GM Signs Up AlixPartners to Wind Down Saab; Further Details Emerge of Genii Capital Bid

General Motors (GM) announced on Friday (8 January) that it has signed up consultants AlixPartners to "supervise the orderly wind down of Saab." The automaker said in statement that it has requested the approval of the selection from the appropriate authorities in Sweden. It added that "the wind down process is expected to take several months, and will ensure that employees, dealers and suppliers are adequately protected," while Saab customers would have their vehicle warranties honoured and service and spare parts would continue to be available. However, it also said that it had received several proposals from possible buyers of Saab and it would continue to evaluate these proposals, and added that the appointment of AlixPartners would not affect this process.

Despite the assurances that the evaluation of bids would continue to take place, there has been an outcry from the labour union representing workers at the Swedish automaker. Stefan Lofven, head of trade union IF Metall, said in a press release published by Dow Jones International News "It is irresponsible of GM in this situation to act in two directions, both towards a sale and towards a wind-down." Lofven added that the Swedish government should try to influence the GM's largest shareholder, the U.S. government, over this matter. A group of Saab dealers in the United States have also accused GM of failing to do all it can to sell the company and allow it to continue. In a letter from the group's lawyers, Bass Sox Mercer, to GM, the company said that "GM owes Saab dealers a duty of good faith and fair dealing in its efforts to market the Saab brand." However, Victor Muller, chief executive officer (CEO) of bidder Spyker Cars told the news service that it did not come as a surprise that GM had taken these steps, and did not believe that the decision would have any implications for his company's offer.

While this announcement took place, further details have emerged with regards to Genii Capital and CEO of Formula One Management, the commercial rights holder of the Formula One motor racing championship, Bernie Ecclestone's joint bid for Saab. Lars Carlstrom, a Swedish investor who is co-ordinating the bid, told Reuters that the pair are keen on buying the company for its brand, saying that it is "comparable to that of Porsche and BMW." He added, "They love brands and they really value Saab's brand... They are really supportive and will definitely be able to bring Saab to new heights." However, it is still not clear whether the Genii Capital-Ecclestone team had sent in a formal bid prior to last Thursday's (7 January) deadline, Carlstrom telling the news service that "I have had contacts with GM, who have given us a deadline of the beginning of this week, which I interpret as Monday [11 January] through Wednesday [13 January]." Carlstrom also confirmed that any bid for the company would not rely on the previously secured European Investment Bank (EIB) loan for continued funding, adding "That is an absolute condition from GM's side and one of the keys to being able to buy Saab… No one knows if the EIB would agree such a loan." Swedish newspaper Dagens Industri has also reported that this bid would soon have the initial financing in place to show GM that they are serious about the acquisition, with 500 million-1 billion Swedish kronor (US$70.4 million-140.8 million). However, sources also told the newspaper that any buyer would need to have a total of 10 billion Swedish kronor to invest in the automaker, with GM demanding evidence of an initial 1-2 billion Swedish kronor. The sources also added that Spyker was currently the strongest contender to take over the company.

Outlook and Implications

The process of appointing a supervisor to preside over the wind-down process is a commonly used practice in Sweden, and works in the best interests of the shareholder. With GM still evaluating bids for Saab, having received at least two prior to Thursday's (7 January) deadline (see Sweden - United States: 8 January 2010: Eleventh-Hour Bids Submitted for Saab; GM Board to Meet Today), it could be seen that it is being hasty already appointing consultants to wind down the automaker. It is well known that should it decide that bids are not suitable going forward, it wants to wind down the business as quickly and efficiently as possible, so as it does not continue to be a further drain on its finances. It may well have considered that there was some merit in making an official announcement, in the face of the possibility of unsubstantiated reports causing further uncertainty and bad feeling. However, this does not seem to have proved the case, and it does seem to those outside the company that GM is continuing on a course towards the eventual closure of the business.

It is unsurprising that Spyker's bid is reportedly best placed to capture the company given that this is the third bid it has submitted over the past month or so, and has used each submission as another chance to refine it. Although it still seems that Genii Capital and Ecclestone need to submit a formal bid for the loss-making business, their substantial financial resources could well prove to be a safer bet for the future of Saab as an independent entity. However, it will inevitably take additional time to undertake this review process, and due diligence and settling of intellectual property rights will need to be undertaken, which could add further weeks to the process, and may prove to be a stumbling block for this bid, particularly as time seems to be of the essence to GM. As representatives of the Swedish government are set to travel to meet GM this week (see Sweden - United States: 6 January 2010: Swedish Government to Meet With GM on Saab Next Week; Supplier Issues Redundancy Notices), they will no doubt be persuading the company to spend as much time as possible on reviewing the bids, as one of the key components of the discussions. However, given that the government has previously said that it will not offer financial support to the process, it may well find it hard to persuade GM to take as long as it needs to ensure the future of the company.