay wages, although it’s hard to see what bank would be willing to take on a risk like this.

Reports from China said any approval from government agencies is unlikey to emerge before mid-October. Will the unions, and suppliers owed upwards of about €100 million, be content to wait another six weeks or so, or will they decide that Saab is irretrievable, and pull what scraps they can from the dying embers?

Neil Winton – September 2, 2011 

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