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Saab China Deal Might Not Pass Government Scrutiny

China Said To Want Deals With Big, Global Players, Not Niche Fillers
Could Youngman Deal Convince China Authorities?

As Saab production starts, stops then starts again in Sweden, reports from China suggest that government approval of the deal with Pang Da is not a foregone conclusion.

The reports, from Automotive News in Beijing, said the part of the deal under which Pang Da bought Saab vehicles for sale in China might not be in doubt, but the long-term local manufacturing nature of the alliance might not pass government scrutiny.

Later, Saab announced an agreement with China’s Zhejiang Youngman Lotus Automobile Co in which Youngman would take an equity stake in the ailing Swedish company for €110 million. In return Youngman would distribute and manufacture Saabs.

The report from Automotive News said the Chinese government might not be interested in a small niche-player like Saab, when it really wants to attract a few big companies which can compete globally.

Chinese media has been criticising the Saab-Pang Da deal, after being negative about the previous Saab agreement with Hawtai which crashed and burned after 10 days. The latest deal with Youngman would seem to fail the same test which apparently requires deals like these to be with global players not smaller, would-be contenders.

The Automotive News report called Saab a dying brand which would add little value to an industry already plagued by too many inefficient, tiny players.

“Saab has been on the ropes for years,” the article quotes Michael Dunne, president of industry consultancy Dunne & Co Ltd as saying.

“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.

Dunne says 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 told Automotive News.

Neil Winton – June 15, 2011

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