Saab-Hawtai Deal Fails: Chinese Consolidation To Blame?

Saab’s deal with the Chinese automaker Hawtai has failed in a predictable manner, as the struggling Chinese partner apparently didn’t receive government approval for the deal. Saab-Spyker’s announcement of the deal’s collapse explains [via AN [sub]]

Since it became clear that Hawtai was not able to obtain all the necessary consents, the parties were forced to terminate the agreement with Saab Automobile and Spyker with immediate effect. The parties will continue their discussions about a possible cooperation, however now on a non-exclusive basis

This isn’t the first time that the Chinese takeover of a Western brand failed due to the Chinese government’s insistence on industry consolidation, as the Hummer-to-China deal failed for similar reasons. Meanwhile, we should have seen this coming a mile away…

According to one of the earlier reports of Saab’s flirtation with the Chinese industry,

Saab was talking to a wide range of Chinese automakers about a tie-up to help the carmaker weather its current crisis. He did not name those potential partners, but described them as “niche players and big boys.”

But Muller added that teaming up with a large manufacturer was more difficult for a smaller brand like Saab. Partnering with a local niche player would give Saab a stronger voice.

Though Muller may have had his reasons for picking a smaller partner from China’s vast auto industry, he should have studied his history first. The Hummer deal was axed by the Central Government not only because it represented an anti-environmental image, but because the proposed buyer (Sichuan Tengzhong) wasn’t one of the large automakers favored in China’s industry consolidation scheme. The strange part? According to a separate AN [sub] report, Muller has been “doing his homework” on the Chinese industry for six months, saying

In September we put together a working group to inventory the Chinese market. That related to importation, potential partners for distribution, potential partners for manufacturing. We have been at it for half a year

And yet they didn’t pick up on Hawtai’s struggles, and therefore its lack of credibility as a potential partner. Sure, they might have assumed that the Chinese Government would have been receptive to tying a company that had over-gambled on diesel engines in a market where you can hardly buy a gallon of diesel with a struggling European brand… but ultimately, the Chinese government almost always defaults to macro-solutions over micro-solutions (a natural product of trying to govern a billion people). Saab should have known that Beijing would not approve the Hawtai tie-up.

But, like the good newly-converted Chinese evangelists they are, Saab-Spyker is moving on from the Hawtai mis-step, and is pursuing a deal with the larger, more export-focused Chinese OEM Great Wall, according to Automotive News [sub]. According to AN’s sources

The two sides have never stopped talking and have been in touch with each other despite the Hawtai/Spyker deal. It could be mutually beneficial if Great Wall and Spyker team up eventually. The Chinese partner has the cash that Spyker needs, while Saab’s technologies and its network in Europe are valuable for the Chinese side

And though that relationship could materialize into something solid, as Great Wall is considered one of China’s flagship automakers, it still leaves Saab back in a short-term scramble for cash. The firm says that it will restart production once its EIB loan drawdown is approved, but it’s still got a long, rough road ahead of it…