GM Announces Winding Down of Saab; Spyker Makes Renewed Offer

End of the Road for Saab…

General Motors (GM) announced on Friday (18 December) that it would not be able to conclude plans to sell its Swedish brand Saab Automobile AB, and that instead it would begin the winding-up process. In a statement, the company said that negotiations with Dutch sports-car manufacturer Spyker Cars had hit a roadblock during the due diligence process that neither side believed could be resolved. GM Europe president Nick Reilly said, "Despite the best efforts of all involved, it has become very clear that the due diligence required to complete this complex transaction could not be executed in a reasonable time. In order to maintain operations, Saab needed a quick resolution." He added that the automaker "will work closely with the Saab organization to wind down the business in an orderly and responsible manner". Reilly also said that since this is neither being a bankruptcy nor a forced liquidation, it expects Saab to "satisfy debts including supplier payments, and to wind down production and the distribution channel in an orderly manner while looking after our customers". Saab would also continue to honour warranties and provide service and spare parts to current Saab owners. Although a timetable for the process has not been agreed, GM said that it would begin in January.

Saab's chief executive Jan-Ake Jonsson expressed his disappointment that an agreement could not be reached. He told Dow Jones International News that, "We're surprised and a bit disappointed at the decision", adding that it was too early to say what the next step of the process would be. He also said that despite the criticism of the Swedish government's involvement, it is difficult to see what it could have done differently.

The news was also met with disappointment in Swedish political circles. Industry Minister Maud Olofsson said following the announcement that the situation was regrettable and came as something of a surprise. She added at a press conference, "GM could've done much more to help Saab." However, Prime Minister Fredrik Reinfeldt was less shocked at the announcement, reports Reuters. He was quoted in a radio interview as saying that he was not surprised that this had happened, adding that, "The process was built around a loss-making company and an American owner that owned Saab for 20 years and made a profit in one of the 20." He added, "Basically, they [GM] have not been successful enough at building Saab's profitability, and they have not either come up to those volumes which modern carmakers probably need."

…Or is It?

However, despite the announcement, Spyker yesterday made a renewed attempt to acquire the automaker, reports the Wall Street Journal (WSJ). According to the automaker, the latest bid is an 11-point-proposal that addresses each of the issues that arose during the due diligence process. Victor Muller, the chief executive of the Dutch concern, said in a statement, "We have made every effort to resolve the issues that were preventing the conclusion of this matter and we have asked GM and all other involved parties to seriously consider this offer." The company added that the latest bid has the blessing of Saab's management and also eliminates the need for a loan from the European Investment Bank (EIB), although he declined to say what alternative arrangements had been made. The new offer is said to be valid until 17:00 Eastern Standard Time today.

GM has also said in a statement that it has "received inquiries from several parties" about Saab. It added that it will evaluate each inquiry, but will "not comment further until these evaluations have been completed".

BAIC to Use Saab Architecture from 2011, Hoping for Further Links

Prior to Friday's announcement, Chinese automaker Beijing Automotive Industry Holdings Company (BAIC), which acquired the rights to some of Saab's intellectual property rights last week (see Sweden - China: 15 December 2009: GM Confirms Sale of Saab Intellectual Property to BAIC), said that it could begin using these in commercial production by 2011, reports Reuters. The president of the company, Wang Dazong, also said that the company needed to grow as a global business, adding that this could include further co-operation with Saab in areas such as alternative powertrain vehicles and component purchasing.

Outlook and Implications

Despite the announcement that Saab is to be shut down, it would seem that the future of the automaker, its 3,400 staff, the 8,000 other workers that are dependent on the automaker, and around 1,100 dealers worldwide remains in the balance. The automaker was first put up for sale by GM around a year ago when a decision was taken to put it "under review". The U.S. automaker acquired 50% of the brand in 1990 for around US$700 million, with the remainder bought in 2000 for US$125 million from Scania, as well as the assumption of debt. Since the takeover by GM, the automaker has suffered mounting losses and declining sales, with its 2008 loss estimated at US$340 million and this year's expected to be similar. It had previously been hoped that the brand might be sold to local sports-car manufacturer Koenigsegg, with the backing of several investors including BAIC, but this deal also stumbled (see Sweden - United States: 25 November 2009: Saab Future in Doubt as Koenigsegg Withdraws Offer).

It could be argued that GM did not nurture the many strengths of the Saab brand that appealed to customers. Saab has used the power technology and architecture of other automakers prior to being swallowed up, most notably the Triumph slant-four engine that have formed the basis of its naturally aspirated and turbocharged engines since 1968, and its relationship with the Fiat Group on the Type Four chassis that underpinned its 9000, but to many, GM's increasing control saw the company lose what made it so unique. The most glaring of these faux pas resulted in the "Saaburu", or 9-2X, based on a Subaru Impreza, and the Saab 9-7X, or a Chevrolet Trailblazer with a Saab front end nicknamed the Trollblazer. Such crass and mindless management of the brand has effectively consigned it to the history books long before today, although it could be resurrected by a more sympathetic parent company.

Despite Spyker's renewed offer, it remains to be seen whether a deal is actually feasible. According to Spyker, the original agreement collapsed because it would have taken longer than the 31 December funding cut-off date to sort out the 400-million-euro (US$573.2-million) EIB loan, guaranteed by the Swedish government. However, this still begs the question of where Spyker will now find the cash to buy Saab and fund it for the foreseeable future. Spyker is a loss-making firm and remains reliant on the Convers group, which owns 29% of it, and is in turn controlled by financier Alexander Antonov. The EIB loan has always been thought to be key to any buyer acquiring Saab, which despite the cash that GM has thrown at it over the years continues down a loss-making path. It would certainly require very deep pockets to fund the brand, without much reward. However, Saab's potential buyers may be looking at the future models that the automaker has in the pipeline. Certainly, the latest generation 9-5 has been warmly received and should certainly offer gains when it replaces the current 12-year-old model. There is also the 9-4X due in a couple of months, Saab's second effort in the sport utility vehicle (SUV) market and which includes greater DNA than the 9-7X. There is also apparently a replacement for the 9-3 on the drawing board, which could also help. This may come with its own problems though, and GM may not be keen to open up its latest technology to a concern backed with Russian money.

If this latest offer fails and the brand is wound down, certain technologies could well live on, if not at GM then at automakers in developing markets. Among these are Chinese manufacturers such as BAIC, which now owns the architecture of the previous-generation 9-5 and other assets. Prior to Friday's announcement it was said to be looking at Saab's other technology for possible use. With the closure of the brand, it could take the step of acquiring not just intellectual assets but the expertise of Saab's engineers to advance its own products to a standard allowing them to be exported. The Saab brand may also go the same way. However, this would be an ignominious end for the innovative automaker that helped pave the way for hatchbacks, turbocharging, and front-wheel drive to be brought to the masses.