Our Daily Saab: Saab "Saved" As 100% Chinese Firm… Pending Those Pesky Approvals

On the last possible day to work out a deal before being forced into bankruptcy, the Victor Muller era has ended at Saab. The Swedish brand will now become a completely Chinese-owned company… if all goes to plan. A press release explains

Swedish Automobile N.V. (Swan) announces that it entered into a memorandum of understanding with Pang Da and Youngman for the sale and purchase of 100% of the shares of Saab Automobile AB (Saab Automobile) and Saab Great Britain Ltd. (Saab GB) for a consideration of EUR 100 million…

…The administrator in Saab Automobile’s voluntary reorganisation, Mr. Guy Lofalk, has withdrawn his application to exit reorganisation. The MOU is valid until November 15 of this year, provided Saab Automobile stays in reorganisation.

But remember, this is Saab… and its fate rests in the hands of many, many people not named Victor Muller. Despite the air of finality that is surrounding some of the media coverage of this latest announcement, this is not a done deal. The Saab saga rolls on…

You see, I left one crucial paragraph from Swan’s release out of the quote above, to wit:

Final agreement between the parties is subject to a definitive share purchase agreement between Swan, Pang Da and Youngman, which will contain certain conditions including the approval of the relevant authorities, Swan’s shareholders and certain other parties. The consideration of EUR 100 million will be paid in installments. An important consideration for Swan to enter into the transaction is the commitment of Pang Da and Youngman to provide long term funding to Saab Automobile.

In other words, the deal itself is not done. This is simply an MOU that does not appear to be legally binding… and is only valid for another two and a half weeks anyway. Besides, the European Investment Bank, China’s NDRC, General Motors and Saab various creditors still need to approve the deal. Bertel has made the case that China is unlikely to approve any deal to bring Saab to China for a wide variety of reasons, and Reuters points out that GM is hardly guaranteed to go along with the deal.

Swedish Automobile chief executive Victor Muller, whose company is selling Saab, said he had so far only had a “brief dialogue” with GM about the planned sale, but hoped to convince them of the benefits of it.

“It is way too early to make a statement about whether this is going to be easy or not,” he added.

In case anyone has forgotten, GM “has preference shares in Saab, supplies it with parts and is a creditor.” Does GM want to be in business with Pang Da and Youngman, two bit players in the Chinese scene, when it has such strong ties to the much stronger firm SAIC? Furthermore, if the NDRC still doesn’t want the Saab deal to happen, GM might have an opportunity to win some guanxi with the government by blocking the deal for them. Otherwise, the NDRC will continue to wait out the clock, allow this MOU to expire, and kill off Pang Da and Youngman’s ambitions without a face-losing confrontation.

After all, while the west has been fixated on Saab’s dramatic roller-coaster ride, the realities have not changed in China. The Central Government still wants its industry to consolidate, sees foreign partnerships almost solely as opportunities to gain intellectual properties, and it still wants the auto industry to hold off on ambitious export schemes until at least 2015. Wedding a weakling Western brand (with no I.P. to speak of) to two weakling Chinese firms does not take the industry in the desired direction, and as the HUMMER non-deal proved, the NDRC has no need to explain itself… it will simply not give approval until this MOU expires.

But even if the NDRC does give approval, as Saab’s bankruptcy administrator Guy Lofalk claims it will, the Pang Da/ Youngman rescue plan is hardly confidence-inspiring. Per Saabsunited (from Swedish media sources),

we are estimating about 40 million euro to fund the reconstruction depending a bit on its length and for the years 2012 and 2013 a cost of about 550 million euro. After that the plan is that the operations will reach a point of break even.

So, what’s next for Saab? Two and a half more wild and crazy weeks, as creditors, the E.I.B., NDRC and GM are pitched this latest plan. But don’t hold your breath for much of anything to change. With two of the three stakeholders unlikely to approve the deal, this is probably just another stop on Saab’s downward decline. And with Victor Muller signaling that he understands that his time at the helm of Saab is over, it’s unlikely that anyone else will continue his crusade if this final deal falls through. In the meantime, North Street Capital is out of the picture, and Swan is going back to its $150m equity agreement with G.E.M. in order to raise a little more cash.

Watch this space…