Thursday, April 7, 2011

Another SAAB story : No Money, No Name.

^ Haters Gonna Hate ^

Earlier this week we learned that Saab can not pay its supplier bills until its Russian sugar daddy, Vladimir Antonov, gets Swedish government approval to buy into the company that owns it. Now, suppliers are speaking out, telling Automotive News [sub] that the brand and its owner, Spyker Cars, owes “tens of millions” of Swedish crowns (10m crowns equals about $1.6m). A representative of the Swedish suppliers association explains

There is a perception in the media that there are discussions on extended credit times and such. But it is not about that, it is about the fact that Saab must pay its bills. If they cannot sort out their financial situation, things look very bleak.

With a “desperate” hunt for investment underway, Saab’s only hope appears to be Antonov, who says he has $71.5m to invest, an amount that should cover the $4.7m+ supplier debts. Meanwhile, work at Trolhattan has been stopped for at least the rest of the week. But even if Antonov gets Swedish government approval to invest, another, equally dire problem appears to be materializing: a dispute over the use of the name “Saab.”

The Saab brand is currently owned by Spyker Cars, a dutch-registered company. But Spyker Cars recently sold its Spyker sportscar business to an Antonov-owned firm an announced its intention to rename itself. The assumption has been that Spyker Cars would rename itself with some variation of the Saab name, but according to, that assumption faces a serious obstacle.

Spyker has since indicated it wants to change its name to something that more reflects its new focus, but Swedish defence contractor Saab AB remained cool to the idea of Spyker using ‘Saab’ in its new name.

Instead, Spyker plans to vote to change its name to Swedish Automobile at its upcoming annual meeting, scheduled for May 19th.

But, as points out,

it is unknown if they are fully free to use the name SAAB, or if they have to always ask Saab technology AB if they want to use it differently.

With no money and no name, Saab is finished. If, on the other hand, Saab Technology AB has no claim to the Saab name, other options are opened. A Wall Street Journal commentary by Alessandro Pasetti suggests another possible outcome: a Chrysler-style takeover by the bottom feeders at Fiat. Pasetti sets up the challenge by explaining the hopelesness of Saab’s situation

Under a very bullish scenario, we estimate that even at steady normalized long-term 10% growth of sales—a rate never consistently achieved by any auto maker on the planet—combined with a break-even earnings before interest, taxes, depreciation and amortization in 2011 and mid-teens operating margin expansion afterwards, the group will not be able to service its debt obligations by 2016. That’s precisely when the majority of its debt comes due, according to Saab’s financials.

More realistically, any viable business plan, in the light of the cyclical nature of the auto business, should hinge on a cash injection.

The upshot? Even if the name issue works out and Antonov invests, Saab will need more money. The solution?

As remote an option as it may seem, Fiat could strike a deal, structured along the lines of its Chrysler involvement. It could renegotiate the company’s European Investment Bank loan, putting in relatively little money but providing plenty of know-how for a 20% to 30% stake and leadership in the business.

The Italian auto maker is widely expected to increase its stake in Chrysler to 30% and take a majority stake in Detroit’s third largest auto maker in the next twelve months pre-IPO. Admittedly, Saab would be no game changer for Fiat, but it could become a short-term loss leader to help promote both Chrysler and Alfa Romeo, which is attempting a U.S. comeback. Saab offers a decent distribution network in the U.S., with sales of around €160 million (about 19% of total sales), so cross-levering Chrysler/Alfa and Saab’s distribution networks would make sense.

Meanwhile, trimming European exposure (78% of sales at €639 million), would help cut the highly uncompetitive cost base at the Swedish car maker. Its fixed and variable costs structure put it at a disadvantage not only to European mass auto makers, but also premium manufacturers like Daimler AG’s Mercedes and BMW in Germany.

The model pipeline is weak, but Saab brings fleet customers, which constitute a key part of its customer base. Logistically, moreover, Saab is attractive and, perhaps equally importantly, it offers a back door to China, where Fiat has historically struggled to make a breakthrough. On March 25, Saab announced a partnership deal with China Automobile Trading Co. Ltd. Russia is also on Saab’s radar.

Interesting… but not exactly comforting. Fiat’s got plenty of challenges without taking on another charity case. Fiat certainly seems like a likely candidate to “rescue” Saab, based on its experience getting a bailed-out Chrysler for no money down, but whether such a scenario would mean an end to Saab’s problems is hardly a sure thing.

No comments:

Post a Comment