19
Jun 2012
Five Unanswered Questions About the New Saab Deal
Saab has been bought out by National Electric Vehicle Sweden (NEVS), a Japanese/Chinese/Swedish consortium.
Great news of course – no-one wants to see livelihoods lost and factories closed. It’d also be a tragedy to see a brand as big as Saab disappear into a puff of smoke, even if it hasn’t been profitable for the last twenty-or-so years.
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It’s been obvious for a while that there’s something inherently wrong with Saab. Previous owners General Motors and Spyker couldn’t fix it, so what chance does NEVS have of turning it into a global force?
The investment group’s first challenge is to build excitement about their electric interpretation of their 9-3 model, as well as tackling the company’s sizeable arrears.
NEVS’ goal is to turn Saab into the world’s largest electric car manufacturer, and they’ve briefly outlined some of its key strategic points. Below, we deconstruct five of NEVS’s claims, to try and answer some of the key questions that Saab is likely to face over the next decade:
Is a Focus on the Chinese Market the Right Step?
The buzz around the Chinese auto market gets louder with each passing month, and NEVS is hoping to capitalise on the hype by focusing its new electric models primarily to electric-conscious drivers in the east.
NEVS spokesman Mattias Bergman says, “We’re striving to be a world-leading company for electric cars," so the only feasible strategy is to get the brand into China as quickly as possible whilst the market is still finding its feet.
Kai Johan Jiang, Chief Executive of NEVS is adamant that the Chinese market is on the verge of electric explosion. “The Chinese can increasingly afford cars. However, the global oil supply would not suffice if they all buy petroleum-fuelled vehicles.
“Chinese customers demand a premium electric vehicle, which we will be able to offer by acquiring Saab Automobile in Trollhattan."
Saab needs to get into that market as quickly as is feasibly possible if it's to seriously attract the consumer base highlighted by Mr. Jiang.
Will Saab Ever Be Profitable?
Saab has been haemorrhaging money for the past two decades, finally declaring itself bankrupt in December 2011 when Dutch manufacturer Spyker decided to cut its losses.
Saab peaked in 2006 when it sold 133,000 cars, which sunk to a dismal 27,000 units in 2009. Saab was reported to have enough assets to cover a third of its debt as of April 2012, which was in the region of £1.2billion.
NEVS has an incredibly tough challenge to get Saab earning money. Previous projects appear to have been scrapped – Saab actually hasn’t produced a new model since March 2011, which isn’t good news whichever way you look at it.
Also, what of its electric future? If NEVS are serious about focusing solely on manufacturing electric cars then they’ll need heavy government backing, with charge points built across the nation for motorists. If no charge points appear any time soon, then it’s unlikely that consumers will want to invest, leading to another massive headache for Saab.
If the company’s cost-cutting measures, complemented by fresh ideas and success in the Chinese market go well initially, then Saab might be smiling once again by the start of the next decade.
How Transparent Will NEVS Be?
Saab’s factory in Trollhattan, west Sweden, employs approximately 3,000 people – 1,600 of which were engineers. NEVS is expected to wield the axe, cutting that number to 200 engineers when it begins production of the 9-3 sometime in 2013-14.
Key appointments have already been made – aforementioned Chief Executive Kai Johan Jiang was quick to appoint Karl-Erling Trogen (former head of the truck division at Volvo) as Chairman of NEVS, to help get a uniform chain of command in place as quickly as possible.
Elsewhere, the NEVS website is currently advertising for new operations managers at its Trollhattan plant.
Saab has been on a turbulent journey over the last couple of years, and has yet to release sales figures from 2011. The recent takeover though should help give greater transparency, and show the exact state of Saab’s previous financial years and the decisions they’ll have to take to eliminate the sizeable debt hanging over the company.
Will GM Stick its Oar in?
Previous owners GM have a lot of intellectual property tied up in Saab. One of the conditions of the NEVS deal is that GM retained rights to the 9-5 model and Saab Automobile Parks.
GM has previous when it comes to selling Saab to the east (or not, as is the case). Spyker were in talks with eastern business Youngman and Pang Da over a rescue deal last year before GM intervened in December.
GM didn’t want its intellectual properties and technologies to end up in the hands of eastern competitors in what is proving to be an incredibly lucrative market for the American giants.
GM’s viewpoint at the time was perhaps understandable from a manufacturing perspective. Had the Youngman deal gone through then GM would have been in competition against its own technology from companies not requiring a license to use it in their cars.
GM’s standpoint and relationship with the NEVS deal is still a bit murky. If something happens that they don’t like, then NEVS is bound to know about it in the harshest possible legal terms.
Will it Mark the End of Saab Parts?
Saab’s spare parts unit is a tricky one. It’s a valuable service to existing Saab owners, providing specialist parts and maintenance to Saab owners that want trained technicians evaluating their cars.
Unfortunately, it wasn’t included in the sale to NEVS, and was instead used as collateral when the company requested a 2.2 billion-krona loan from the European Investment Bank.
Saab hasn’t come anywhere close to repaying that loan, with the likelihood that Saab’s spare parts division will end up in the hands of the Swedish government.
Unni Jerndal, a debt office spokeswoman is recently quoted as telling Bloomberg that “taking over the unit is still one of our scenarios." If that does happen, then the future of Saab Parts UK and many more services like it provided by the company will be clouded in long-term doubt.
Written by John Meadowcroft