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Almost back to normal: SAAB recovers from a major crisis

Regular visitors to SeriousSAAB have lamented the fact that there has been a singular lack of updates for some weeks now.  This has not been due to illness, pressures of work, or family commitments but due to a complex and shifting situation that saw production at Trollhattan halted for an alarming length of time. 

Pand Da CEO Mr Pang addresses the media May, 2011In mid April, the author became aware that whispered rumours about liquidity problems were starting to escalate into something rather more serious as it became clear that several component suppliers required payment for accounts outstanding.  In these troubled economic times, the merest whiff of trouble was more than sufficient to trigger a chain reaction of payment requests (nothing spreads faster than bad news!) and SAAB management had little option other than to suspend production.

As the crisis deepened, various plans to safeguard the short and mid term future of the company emerged.  One entailed selling SAAB real estate –including the plant at Trollhattan- and leasing it back from the Swedish government.  Of course, there are many precedents for this: in the UK, for example, many government buildings were sold then leased back some years ago.  The second (related) plan was rather more controversial, since it involved wealthy Russian investor Vladimir Antonov, who has long expressed an interest in acquiring a substantial stake in SAAB.  Those readers with long memories will recall that intervention by the US government blocked the sale of SAAB to Spyker originally due (apparently) to misgivings about Mr Antonov.

While progress ground to a stand and mired in a sea of red tape, SAAB courted Chinese investment.  Those of us with long memories may recall that BAIC had formalised a move towards acquiring SAAB from erstwhile owner GM as long ago as 2009 and of course the pre 2006 model 9-5 and 9-3 designs were subsequently sold to that company, so this latest initiative was not unexpected.  The level of interest aroused however was sufficient to arouse the concern of China’s top economic planning body the National Development and Reform Commission.  A meeting was arranged in which NDRC stated plainly that it would not approve a complete buy-out but would consider collaborative ventures.  Ultimately, the two most interested parties were Hawtai Motor and Pang Da Automobile Trade: both fall into the major league player category. 

Both organisations stood to gain from a deal: SAAB would solve its cash flow crisis in the short term and be able to concentrate on forthcoming new models in the long term but any Chinese partner securing a deal with SAAB would be able to tap the potentially lucrative Chinese car market.  When proposals became public knowledge, analysts expressed concerns that the substantial investment required by SAAB might not be forthcoming as quickly as the Swedish maker needed to avert further crisis.  These fears were realised in mid May when it emerged that the deal with Hawtai had collapsed.  Just four days later, Pang Da, China’s largest car distributor agreed the purchase of a 24% stake in Spyker said to be worth €65 million in addition to outright purchase of vehicles worth €45m.  This news was nothing less than music to the ears of many SAAB enthusiasts but jubilation needs to be tempered with caution.

Ironically, it may be stated that the short term financial crisis occurred not because SAAB did not hold sufficient funds to pay creditors but because of contractual restrictions upon the way that the funds could be deployed.  Equally, resolution of the crisis could not be achieved quickly because all the stakeholders (including former owner GM, European Investment Bank and the Swedish National Debt Office) had to be completely satisfied.

In the interim, while efforts to secure additional funding have explored a number of different routes, the loss of production accounts for around 5,000 vehicles.  The damage to the company’s reputation and general standing, however, is rather harder to quantify, particularly coming at a time when orders were coming in at a steady rate. 

Finally, on May 27th, it was possible to resume production but although there is cause for cautious optimism, this is only a semblance of peace and this outlook will remain until all the agreements have been rubber stamped by all relevant parties in a protracted process that will probably take 3 months to run its full course.

One of the most alarming facets of this débacle has been the outpourings of negative or overtly vitriolic invective about the company – some of it from wholly unexpected quarters.  Being deeply associated with the brand for many years, and concentrating on promoting the brand, conversing with fellow enthusiasts and supporting owners no matter where in the world they may live, it came as something of a shock that many people far from lamenting the setback were positively gloating over the crisis. 

Ultimately, looking backwards to February last year, only sublime optimists and the naive would have predicted an effortless recovery for SAAB.  Bringing two new products to market with all that entails and committing substantial effort and investment into next generation models for the future was an inevitably perilous but necessary course to adopt.  Presently, SAAB is back making cars and whereas the future looks brighter, much work remains to be done before the long term future of the company is secure.

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