Death In Trollhattan – Saab Bankruptcy Looming (again)

Scandinavian thrillers have been in vogue for the past 5 years or so, but this one’s becoming less of a thriller and more of a “why-dunnit?”. The conclusion is fairly well known to most objective observers; Saab is highly likely to be skewered and fairly soon. The only remaining questions are to do with any minor flips or twists along the way and the inevitable examination of why it happened.

My memory on the exact procedure from years ago is fuzzy, but hopefully I’m not putting anything out of context here.

Petition for Saab Bankruptcy

So what’s the latest?

Here’s the word from just-auto, which is a reliable source of news from my experience:

National Electric Vehicle Sweden says 250 production employees are at home following further struggles with short-term financing.

Staff only recently returned to the Saab-producing parent after summer holidays, but a petition filed with Swedish authorities from a supplier, today (12 August) has seen many without production work.

“The vacations ended this weekend, so when they came back we informed them [production staff] we still have things to do in the factory,” a NEVS spokesman told just-auto from Trollhattan in Western Sweden.

“So everyone comes back every Monday, but during the stop of production they stay at home and wait for new information.

“Those 250 people are being paid – they are at home with wages. The petition to the Court was today and they made a decision to have a negotiation on 8 September. It is the Court here in the area [of] Vanersborg.”

That’s a bankruptcy court they’re talking about.

So while NEVS continues to talk to two ‘prominent’ OEM’s about the company’s future – those two companies are widely believed to be Mahindra and Dongfeng – a supplier has had enough and petitioned the bankruptcy court to step in. The company that has filed this motion isn’t owed much (150,000SEK is not much at all in car company terms) but it doesn’t take much to get the ball rolling.

It should be noted that the filing was actually made by a debt-recovery company engaged by the supplier rather than the supplier itself. The CEO of the supplier company was surprised the debt recovery boys had taken this action but didn’t commit to withdrawing it. As we saw back in 2011, it only takes one to encourage a few more so even if the motion is withdrawn, others may follow.

The Likely Outcome

Back to NEVS/Saab:

The two companies [with which] we are in dialogue are fully aware of our situation. That it takes some time to complete a cooperation is a sign they are very serious.

I’ll bet they’re fully aware of the situation and I’m sure they’re quite serious. But I doubt they have the honourable intentions that NEVS is leading everyone to believe.

Trollhattan’s mayor, Paul Akerlund, remains ‘optimistic’ according to TTELA, but his statement sounds neutral-at-best, to me:

I am quite hopeful that there will be a solution in the pipeline that will be stable for the future.

And of course he’s optimistic. He might have been a former Saab guy and union guy in the past but in 2014, he’s the mayor. It’s his job to remain optimistic about his region.

Jonas Froberg from SvD has an informed and realistic view, I think:

A likely outcome is that the Dong Feng, or any other player, buy the rights to the [Phoenix] platform and that Kai Johan Jiang sells the factory to someone else – paying debts and accepting a dream shattered.

That’s where I think this is going, too.

No company is going to commit massive funds to Saab when it can let the inevitable happen and pick up the technology or property it wants for pennies on the dollar.

Why Has This Happened?

I’m far away from the action and like most of you, I’m left to read between the lines. From afar, however, I can say that any company looking to rejuvenate Saab needed two things: Plenty of money and a credible plan.

Victor Muller had one, but not the other. He had new models ready to go, an outstanding bunch of engineers that were already making progress on improving/replacing those models and a global sales pipeline that was hurting, but still alive. Things needed improvement, but that was known and it was being addressed. That’s as close to a credible plan as Saab has had in a long time. What he didn’t have was the money or the political support to get it.

NEVS – and this is only my opinion – had neither.

Converting to an all-electric fleet was always a massive gamble. Not only does it require massive resources, it needs the product to be an absolute groundbreaker in order to sell. A short history of Tesla will tell you that much.

NEVS had some good PowerPoint presentations in the beginning but time told us that the thoughts therein could not be turned into actions. The electric vehicle they promised was delayed to the point where they had to divert scarce resources into redeveloping a petrol version of the Saab 9-3 – a car they’d only ever be allowed to sell in tiny numbers because it didn’t meet regulations for selling in volume. The move to a petrol powered Saab 9-3 was the first sign that NEVS was in genuine trouble.

That’s the credible plan part.

We all know now that they don’t have the money, either. Kai Johan Jiang has made an honourable effort and continues to do so, but he couldn’t do it alone and he was let down by a Chinese partner that didn’t make good on its promise. I sincerely doubt NEVS’s long-term viability even if their Chinese partner had made good on their commitments, but they didn’t.

That’s my short theory as to why. I’ll leave it to people closer to the action to tell us the gory details in good time.

It Ain’t Over ’til It’s Over

There is a small, small chance that this could all come good. Either DongFeng or Mahindra might surprise everyone and come through with a deal that keeps a Saab presence in Trollhattan. And because I love the town and the factory, I sincerely hope that happens.

But the realist in me says we’re witnessing the final scene in a Scandinavian drama that we’ll all say would have been nice if it had a more un-Scandinavian outcome. A happy ending would be nice, for a change.

Roll credits.

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10 Comments

  1. I was very skeptical about NEVS from the beginning, but it’s still very sad to see. I wish the people well, and I’m confident that the technology will live on. Who knows where?

  2. I am growing very tired of this SAAB Saga. It almost reminds me of a once great athlete that tries to compete well past their prime, while also dealing with one scandal after another — it takes away from all the previous accomplishments and tarnishes the legacy.

    For me, SAAB stumbled and never recovered decades ago. We never had the correct group at the helm, starting with GM — it was about business for them and not about SAAB. I didn’t have much confidence in NEVS and even though I never completely supported VM and VA, the question and statement that they respectively raised in a video struck me like lighting: 1) VM: “Isn’t it sad that a Dutchman had to buy/save SAAB?” and 2) VA: “It is not our national pride, it is your national pride.”

    It is my hope that someone buys the factory and employs the local people of Trollhattan in a solid and stable business enterprise — they deserve no less!

  3. I agree with you Swade and most of your logical statements, still not understanding how an experienced businessman can have been so wrong on gambbling on EV models. I still do not believe they spent the money (hundreds of millions of Euros for sure) for a foolish gamble. I hope we will know more about what was at stake behind the curtains… It looks now that Saab’s fate will follow the “Rover scenario”.

  4. Waiting for NEVS to go under means they’re going to lose all of the good people at Saab. Again. If this pans out like I expect I don’t know if we’ll ever see a Saab-badged car with Saab-like qualities again. I can see it all going a bit MG shaped, and that would be truly shit. Anything we do see is a long, long way off, and I don’t think it’ll be on Phoenix, either. I do miss VM – if only, huh?

  5. Well, I actually think that EVs was their best shot at it. Going out in the world of investors today and asking them to put money into yet another glorious PowerPoint sketched future about the same fossil fueled things that the Wallenberg family, GM, and Muller failed at is a certain failure. Not even Muller with an intact company (somewhat creditable brand name, technical development up and running, dealership organization etc.) had loads of serious potential investors with really big pockets lining up. What was needed was a clean break from the past. But potential buyers are not stupid. For every month the value goes down even further. Key staff is long gone, exciting technologies scattered, brand name hardly on the radar outside Sweden. In-house technologies that 3-4 years ago was a possible basis for future models is now old. So much stuff other than a platform is needed to compete today. If someone is going to put billions into this over the next ten years, it’s because of things unrelated to the auto industry or even the Saab brand name (think family connections between wealthy conglomerates, political interventions).

    Maybe someone in India can be persuaded that the Saab name and the spirit of Trollhättan is worth those billions. Maybe someone can be persuaded that the Trollhättan factory is indeed a good investment as a manufacturing plant for the European market. But the odds or not high, and it will take much more than common business sense to create such a solution. I did somewhat believe in NEVS since I just assumed they had learned the lesson and already had potential investor(s) with big pockets lined up two years ago when they bought the company. But now it is obviously panic all over again.

    1. I mostly agree. An exception wrt the fossil fuel future might be something like what Koenigsegg is doing with the free valve system (I wish they had been able to buy SAAB). Unless there has been something remarkable happening at NEVS that we don’t know about, time has marched on and a platform that might have been ahead of the curve in 2011, may well be too far behind the curve now. It is all quite sad for Trollhattan.

      Here’s a pipe dream for you all:

      Wouldn’t it be cool if a small group of engineers from SAAB (the aerospace company) developed a new truly innovative car? An actual new SAAB! Kind of says a lot about the business and engineering climate that this could happen in 1945 and not in 2015. There is as much of a revolution in car technology now as then, but the players are so established and the regulations so great, it takes a behemoth of specialists with billions of dollars backing them to do anything the general public might be able to afford. Sad because the greatest innovation often comes from smaller startup groups with a few really bright lights. Again, look at Koenigsegg!

      With that in mind, I kind of hope SAAB says “no, you can’t have the name” to whoever buys up the dregs of this and wants to stick a SAAB badge on a Chinese hack job of the remains a la MG. Hopefully Volvo will fare better, but who knows? What a sad situation for the Swedish automotive industry.

      1. After typing all that – I got thinking – wouldn’t it be cool if Koenigsegg were to buy up the old SAAB factory for peanuts from the bankruptcy and do something with it? Maybe they could make a more “pedestrian” Koenigsegg there? Like maybe something about 9-5 wagon size with lots of power (free valves?) and carbon fibre wheels – ha! Now that would be something I’d be interested in buying!

      2. CVK has always been my choice to take over SAAB. You made some excellent points in your post.

        Every time I look at one of his videos, I cannot help but think: what a perfect marriage/scenario. SAAB was once synonymous with technology, safety and innovation, yet now, nobody embodies that more than CVK!

        1. Except even he realized you couldn’t make the numbers work for the prices people were willing to pay for a Saab.

          I thought their best bet was to take a leaf out of the Lotus model: use the cars they build as examples of the consulting work they could do for other companies. I suspected there would be money to be made doing that, particularly in helping the Chinese improve their products.

  6. Swade, it looks like Saab’s lucky feline number 9 keeps us guessing and you might get your happy ending after all. Most of you will know this because you also read Saabs United, but in case you don’t:
    1. The bankruptcy petition has been withdrawn.
    2. Negotiations with Mahindra and Dongfeng are continuing.