eirmoney | Saab Finds A Buyer, Finally!

Saab Finds A Buyer, Finally!

Posted by Anil Bagra | 27 January 2010

General Motors and Spyker Cars NV on 26 January confirmed that both have reached a binding agreement on the purchase of Saab Automobile AB.

The deal would be a coup for Spyker and sustenance for Saab which has almost 3500 workers in Sweden. The small Dutch auto group, which makes high end sports cars, completed the negotiations to give a fresh lease of life to an otherwise defunct brand. Spyker has sealed the bid with a US$400 million offer including US$74 million cash and stocks for the rest of the amount.

Spyker’s history traces back to early 1900s when it started making motorcar and coaches. The company resurrected in 2000 making niche sports cars after being liquidated in 1920s.

The Swedish automotive brand wasn’t fitting in the survival strategy of government bailed out General Motors which plans to focus on four brands including Chevrolet, Cadillac, GMC and Buick. The sale rakes in US$400 million for the North American OEM as the company was planning to close the operations for Saab otherwise. General Motors has similar plans for other loss making brands such as Pontiac, Hummer and Saturn.

Skeptics are calling Spyker’s move an audacious attempt to acquire Saab and they have good reasons to believe so. Although Saab remains a strong brand in certain geographies, it is hardly profitable with eight long years of losing money behind it. Furthermore, the acquisition marks a marriage of Spyker, making 43 handmade cars with Saab that rolled off 93,000 cars in 2008. Spyker employs around 100 workers while Saab has 3,400 workers. What’s strikingly audacious about the deal is that Spyker, being a marginal player in the auto industry, is dependent on external funding for the acquisition. Spyker, whose market value is less than US$85 million, will have to take on a lot of debt to pull off the acquisition and subsequent integration of Saab.

However, Swedish Government is at present appraising and reviewing the transaction and the concerned requests for guarantees of a Saab automobile credit that has been requested from the European Investment Bank. It is further added that Saab seeks to borrow €400 million. Presuming nippy action, the transaction is likely to be completed by mid February.

It is still unclear how Spyker will benefit from the Saab buyout given that the sales are dwindling fast for the Swedish brand. General Motors has already sold some of the Saab tooling and machinery to Chinese automaker BAIC. All Spyker gains from the transaction is the technology behind 9-5 sedan, Saab’s first new product introduction in last seven years. Saab’s existing distribution network will be of use for Spyker only if it plans to continue the Swedish brand in its current form.