Saab's Survival Depends On A Chinese Car Dealer

Victor Muller is getting desperate. Hard up for cash, he is willing to sell 24 percent of Saab to a car dealer in China. It’s not any car dealer, but Pangda, one of the larger chains in China. According to a Spyker press release, Pangda has “over 1100 dealerships nationwide”, according to Pag Da’s own profile (see below) is has about half of that. Be it as it may, it is a dealer group, not a larger automaker. Not even a smaller one.

According to the Spyker press release, Spyker, Saab and Pangda signed a Memorandum of Understanding today. The MoU “includes a strategic alliance consisting of a 50/50 distribution joint venture and a manufacturing joint venture (MJV) for Saab branded vehicles as well as for an MJV-owned brand (the so-called ‘child brand’) in China. Saab Automobile will have up to 50 percent in the MJV, with Pangda and a to-be-selected manufacturing partner owning the remaining shares.” Great. They don’t even have a manufacturing partner yet, but are already creating Chinese brand which are all the rage in the Middle Kingdom,

Spyker and Saab hope that “Pangda shall make a EUR 30 million payment for the purchase of Saab vehicles and is expected to make an additional EUR 15 million for the purchase of more Saab vehicles within 30 days subject to certain circumstances. Additionally, Pangda will take an equity stake in Spyker for a total amount of EUR 65 million at EUR 4.19 per share (the weighted average of the ten last trading days), representing 24 percent of Spyker on a fully diluted basis.”

Here is some unsolicited free advice for Mr. Muller: Don’t spend the money yet. If you need quick cash, don’t look to China. Here is why:

• In China, a MoU is part of the flirtations that may or may not lead to doing business. But it is of zero value.
• A contract, signed and “chopped” by all parties involved comes closer to doing business.
• Even after the contract is signed, the bargaining usually does not end.
• Unless Pang Da has € 30 million sitting around in a bank account somewhere outside of the country, there is no way in hell this money will be flowing fast. Even if it is payment for cars, the payment needs to be approved by the government. Cars need to actually change hands. They need to be available and certified for the Chinese market.
• I wouldn’t do a deal with anyone in China if they know that I am desperate for money.

The press release warns that “some of the transactions following the MoU are subject to agreement on definitive transaction documents and certain conditions, which include consents from certain Chinese governmental agencies, the European Investment Bank, GM and the Swedish National Debt Office.”

That’s a lot of people that have to say yes. GM and the Chinese government probably won’t be on the same page when it comes to the intellectual property of Saabs.

Victor Muller was dreaming when he (according to Reuters) “said the fact Pangda is a distributor, not a manufacturer, meant it would not need approvals to buy Saab cars for sale in China.” Pangda may not need approvals to buy cars, but it needs approvals to import them, to sell them, to make them street-legal, and most importantly for Mr. Muller, to wire the €30 million in payment. If a government wants to be ornery, the car business offers ample opportunities to do so.

Pangda recently made headlines by dropping 23 percent on the day of its IPO on April 26. The nearly $1 billion the company raised were worth $770 million. The IPO had unfortunate timing: It came days after China had announced disappointing sales for April and a big downdraft at the Shanghai stock exchange.

According to listed information, “Pangda Automobile Trade Co Ltd is principally engaged in the distribution, repairing and maintenance of automobiles. The Company distributes cars under 49 brands, including Benz, Audi, Subaru, Volkwagen, Honda, Toyota and Hyundai; trucks under 15 brands, including Auman and Jiefang; mini coaches under 10 brands, including Wuling, Hafei and Jiabao, as well as agricultural vehicles under six brands and engineering machinery vehicles under six brands. As of June 30, 2010, the Company had 501 automobile exclusive agencies, 176 automobile markets, as well as eight specialty automobile markets, located in China and Mongolia.”

Pangda is located in bucolic Tangshan, Hebei Province.

PS: CarNewsChina has a whole dossier on Pangda.

PPS: On the positive side, Pangda preserves an endangered piece of Chinese culture: Chinglish. Their website has such gems as “Pangda Initially Publicly Issue the A-share to Officially Launch the Stock Markets of Shanghai,” or “Pangda Group Boosts the Closing Ceremony of the Tangshan’s Third Session of Television Calligraphy Competition Completely.”