By on May 18, 2011

Saab has received wire transfers of around €30m from both Gemini Investments and the Chinese dealer group PangDa, reports Aftonbladet, and it will be using that money to pay off its supplier debts which could use up most of that cash (Saab’s supplier debts are estimated by at between two hundred and four hundred million kroner, or as much as €44m). Leaving aside the issue of how that money was able to be transferred from China to Sweden in a matter of two days (more on that from Bertel here, the short version: the deal should need Chinese government approval), there are serious questions about Saab’s ability to restart production. After all, the €30m from Gemini is debt, while Saab owes PengDa for an undisclosed number of vehicles that it bought with its investment. Unless those cars are sitting somewhere waiting to be shipped, Saab will have to pay off its suppliers and then build the cars on what is essentially credit from PengDa. Meanwhile, that’s not the only demand on Saab’s finances and attention, as CEO Victor Muller is planning on taking a bonus of over half a million dollars, a decision that is creating fresh problems of its own.

The Swedish paper reports

At Saab, Spyker’s shareholders’ meeting in Zeewolde in the Netherlands on Thursday will get Muller’s criticism from the Dutch shareholder rights association VEB. Muller may, for the first time, receive a cash bonus of 4.5 million kroners, while Saab has severe problems. The bonus is disproportionate, argues the VEB.
“We will try to convince him to surrender,” said David Tomic, an economist at the VEB, said.

Muller defended at a press conference in Nacka in early April, their choice to receive the bonus with certain goals in the business plan is reached and that management did a good job even if the company made a loss.

It does not impress David Tomic.

“The bonus is disproportionate. Given the large financial losses and poor sales, we wonder what objectives have been achieved that may justify a bonus,” said Tomic.

Spyker Cars has not previously had monetary bonuses, according to David Tomic.

At current exchange rates, that bonus amounts to over $710,000. Is it enough to sink Saab-Spyker? No. Is it an appropriate reward for hustling millions in financing for a company that many are already writing off as dead? Possibly. But given the touch-and-go nature of Saab’s recent history, it’s clear that Muller’s bonus sends the wrong message. After all, not only does Saab apparently not know exactly how much it will cost to restart production, but it’s not at all clear what terms the suppliers will accept to keep a long-term relationship together. If you asked us, we’d say C.O.D… which is a brutal way to run any automaker. Not only does Saab need every penny it can scrounge to stay afloat, but it also needs to send the message that its priorities are such that its worth suppliers taking a risk on it. Executive bonuses in the midst of declining sales, huge losses and whirlwind finance-seeking tours hardly send that message. If anything, Muller’s just lost some of his incentive to continue his Saab Rescue World Tour.

And, having received a healthy little bonus for simply keeping Saab alive, Muller now has to face his suppliers as well as the angry shareholders represented by VEB. Given that Muller’s last shareholder meeting included the promise that Saab would turn a profit by 2012, the feelings of anger and betrayal are likely to outweigh sympathy for the plucky little automaker. Meanwhile, the storm clouds continue to gather. Beijing Auto, which bought Saab’s old IP last year, is preparing to roll out new cars based on the technology, using the tagline “From Saab, Better than Saab”. And, with hope running out, Saab’s sad plight has inspired a thoughtful meditation on how companies die, from Forbes‘s Ron Ashkenas, which notes

While the final days of some companies are dramatic and garner top news coverage, most companies deteriorate over a period of years due to competitive issues, financial weakness, or strategic missteps. For example, Saab’s growth and expansion in the 1980’s created a need for capital that brought it into the arms of General Motors, which purchased 50 percent of the automotive division in 1989, and the remainder in 2000. From that point, Saab became a casualty of GM’s inability to rein in costs, prune products and platforms, and compete on quality.

In other words, companies don’t usually die of sudden heart attacks, but rather have protracted illnesses that kill them over time.

Clearly the end of a company — whether through bankruptcy, merger, restructuring, or shutdown — is often painful and traumatic for those involved. Most people emotionally identify with their employer so even when their job continues with a new entity, or they get a financial payout, there is still a sense of loss. And of course, the loss is more acute when there is neither a job nor a payout.

Organizational failure, like death, is one of those subjects many of us avoid and deny, which makes it all the more shocking when it happens. But given the reality — it might be worth considering in advance how you would handle the impending death of your company or division. Is there anything you could do to prevent it based on your position and influence? If not, think about your own future.

It seems that Muller has already taken Ashkenas’s advice… now the question is whether he’s ready to let go of his floundering company. The next weeks will hold the answer either way.

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8 Comments on “Saab Has Enough Money For Muller’s Bonus, But Does It Have Enough To Restart Production?...”

  • avatar

    Getting a big bonus while the ship is sinking? What the hell are they doing…following GM and Chryler’s lead?

  • avatar

    Sounds like a repeat of what the guys who ran Rover into the dirt did…

  • avatar

    It didn’t believe in miracles, but now I do. So on Monday, a MoU is signed in China. On Wednesday morning, a journalist in Stockholm writes that “My contacts in Trollhättan said last night that the 270 million [Swedish Krona] from Chinese Pang Da are in Saab’s account.” So that would be Tuesday. Amazing. I haven’t seen a wire from China, or from Hong Kong, hit a European account within 24 hours. I must believe that someone in China gave Muller a huge suitcase full of cash. (Which he did properly declare when entering Sweden, I trust.)

    I didn’t believe in miracles, but now I do. A Chinese car dealer wires $42 million on the basis of a MoU. It says 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,” but the money is transferred nonetheless. I want to meet that dealer. I trust he has a long white beard and a halo.

    I’m jealous. I have received many MoUs. They tend to elicit a predictable comment: “Not worth the paper they are written on.” In the import business to China “payment against documents” (i.e. cash for the bill of lading when the merchandise leaves port) are considered the best terms one can get. Usually, they want the stuff to arrive in Chinese port and clear customs before they pay – reluctantly. Suddenly, all of this has changed.

    Please let this be true. Don’t ruin my new-found belief that there is a God.

    And to all the detractors: If someone pulls off that kind of a miracle, then he deserves a bonus.

  • avatar

    Ed and Bertel, despite protestations to the opposite, there is something about TTAC reporting on Saab that does not seem quite balanced. (yes I know you are tired of hearing that but if you please, read on.) I like reading TTAC, but would it be possible to realistically present Saab’s difficulties and challenges, and even to state your opinion that they cannot succeed, while denigrating their management or product a bit less? I don’t know if you do it intentionally or not, but you do give the impression you would like to see Saab fail. In fairness, I get that may not be the case at all.

    I think there is a sizable group of people who find it interesting to also look for reasons, against all odds, why endeavours might succeed, rather than fail. (Not to say analysis of failure isn’t interesting, of course that is too).

    Have you considered that at this time, while the research might be more time consuming, your readers might like to have some factual reporting about what assets Saab has that could make it survive, as unlikely as that may seem? I for one would like to know more about the capabilities of their factory, their design studio, their engineering, union relations, potential partnerships, etc. I’ve read a lot of speculation (all parts suppliers will become COD, for instance). How about some speculation on how this might actually work?

    One other topic, not editorial, I would like to address. Lots of postings to the effect of who needs Saab, why is a Saab compelling versus other cars? Most of these come from people who have never owned one, let alone driven one. While the company may go under, you don’t build such a rabid fan base without something special about your car. They were and still are nice cars, just not for everyone. They may not be competitive on a features basis, but they do have a good design feel about them; that is subjective of course. I don’t think the cars are the fatal flaw with Saab as much as the management, GM, poor marketing, stoppage of production, lack of confidence in the future, etc.

    Full disclosure: I have owned a Saab 9-5 for ten years. I or my family have also owned Ford, Toyota, Honda, Isuzu, Nissan (and Datsun), Volkswagen, Audi, Mercedes, Lexus, and, get ready for this, Fiat(gasp). (Also had driving rights to a TR-250 but that’s another posting. That was by far my favorite car.) The 9-5 has been a good car. About in the middle of the pack for maintenance costs. On the highway at 80 better than any of the others. Best seats for sure. Actually really not too bad for a car that was designed almost 20 years ago.

    Anyway, thanks for slogging through the long post.

    P.S. Bertel, your reporting on doing business in China is always fascinating and I hope you will do even more.

  • avatar

    Majorfrn: Thanks for taking the time to write such an in-depth comment. Your thoughts are similar many I’ve encountered recently, and to all the these critics of our Saab coverage, my question is simply: how would you have us cover Saab? Must every paragraph end with the words “but we sure hope Saab makes it anyway”? Should we not have reported about VM’s bonus (which most auto sites still haven’ reported)?

    Your suggestion of digging into Saab’s assets is a good one, but given the amount of research it would take and the variety of stories we normally cover here, it would be hugely distracting and would basically turn us into a Saab blog for some period. Besides, there’s not great transparency when it comes to Saab’s assets… one of the huge issues surrounding all of Saab’s dealings (especially in China) is its intellectual property holdings, and what its licensing agreement with GM is (GM must still sign off on Saab’s alliances, indicating Saab is still licensing IP).

    So, short of providing a 3rd party audit of Saab’s assets and liabilities, what should we be doing? Bertel has simply pointed out the difficulties of doing the kinds of deals in China that Saab is trying to do… most people don’t understand how business is done in China, and some of our pessimism comes from Bertel’s inside info. The main complaint is that we are criticizing the “heroes” who are rescuing Saab… so what, we should only talk about the mistakes GM made when it owned Saab? We try to stay a little more current than that.

    The upshot is this: we have our own take on the Saab situation which you are free to agree or disagree with, or even ignore. I personally really don’t care whether Saab lives or dies, but I see decades of odds (and a brutal market) stacked against the brand. If you want maximum Saab optimism, and a community that only wants Saab to succeed, check out or There are plenty of cheerleaders out there… and TAC’s role has always been “the cold bucket of water” of the automotive world.

    When Saab dies, on the other hand (and believe me, it will), we’ll be sure to not speak ill of the dead. Saab’s a cool brand with a fascinating history, and we’ll be sure to highlight the non-depressing years as we look back at its history. Trust us, we have had quite a bit of experience with this in recent years, between the deaths of Pontiac, Hummer and Saturn (all brands with both hard-core fans and die-hard detractors.

    • 0 avatar

      Ed – appreciate you taking the time to respond. I couldn’t imagine a clearer explanation, and I respect your point of view. I didn’t think it was at all out of line to report on VM’s bonus. Your post did clarify where TTAC is coming from. I get that you guys are covering a heck of a lot of ground every day. I’m not unappreciative of that, and even if the news is not good, please keep reporting on the latest Saab developments.

      Well, if they survive long enough, maybe you could review the 9-4!

  • avatar

    the details are here:

    Zeewolde, The Netherlands, 16 May 2011 – Spyker Cars N.V. (Spyker) announces today that Spyker and Saab Automobile AB (Saab Automobile) signed a Memorandum of Understanding (MoU) with Pang Da Automobile Trade Co., Ltd (Pang Da), China’s largest publicly traded automobile distributor with over 1100 dealerships nationwide. 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 MJVowned brand (the so-called ‘child brand’) in China. Saab Automobile will have up to 50 percent in the MJV, with Pang Da and a to-be-selected manufacturing partner owning the remaining shares.
    Pang Da 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, Pang Da 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, and will have the right to nominate a member of the Supervisory Board of Spyker and /or the Board of Saab Automobile.

  • avatar

    Wrong again, TTAC. Muller hasn’t received his bonus, but rather decided to wait with it until Saab’s economy is more stabile (well, it really never has been, but you get my point…).

    And yes, I think he deserves it.

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