Saab Hits A Financial Wall, Stops Production

For those who are wondering, it’s been quiet here because I was away for work, and bracketing that trip is the demise of my computer (which will hopefully be fixed soon). I’m actually enjoying the hiatus.

I had to get back online for this, however. My thanks to ctm for posting this press release from NEVS in comments.

A few cents worth of thoughts at the bottom…..

Status update from Nevs

National Electric Vehicle Sweden (Nevs) is preparing an extensive investment to develop a new platform on the Phoenix architecture, which will be the base for future car models. This development will be done in cooperation with other global OEMs. These collaborations involve sharing cost of development and reduced costs of components through significantly higher volumes.

Nevs has recently signed a frame agreement with a major international automotive OEM regarding the cooperation in product development of the future platform. A negotiation with another major automotive OEM is also taking place regarding part ownership. The objective is to add significant resources to the development of Saab as a global premium car brand name. The partnerships will contribute to secure Nevs with the right financial and technical support to develop new products and distribution of cars on a global basis.

Even if the long term perspective of Nevs remains very exciting and promising it is a short term cash problem.

The root cause of the current situation is that Nevs’ shareholder, Qingbo Investment Co. Ltd, has not fulfilled their contractual obligation to finance the operations.

As a consequence Nevs’ main owner National Modern energy Holdings Ltd. (NME) has since the beginning of the year decided to enter into the position as the sole financier of the company. Recently NME had to conclude that despite enormous efforts it has not been possible to capitalize its assets in China as fast as needed to support Nevs. This has resulted in a time lag between the financing from China and the need of cash to pay suppliers. As of today NME has transferred over 3 Billion SEK to Nevs and made additionally large investments in China, i.e. in the new battery factory and the technology development center.

It is important to state that the assets are significantly higher than the debt but Nevs is planning to use short term credits to cover all outstanding and near term obligations until the long term financing is secured. This is bridge solution is planned to be realized within a near future.

To further support the situation financially and give Nevs time to align the strategy with the new OEM partners Nevs will also take short term measures to reduce cost. Among the measures to be taken are a short term stop of production, which today is six cars per day, and a reduction of hired consultants.

End of press release.


A couple of points……

As many regular readers would know, I was skeptical about NEVS’s electric vehicle plans right from the beginning. I was reassured, however, by words from some former colleagues at Saab saying that Kai Johan Jiang’s companies were VERY well resourced.

I guess it just goes to show exactly how tough it can be to run a car company, especially one that you hope will be a mass producer. The costs are Massive-with-a-capital-M.

It’s a chicken-or-egg situation. People aren’t going to buy the cars if they don’t feel they’re getting value, or ongoing support. To get the costs down and build in some value, you’ve got to create economies of scale. To reach the volumes that create economies of scale, someone has to invest a metric buttload of money in order to both build and market the cars for sale on a large scale. But people aren’t going to buy the cars if……….

Saab was behind the 8-ball on that right from the beginning. Their decision to build the old 9-3 put a very tight cap on the potential size of their market because it didn’t meet safety standards for general approval in Europe.

The 9-3 decision was one that had some real short-term appeal; it was a smaller investment and meant a shorter time to market. It needed to be a success, though. Sadly, it hasn’t been a success at all. Yes, fans can judge the re-commencement of manufacturing as an achievement in itself and that’s fine and dandy when you’re future’s still full of potential. Eventually, though, you’ve got to sell some cars and make some money. Whether by lack of marketing in Sweden or market fatigue with the old 9-3, they simply haven’t sold.

Jiang was hoping Quingdao would fulfil their commitments to the investment they made in the company. I guess not. Welcome to the Chinese way, which is not exactly a new phenomenon for Saab fans.

I took a few suns worth of heat for not being an unequivocal cheerleader for a new Saab. The reason I took the cautious stance I did is because I didn’t want to encourage friends to spend their hard-earned on a product that had potential to be unsupported. Once was enough.

It’s unpalatable, but you simply have to wait for proof of sustainability in a situation like this. We all wish Saab well, but pouring money into the company is something investors have to do before they ask customers to do the same.

I hope the lads and ladies at NEVS can sort this stuff out. Everyone wants to see the Saab name continue to be associated with quality cars that have a real connection with Sweden.

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  1. Agreed. I’m actually amazed they have lasted this long. I’ll be curious to see what rabbit they can pull out of the hat, at least they don’t have to rely on GM being twitchy this time around.

  2. I do not see how NEVS/SAAB or any other company will be able to overcome all of the past shortcomings and mismanagement of our beloved brand.

    It really hurts to see a car brand that had such promise on the technical front, continue to “bleed”.

    I am now concerned SAAB will lose its rightful place in history if we continue to operate on life support.

  3. I’ve got to say that, like you, I’m not wholly surprised by this turn of events. That said, the biggest takeaway I get is from their amature hour handling of the communications.

    Look, things like this happen and it’s no shock or surprise to the finance people. Heck, they EXPECT this sort of thing to happen. The challenge is the marketplace. Saab’s been declared dead twice in the last 5 years. As news like this hits potential future customers, their takeaway is “Look. Saab’s gone belly up. Again.” That’s not exactly the message you want consumers to be left with, even if that’s not really what’s going on.

    A smarter set of operators would have seen the cash crunch coming and “scheduled” a production hiatus. Given the limited production rate they were already at and the “We’re just making sure the production line works.” nature of what they’ve been doing, a scheduled hiatus wouldn’t have caused a ripple in the mainstream press, regardless of its cause.

    Now they have fallout to contend with and I’m not keen to believe they’ve the savvy to deal with it.

  4. I feel that we are hoping against hope…….what to I mean?

    hope against hope…………………to hope very strongly that something will happen, although you know it is not likely:
    They’re just hoping against hope that Saab still alive.

    Who wants a 5 year old 93 with an old GM engine? Who wants an electric car we have never seen?

    Looks like nobody does.

    Lets just quit hoping, and enjoy the great cars we have. The old generation 95 is a great car with very available parts and lots of service data available and a decent network of independent technicians. Same with the 93 and the 9000 and older classics like the 900.

    In Saabnet, Saabcentral, Saabscene, Saabworld, and other sites there is great information and wonderful sharing of how to fix Saabs…..

    eEuroparts, genuineSaab and other great parts suppliers provide a fast reliable supply chain.

    Saab is a collectible brand with very modern product in the last production models.

    I was up on Carmel California this past weekend. I was filling my classic 300HP 95 Aero with petrol. Across the island was a gent with a 93 sport wagon. He told me this was his 9th Saab, and he had a 95 as well and his son had a 95 wagon. He told me he loved Saabs but did not know what he would buy next……..I told him I new the answer. I said “we already have great full featured cars, I will just keep fixing my Saab forever”. He did not look like a gearhead, but he did say “I won’t give my Saabs up for a LONG time”.

    I drove my 199,785 mile 2001 Aero about 1000 miles last weekend and it was flawless. great A/C even in 100 degree weather at times. I had the vented sears blowing cool air, Bob Dylan, Joe Cocker, and Janis on the CD, and I just cruised.

    Wonderful on awesome twisty roads on the central coast and just set the cruise control at 75 on the freeways…….and still get 28 mpg for the trip. I don’t want no Lexus, or MB , or BMW.

    Give me my classic 95 Aero. It stacks up against them all in performance and no interest payments, insurance is reasonable, and cost of operation is cheap. That is all I need.

  5. As has been suggested, perhaps it’s finally time for Mahindra to take a major interest in Saab? I think there would be benefits all round.

  6. Well, as you may recall, I was very much in agreement with your skepticism about NEVS. I was also not positive on the 9-3 stop-gap measure. Unfortunate to end/pause this way.

    The Chinese. What can you say? They’ve pulled many the rug out from under risky foreign projects before. Witness Malcolm Bricklin’s divorce from Chery, and then Chery’s subsequent rejection of Chrysler, too.

    I don’t think it was high on the list of reasons for GM to reject a Chinese partner for Saab, but it certainly was on the list of reasons not to work with a Chinese consortium partner.

  7. What happened to ‘keeping things simple and stupid’?
    As long as the producer of Saab cars (whomever that might be) has strings attached to Swedish or Chinese politics it probably can never work.

    Agreeing to sell a big chunk of NEVS to Quingdao for what I considered pocket change was not a good sign to me.

    1. In what way was it pocket change? NEVS bought the Saab Automobile AB bankruptcy estates for SEK 1.7 Billion. Qingdaos investment was to be SEK 2 Billion for 22% of NEVS. Saab is worth what the market think it is worth – for the last five years, not much.

      Every major company in every country has some strings attached to politicians. Companies are dependent on political decisions regarding taxes, infrastructure, subsidizes, international trade… Governments are dependent on healthy companies for tax incomes, employments of citizens, trades, pride…

      1. No offence but If you want to run a global car production company the investments got to be billions in EUR not SEK, or the day-to-day operation is financed purely on debt. High interest at worse like Spyker.
        Now Qingdaos investment couldn’t even come up with some 330 million USD.

        1. That may or may not be true, but you can hardly blame a seller for not selling a something for much much more than the market think it’s worth? Because if Saab was worth that much (and is has to be if anyone is to invest that kind of money you mention), then why the turmoil regarding ownership the last 6 years? Has everyone failed to see what a rock-solid investment this manufacturer is?

          Obviously, they didn’t sell the share for SEK 2 Billion and then only expected to be paid a small amount.

          1. If they can’t sell their idea of producing cars for a profit to any investor willing risk the money that’s required to lift this plain off the ground then obviously NEVS is too small to handle Saab.
            It’s been said time and time again that the development of a new model alone cost approximately 1 billion dollars.
            Better have a few extra billions in reserve for other things also…

  8. In the beginning (Summer 2012) I was somewhat confused by NEVS and their weird statements to media about Saab. The last year I have been more satisfied in how they have presented themselves. But this press release feels a little bit strange…

    I just going by memory here, but wasn’t a new platform based on Phoenix the main pillar from the beginning? The first model designed to be an EV instead of being a rebuilt 9-3? Or do they by “new platform” mean a model in another segment based on Phoenix? If not, what have they been doing for close to two years if not developing a new car on Phoenix? Or is the old plan of a “standard” mid-sized passenger EV scrapped and replaced by a new business strategy that targets a whole new type of vehicles (luxury sports cars a la Tesla, small city cars for Asia, etc…)?

    The term OEM is kind of confusing, but I guess they mean companies that produces parts for car manufacturers. So they will develop the platform with one OEM, and at the same time they are looking to sell a stake in NEVS to another OEM? Sounds a little complicated to me. What OEMs have the long-term financial means to invest in a EV startup that plans to go global? Also, OEMs do not have access to dealer networks as another car manufacturer would have.

    And what is it with Saab and China… Geely bought Volvo, and things seems to going along pretty well. Major investments are made in Sweden, new models are being developed, and China is about to become Volvo’s biggest market. Is it just that Saab and their business plan is not viable?

    About the current 9-3 that NEVS is selling… I don’t think it was ever to be a part of a plan to earn money – it was to get the supplier network ready and the factory in order. Remember, they could only sell a thousand cars due to EU regulations. I don’t know how many cars that have been sold and/or are being used by NEVS as fleet and test vehicles, but the numbers are way to small to be judged as either a success or a failure. And then, of course, everybody knew that there would be a face-lifted version this year. Selling a 10+ year old car with a 6+ year old facelift would always be very hard.

    I would guess that a month form now NEVS either has some new partners and owners, or the plant is closed down and for sale. I still think it would be better if they ended as a specialized global sub-brand within a larger manufacturer (Fiat, Tata, Suzuki – maybe even Geely).

  9. For any potential buyer its all about confidence in the brand going forward, if nevs cannot garner confidence in a reinvigorated SAAB then they will not have a business, investors from the PRC are some of the most hard nosed business people that I have met, also notorious here in Western Australia for reneging on signed contracts. The road was always going to be rocky…

  10. Do I love my current (2008) model 9-3? Absolutely. Would I spend 50 grand (or whatever they would cost if they ended up here) for a new one that looks almost the same as my 2008 model? Not while my butt points to the ground. It would be financial suicide.

  11. The ‘asian way’ is the underlying factor that seems to have been overlooked in all of this.
    When they change their mind, they change their mind, and it is irreversible. Seems like the political environ in Quindao has changed and the fallout is financial support of Saab on the other side of the globe. Surely they did not expect the financial security to last….the boffins at Volvo must be getting the jitters too seeing this unfold.

      1. No. The Asian Way is something else entirely. It is their way or the highway. It them having everything exactly as they want it to be. Their way.

  12. Suppliers’ Note: No, No, not again…..

    Are we to assume the Bankruptcy administrators will now be repaying all their fees.

  13. Who on earth will want to dump any more money down this particular hole in the ground? The Phoenix architecture, as a development leg up for an ambitious minnow, may have had some value at one time but not any more. The name SAAB may return, like MG, adorning some piece of junk but former SAAB customers have moved on. RIP

  14. Wait and see, perhaps they will be stronger after getting a big car maker to work with.
    I wonder what other company it is?

  15. Sadly…it’s “deja vu all over again”. Just too bad for the workers, who are being pulled “six ways to Sunday” over this on again, off again operation.

    1. Just saw this. Seems like it might be a very GOOD thing SAAB & GM are no longer “an item”.

      “Cadillac Escalade drivers shouldn’t have passengers up front”

      “Cadillac is also being added to the list of recalls with 1,402 Cadillac Escalades and Escalade ESVs from the 2015 model year lineup due to improperly manufactured passenger airbag assemblies. The weld that links the airbag module to the chute, which is then linked to the instrument panel, is said to have not been sufficiently heated, potentially causing a partial deployment upon impact.

      GM cancelled the sales of the Escalades in question and contacted 244 customers with the vehicles on the road, warning them that no occupants should sit in the passenger seat until the vehicle is repaired.”

      Seems like every day more and more crap manufacturing is being uncovered at GM.

      Way to go kids.

  16. Well, I expect a lot to happen over the next few weeks. Nevs is supposed to present the first real development result soon, Qingbo needs to wise up or get out and this time the talk about major automotive OEM is quite different from previous recent history.

    If you follow news at it’s quite striking that nobody in the loop is worried about Nevs future.

    The writing on the wall says ownership changes, and It may well be that Qingbo will end up at the short end of the stick if they don’t do their part. I think there is more than meets the eye here.

    1. I feel the same way.
      If KJJ company NME kept on providing funds, he seems very sure that NEVS can pull this off.
      KJJ obviussly have deep pockets, even if it is not enough in the long run.
      But, NEVS have manage to keep going, debt free for this long. That is a good tjing!
      Now, what happens next is a very important thing. If KJJ can not bring in more funds or loans, investors might just drop this.

      But my feeling is more optimistic than it was the last 6 month with Spyker.

  17. Newest post on SU today says that one of the two major new investors that NEVS is in negotiations with may be Mahindra. If true, it could mean that Mahindra is now looking for a way back in after being rebuffed by the bankruptcy administrators before last time around. It does seem that NEVS is about to give the Chinese investors an ultimatum.

    1. Could be, and rightfully so. If an investor do not provide the funds agreed up on, they should be pushed out.
      However, the company in the needs of the funds is in a tight spot if the other owners can not provide the funds instead.

      This time around, it seems, KJJ have done just that and NEVS might be able to find others thanks to NME. Quingdo should be muscled out of this, and the funds invested so far should be kept by nevs (or NME) as a compensation for the stuff NME had to put up for sale to be able to keep funding NEVS.

  18. The thing about Mahindra or any other potential future owner – and this is even if Mahindra’s a potential suitor, which is a mighty big “if” – is that right now NEVS is pretty much on its knees. Everything’s calm on the outside, but the basics of the situation are:

    • They have a half-finished platform that they can’t bring to market.
    • KJJ is funding the whole thing himself because a major partner has let them down

    That means NEVS is at the mercy of a potential buyer’s good graces. There’s no white knight scenario here where someone loves Saab as much as the enthusiasts do. The closest Saab got to that scenario was with Muller (and even he didn’t do anything out of love, but at least he appreciated brand history).

    No-one’s going to come in and spend a penny more than they think they need to. Saab offers a good factory and the ability to tap into some know-how. But we now know that despite being a few years down the track, they don’t yet offer viable product for the future that’s even close to being finished.

    I hope someone steps in and saves the day here, but if that happens, it’ll be on the seller’s terms because KJJ has little choice.

    1. I was slouching on the porch yesterday at sunset a decided to head over to Saabsunited to check out on the latest bad news. The comments are mostly about this white knight scenario where someone will just materialize and write a blank check to this car company in Trollhättan so they can relax and continue working on the next big thing. Sad…

      On a sidenote, I wonder what happened to the idea of “doing a Valmet” and use part of the plant for building specialized models for som high-margin manufacturer. Next to salaries, just having the plant shipshape for production will cost them a huge amount of money every month.

      I also wonder if the test fleet of 9-3 EVs that were going to be built and shipped to Quingdao during the 2nd quarter were finalized.

      1. I have the feeling that the test fleet is an issue, but that the problem may be elsewhere than Nevs. The reason for my thinking is that the root cause of the situation traces back to before the cars were supposed to be shipped. I expect to hear the real story within months.

        I’m not so sure that Mahindra is the real centerpiece here. There is one even bigger manufacturer that was blocked by GM in the original Saab sale 2010, and now has presence in Trollhättan.

    2. Agreed, except I doubt any buyer is about to resume NEVS’ business in Sweden.

      Prediction time: NEVS will not manufacture another Saab, ever. If KJJ is able to strike a deal with another manufacturer, the sales item will be the Phoenix, or more to the point the IP behind it, plus possibly the assembly line. If anybody (one or more buyers) is interested in those, and if KJJ does not want to ship the whole shebang to China himself, those are the options I predict can materialize as of now.

      I don’t think another manufacturer will take over the Trollhättan plant and start producing Saabs there. In other words, Saab as a passenger vehicle brand is about to enter history.

      All IMHO, of course. A big fat IMHO.

  19. I just read some articles in the Swedish auto magazines about this latest Saab business. I noticed that they refer to these OEMs in the press release as “auto manufacturers”. Even in an interview with a spokesperson for NEVS, the exact wording regarding the companies that NEVS have been negotiationg with for a while is “fordonstillverkare” (as in auto/car manufacturers) – not parts suppliers or similar. I guess that either means a company with a brand on the market, or a company like Valmet Automotive or Magna Steyr that has contract manufacturing of cars.

  20. It would definitely be a manufacturer, I think. Tim seems pretty sure there’s someone interested. I don’t see it being a straightforward affair but I hope his info is correct.

  21. Since the subject here has somewhat been on the Chinese and their (in)ability to pony up the dough… Just saw in the news this morning that Youngman has been sued by law firm Baker & McKenzie and by KPMG for unpaid bills at over SEK 5 Million related to services done when Youngman tried to by Saab Automobile in 2012. Youngman’s business practices seems to be really weird.

  22. Possible Saab sale, part-sale or investment scenarios facing NEVS:
    Option 1: successful, solid everyman manufacturer in search of a credible upmarket brand
    Option 2: BMW, sniffing around Saab for years, plans another Jaguar/Land Rover/MINI coup
    Option 3: another flaky investor or part-owner whose hands are hopelessly tied politically

  23. NEVS let a hundred consultants go last week, all working in tech development. Over the course of summer NEVS will further refuce their workforce with 53 blue collar employees and 19 white collars, who all have been employed on a temporary contract which will not be renewed. Mikael Ostlund says that it is a financial decision and that they were all competent people. TTela and SU both report this.

  24. What if this interested Asian manufacturer turns out to be Qoros? Qoros for ICE models, and Saab for EV models. Or the same models sold as Qoros in Asia and as Saab in Europe. But I guess Qoros don’t want to complicate things further at the moment…

  25. A few days ago Nevs sent out the press release about their dire financial situation, and we know about layoffs, about broken relations with suppliers, and about stopping production for 4 weeks (which in reality will probably be about 8-10 weeks due to the upcoming summer vacations). Today, they sent out a press release of a new Saab 9-3 Aero Hirsch Edition that will be presented in Örebro May 29 and is available as an upgrade for customers buying a new 9-3.


    1. Yeah, I just read that one. I had to smile. It’s one of those cases where if you don’t laugh, you’ll cry.

      It’s a little strange, but I guess you could say there are zero negative side-effects from an announcement like this. That’s mainly because no-one’s listening except for the die-hards and they’ll be happy about it.

      It’ll be a cracker of a car to drive, I’m sure.

      1. Yeah, you are probably right. It is often easy to forget that the Saab universe is not the most important thing in the world for most people – not even for most of the die hard auto nuts.