Saab Sinking?

Saab’s money troubles continue as production is halted until August, and again it’s courting of Chinese carmakers seems to have paid off.

Saab has had an on-again, off-again middle of the year with production at its Trolhattan factory, and indeed its future continually being halted because of a lack of funds. The Swedish Automobile (formally Spyker)-owned firm earlier announced no production would take place at its Trollhattan factory between June 20 and July 3 and it expected to see production return to normal levels from July 4 onwards. That date came and went while the company tried to secure an injection of cash (production is now expected to begin again by August 9).

It’s now done that by selling off and leasing back its Trolhattan factory site to a consortium of Swedish property investors. This consortium has purchased 50.1 per cent of shares in Saab Property AB for a total consideration of SEK 255 million, reflecting an adjustment to the transaction price for a one-year lease free period. Of the SEK 255 million consideration, SEK 205 million will be paid in cash on closing and the remaining SEK 50 million in the form of a sellable bond convertible into shares of the purchasing company.

With this transaction SWAN and Saab Automobile will have raised about EUR 61 million in additional funding commitments over the past weeks. Saab Automobile continues its discussions with its suppliers on materials supply and commercial terms and is close to reaching agreements.

Saab is proposing it pays suppliers 10 per cent of debts owed now and will pay the rest in full by the end of September. The chairman of the Swedish parts supplier organisation, FKG’s Christer Palm, said he believed suppliers would accept the deal.

To continue producing cars Saab needs a lot more than just the drop in the ocean provided by the real estate consortium investing in its property portfolio. And, according to Saab its courting of Chinese car makers has paid off with the announcement of an agreement between Pang Da Automobile Trade Co., Ltd. (Pang Da) and Zhejiang Youngman Lotus Automobile Co., Ltd. (Youngman), thereby converting the non-binding memorandum of understanding relating to the equity investment of Pang Da and Youngman announced on 13 June 2011 into binding agreements subject to regulatory and other third party approvals.

Moreover, Saab Automobile also announced a conditional agreement with Zhejiang Youngman Passenger Car Group Co., Ltd. (Youngman Passenger Car) on the formation of a Sweden-based joint venture company for the development of three new product Saab models (NPJV).

The non-binding MOU announced on 13 June 2011 between SWAN, Saab Automobile, Pang Da and Youngman in terms of which Pang Da and Youngman will make an equity investment in the total aggregate amount of EUR 245 million in SWAN have now been incorporated in binding agreements, while the parties continue working towards execution of binding agreements for a strategic alliance consisting of a tripartite distribution joint venture and a tripartite manufacturing joint venture for Saab-branded and child brand vehicles in China. The agreements are subject to approval from relevant authorities. The agreements allow for the return of Mr. Vladimir Antonov as a shareholder/financier of SWAN and Saab Automobile, which the parties expect as soon as the parties at interest have cleared him.

The NPJV will be 50 per cent owned by Saab Automobile and 50 per cent by Youngman Passenger Car, and forms the foundation for an expansion of the Saab product portfolio with three models which until now did not form part of Saab Automobile’s current and future product portfolio. As such the NPJV will focus on developing three completely new Saab vehicles: the Saab '9-1', Saab '9-6' and Saab '9-7'.

Within the development process of these three new vehicle lines, Saab Automobile will be responsible for controlling and managing the design, the development and testing process to the start of production and providing other necessary technical and quality control support. For this, Saab Automobile will source existing capabilities and expertise from its state-of-the-art technical development department in Trollhättan. Youngman Passenger Car will be responsible for providing the necessary financial investments in the joint venture.