“The rise in forecast values for the Saab 9-3 over the last ten months has been driven by an increased confidence in the brand; allied to an improved product content creating a better future used car,”
We were all pretty pleased to see that quote in a report in the motoring press today, commenting about the fact that Saab’s residuals have improved by around £1,000 in the British market place. (The report is based on a Saab GB press release, which you can view here for the full facts).
The improvement is said to be based on several factors. The first is some renewed interest and increased confidence in the Saab brand since it became an independent brand under the ownership of Spyker Cars.
More specifically, there is also the desirability of the new Saab 9-3 TTiD range, which offers a full-sized, powerful Saloon or SportWagon with the benefits of emissions under 120g/km. Low emissions means big taxation benefits for customers and Saab’s corporate customers are taking notice.
How much notice? Saab’s sales in Great Britain were up 73.1% in the first quarter of this year and Saab GB have had to increase the size of their corporate sales team to deal with the increased demand.
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A few days ago, in a post called Relief and Determination, I wrote about my belief in the future of Saab Automobile, based on the fact that there was just too much good stuff going on at this company, and too many people interested in it, for it to shut down.
You can call the type of innovation and success reflected in this story “Exhibit A”. Saab are making great products for markets around the world. I really believe that the Saab 9-4x is going to have a similar effect on Saab dealers in the US has what the sub-120g 9-3 range has had for British dealers.
Bottom line: there’s a lot of incredible stuff happening at Saab. We just need to tell people about it more and show them the product. It’s all about the product.
Following are a number of questions and answers that I know are on people’s minds with regards to the recent deal Saab struck with Hawtai Motor Group, from China.
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Q: What does this deal mean for the financial future of Saab Automobile?
This agreement with Hawtai, along with the convertible loan agreement with Gemini, means that Saab has effectively satisfied it’s short-medium term funding needs. This is subject to certain conditions, of course, but we believe these conditions should be met OK. A big part of our financial future involves the building and selling of Saab cars and we’re working hard with our suppliers in order to begin production as soon as possible. There will be a limited amount of production tomorrow (Thursday 5th May) and we hope to build on that progressively though the next week.
Q: Will this deal change the ownership structure of Saab and Spyker?
Saab is owned by Spyker and that will not change. What will change is the ownership structure of the parent company, Spyker Cars NV. Hawtai Motor Group will become a large minority shareholder in Spyker Cars NV, signing up for a 29.9% stake in the company. These will be new shares, which is why it’s fresh funding into the company. If Hawtai’s stake ends up being more than 29.9% based on the agreed price and capital contribution, they will sell the excess to an independent third party (or parties) in order to get under the 29.9% cap.
Q: The agreement is subject to consent from certain Chinese governmental agencies, the European Investment Bank, the Swedish National Debt Office and General Motors. So how ‘done’ is this deal really?
A: The agreement is indeed subject to a number of regulatory approvals, but we don’t foresee any obstacles to it being approved, and we expect the deal to be completed in a timely manner.
Q: Why did Saab choose Hawtai as a partner? There were reports that you were also talking to other Chinese car manufacturers.
A: Spyker and Saab have held exploratory talks with several prospective partners in recent times. Each potential partner had its merits, of course. In the end, Hawtai was seen as the best fit and we’re convinced that our mutual interests are served best through this agreement.
Q: What’s the brief on Hawtai? Who are they and how big are they?
A: Hawtai is a privately owned, premium Chinese car manufacturer. They have 4600 employees at the moment, including 120 foreign workers giving expert advice on their development. There are many similarities between Hawtai and Saab, with both companies being of a similar size and with a growing sales volume. Hawtai have invested significantly in the expansion of their production capacity and now have the facilities to build 350,000 cars, 300,000 diesel engines and 450,000 transmissions.
Q: What does this agreement mean for Saab’s plans to produce cars in China?
A: The agreement that’s been signed between Spyker and Hawtai includes both production and distribution of Saab branded vehicles in China. Saabs for the Chinese market will be mostly produced in China, which is an essential and cost-effective solution to gaining a better footing into the world’s biggest car market. More details on which models will be produced, imported and exported with regards to China will be forthcoming at a later date.
Q: There is a technology sharing agreement as part of this deal. What does that mean?
A: Both Saab and Hawtai have technologies and expertise in fields that could be of interest to one another. We’re confident that both parties will benefit from this partnership as time progresses. However, at this point we can’t provide any more specific detail as to what would be shared, nor what model vehicles any technologies might apply to.
Q: Can you say any more about the joint ventures of manufacturing and distribution that were mentioned in the press surrounding this deal?
A: The proposed set-up is currently being reviewed by our financial and legal team, so we have an agreement in principal, you could say, but we expect the details to be signed off in due course. It includes a joint venture for manufacturing and one for distribution of both imported and locally produced vehicles.
Q: What about CATC? Several months ago, Saab signed them up to take care of distribution in China.
A: We have to be mindful here of the distinction between importing and distribution. CATC will still be responsible for the importation of Saab vehicles into the Chinese market. Together with Hawtai, Saab will distribute the vehicles and set up manufacturing, too. This arrangement will complement our current agreement with CATC.
Q: Now that you have secured financing, how will you win back confidence in the marketplace? How can you convince people that this will not happen again?
A: With the current agreements in place (Gemini and Hawtai), we believe that we will be able to stabilise operations and restart production, which is the essential first step. Saab and Spyker are totally committed to restoring confidence amongst our employees, dealers, suppliers, customers and other stakeholders as soon as possible and we are working hard towards achieving that. In the end, it all comes down to product and we believe that our new products will be well received, but we know that have to work hard to give them the visibility they need in the marketplace.
Q: How do the deals announced this week effect the intentions of Vladimir Antonov? Is he still a candidate to become a shareholder in Spyker?
A: Mr. Antonov has consistently stated that his intention is to become an investor in Saab/Spyker and that has not changed. After recently receiving approvals from the National Debt Office here in Sweden, as well as General Motors, Mr. Antonov is now awaiting approval from the Swedish government and the EIB.
Q: What about Saab’s business plan? Is that up for review after recent events?
A: Spyker and Saab stated on March 29 that they would review their full-year targets. Whilst we’re encouraged by the support we’ve received (we have an order book of approximately 5,000 vehicles awaiting production when we restart), it would be reasonable to assume that previously communicated targets will not be met given recent events. At this moment it is too early to tell what the exact consequences of those recent events will be for the confidence in our company, or to give a new forecast.
Zeewolde, The Netherlands, 3 May 2011 – Following yesterday’s announcement that Spyker Cars N.V. (Spyker) secured its short term funding, Spyker announces today that Spyker and Saab Automobile AB (Saab Automobile) signed an agreement with Hawtai Motor Group Company Limited (Hawtai). This agreement conditionally secures medium term funding and includes financing in the form of subscription agreements in the amount of EUR 150 million as well as a strategic alliance for China including joint ventures on manufacturing, technology and distribution.
Spyker, Saab Automobile and Hawtai sign agreement on strategic alliances partnership with respect to manufacturing, technology and distribution in China, subject to definitive transaction documentation
Spyker will enter into a subscription agreement with Hawtai in the total amount of EUR 120 million for in aggregate 24.6 million shares as well as a EUR 30 million convertible loan, subject to definitive transaction documentation and certain conditions.
As a part of the transaction Hawtai will invest EUR 120 million for up to a maximum of a 29.9 percent equity stake in Spyker on a fully diluted basis. The remaining EUR 30 million will be in the form of a convertible loan agreement in the amount of EUR 30 million with a 6 month maturity, an interest rate of 7% per annum and a conversion price of EUR 4.88 per share. The transactions are subject to agreement on definitive transaction documents and certain conditions, which include consents from certain Chinese governmental agencies, the European Investment Bank and the Swedish National Debt Office. As part of the transaction, Tenaci Capital will convert EUR 42 million of its current loan to Spyker into share capital in Spyker at EUR 4.88 per share, thereby substantially reducing Spykers interest burden.
Victor Muller, CEO of Spyker and Chairman of Saab Automobile said:
“The partnership with Hawtai allows Saab Automobile on the one hand to continue executing its business plan since we secured the required mid-term financing subject to meeting certain conditions, whilst on the other hand it allows Saab Automobile to enter the Chinese car market and establish a technology partnership with a strong Chinese manufacturer.
We expect that Saab’s unique brand values based on its aviation heritage, Scandinavian origins and innovation-driven character will do very well in the Chinese market. Our driver-oriented vehicles appeal to a whole new group of independently thinking customers who appreciate Saab’s advanced designs, safety and responsible performance.
With Hawtai’s clean diesel engine technologies and production capacity, and its ambitious development programs, we have found the right partner to develop the Saab business and build a solid relationship.”
Mr Richard Zhang, Vice President of Hawtai, said:
“This is a great day for our relatively young company which was founded ten years ago. The partnership with the iconic Saab brand will give us access to innovative technologies and an international network which would have taken us decades to build. On the other hand we have a very strong Chinese manufacturing and distribution infrastructure which we will make available to our new partner Saab Automobile. Our participation in Spyker, Saab’s parent company, demonstrates our commitment to the future of Saab Automobile as a premium European car manufacturer.”
Founded in 2000, Hawtai is a China-based privately-owned automotive company with its headquarters and R&D centre located in Beijing, and two production facilities located in Ordos, Inner Mongolia and Rongcheng, Shandong Province. Hawtai currently has an annual production capacity of 350,000 vehicles, 300,000 clean diesel engines and 450,000 automatic transmissions. By 2015, Hawtai aims to have raised this capacity to 1 million vehicles, 1 million engines and 1 million automatic transmissions, and to have established itself as a global leading automotive company.
Saab Automobile and Hawtai Motor Group invite journalists to attend a press conference on May 3, 2011, for the unveiling and signing of an exciting strategic partnership between both parties.
The press conference will take place at 14:30 Beijing time (08:30 CET) in the Jinmao Ballroom (3rd Floor) at The Westin Beijing Chaoyang, 7 North Dongsanhuan Road, Chaoyang District, Beijing, 100027 China.
During the press conference both Mr. Victor Muller, Chairman of Saab Automobile, and Mr. Richard Zhang, Vice President of Hawtai Motor Group, will address the media and be available for questions.
I think the appropriate phrase is yeeeeeeeeee-haaaaa!
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Zeewolde, The Netherlands, 2 May 2011 – Spyker Cars N.V. (Spyker) announces that it secured the short-term funding of Saab Automobile AB (Saab Automobile) by entering into a EUR 30 million convertible loan agreement with Gemini Investment Fund Limited (Gemini).
Spyker entered into a EUR 30 million convertible loan agreement with Gemini with a 6 months maturity. The interest rate of the loan is 7% per annual and the conversion price is EUR 4.88 per share.
In addition to the receipt of EUR 30 million from Gemini, Saab Automobile will make a drawdown request to the EIB for an amount of EUR 29.1 million. As a result of the convertible loan and the EIB draw down – which is expected next week – Saab Automobile secured an amount of EUR 59.1 million. With the receipt of these funds, Saab Automobile secured the liquidity that is required to restart production.
Saab Automobile aims to restart production within a week, pending agreements on delivery schedules with its suppliers. In order to improve lead times to customers and dealers on existing and future orders, Saab Automobile will work together with its suppliers to minimize any impact from the recent production stop.
Spyker and Saab Automobile continue to work on securing medium and long term funding.
Victor Muller, CEO of Spyker and chairman of Saab Automobile said:
“I would like to apologize to our dedicated employees,suppliers, dealers and customers for the disruptions of the past weeks. We will do everything in our power to restore the confidence in our company as soon as practically possible.”
After last week’s breakthrough, when the National Debt Office approved Vladimir Antonov as a shareholder in Spyker, we are now awaiting the decisions by GM, the EIB and the Swedish Government.
Discussions are ongoing with members of the EU parliament to ensure that the Bank’s review has the best prerequisites possible. Saab is also talking with Western Swedish Chamber of Commerce, various Unions in Sweden and Fordonskomponentgruppen (Vehicle Component Group).
One aim with these contacts is to emphasize facts that are not reflected adequately in the current debate. It includes highlighting that Saab does not cost Swedish taxpayers anything. On the contrary, employees at Saab and our close suppliers contribute with about 3.5 billion in the form of income taxes each year. Saab wants, in discussions with authorities and other public parties, to stress the value of creating good opportunities for Swedish industry politics and to maintain a strong automotive industry in Sweden.
Over the weekend, efforts to secure funding has continued- and negotiations with potential strategic partners, including the Chinese car companies – are still ongoing.
Spyker Cars NV had a press release today outlining the company’s first quarter interim financial results. You can access the full report here.
For the audience of Inside Saab, it would be appropriate to take an extract from that release, looking at recent events and the future outlook for the company.
Of particular note:
Focus on securing the medium and long-term financial structure of the business.
Approval from NDO for Vladimir Antonov to take an ownership stake in the business.
Discussions with potential strategic partners in China.
Proposed name change to Swedish Automobile NV.
Reassessment of sales and financial targets in the coming year.
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NEAR TERM MANAGEMENT PRIORITIES
Management will continue to focus on its strategy in making Saab Automobile a profitable, independent niche premium car manufacturer, while reducing risks in the execution of the plan. Upon successful completion of securing short-term funding to restart production, Management will continue to focus on strengthening its financial position and stabilizing its operations through securing additional mid- and long-term financing. Management is in talks with several parties to secure access to this funding. A major step forward in this respect was made on 28 April 2011 when the NDO approved Mr Vladimir Antonov as a shareholder of Spyker (see hereafter under Recent Events) Further key management priorities remain:
Continue product development activities in order to refresh and expand the entire product portfolio
Continue to build up an independent Saab distribution organization
Continue to build up capabilities as an independent company
Manage cash and control costs and capital expenditure tightly
Continue to focus on initiatives to further reduce the break-even point
In summary: all measures to continue to restore confidence with our valued customers, dealers, suppliers, shareholders and other stakeholders in order to support increasing sales and improved margins from a rejuvenated product portfolio.
In addition to driving the ongoing business operations, Management will continue to focus on execution of its long term business plan. Saab Automobile will continue to enhance its unique and strong brand, relying on its heritage of innovation, aircraft inspiration and Scandinavian values. In line with the objective to shorten product lifecycles and broadening of its portfolio, in 2011 alone four new models will be launched into markets around the globe, among which the 9-5 SportCombi and the new Saab 9-4X (Saab’s first ever cross-over).
RECENT EVENTS
On 5 April, production of Saab vehicles at the Trollhättan factory was again interrupted due to materials shortages caused by outstanding payment (terms) issues with a number of suppliers. On 6 April, Saab Automobile decided to halt production until further notice pending confirmation of additional funding for operations. Although this is a set back in the production and sales, Management is confident that with secured funding the effect of lower production can be recovered during the course of the second and third quarter.
In addition, Saab Automobile continues to work on longer-term solutions to further strengthen its financial position and improve its capital structure including but not limited to discussions with potential strategic Chinese partners.
Spyker Cars NV proposes to change its name into Swedish Automobile NV at the next Annual General Shareholders meeting 19 May 2011.
OUTLOOK
Management is now fully focused on securing the short and mid-term funding and restoring confidence among suppliers, customers, employees, shareholders and other stakeholders given the recent liquidity issues and production interruptions . However, 2011 and 2012 are build-up years for Saab Automobile and although volume and market share are important, Management’s key objective is to secure mid and long-term financing, renew and expand the product portfolio, enhance the distribution organization and build an independent company, while remaining within the financial boundaries set in its business plan.
The Group’s medium term goal is to establish Saab Automobile as an independent, financially viable, niche premium car manufacturer. Given the recent liquidity and production situation, previously communicated sales and financial targets will be reassessed as soon as the consequences of this situation on the Group’s operations become clearer. Management notes that Saab Automobile will be launching several new models into global markets later this year which should have a positive effect on sales volume during the second half of the year. The Group foresees a net loss for 2011.
Saab and Spyker are working on many different fronts to secure funding in the short and medium term. Negotiations with various, potential strategic partners, including the Chinese car manufacturers will continue.
Spyker reports Q1 results
Today Spyker presents the first quarter report for 2011. Since Saab Automobile is a major part of Spyker’s results, the major focus in the report is on Saab. Spyker Cars (including Saab Automobile) reported an EBIT of (79.4) million Euro. The report underlines the fact that 2011 is another buildup year for Saab, and Saab assumes a loss for the full year as well. Note that the events of the recent weeks are not covered by the report, as it focuses on the first three months of this year. The first quarter can be summarized as challenging but also showed encouraging sales development.
The following press release was issued today by Spyker Cars NV, owner of Saab Automobile.
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Zeewolde, The Netherlands, 28 April 2011 – Spyker Cars N.V. (Spyker) confirms the announcement of the Swedish National Debt Office (NDO) to allow Vladimir Antonov as a shareholder of Spyker.
Victor Muller, CEO of Spyker and Chairman of Saab Automobile said:
“This is a great day for our company and for me personally. We worked relentlessly for 11 months to achieve the desired result: restore the reputation of Vladimir Antonov, who made so many valuable contributions to Spyker since 2007 as financier and shareholder. We are convinced he will be able to make such contributions again in the near future and look forward to the decisions of the Swedish Government, General Motors and the European Investment Bank (EIB), following the recommendation of the NDO which was the result of intense scrutinising.”
Vladimir Antonov, Chairman of Conversgroup said:
“I am very happy finally getting the recommendation from the NDO to the involved parties, being a future investor in Spyker. The past months of speculations around me, as an individual investor and my businesses has been exhausting. Clearly this has been a disturbing factor for many of my businesses. Finally we have managed to obtain a clean bill of health and we need to move fast forward to secure the cash flow of Saab Automobile. I hope all involved parties now further take on their responsibility so we can close all processes fast to secure the future of Saab Automobile.”
Spyker and Saab Automobile continue to work on securing funding. Saab Automobile is still in talks with the EIB and all parties involved on a solution to complete the sale of Saab Automobile Property AB (Saab Property). It is not yet certain whether the above parties will be able to fulfil all of the conditions of the EIB and finalize the sale of Saab Property.
In addition, Spyker and Saab Automobile are negotiating equity and debt financing and/or technology licensing with various strategic partners, including various Chinese car manufacturers. No commitments have been received to date.
Yesterday the discussions between Saab’s representatives and officials from the European Investment Bank, EIB, continued. Saab delivered a counterproposal to the conditions which the EIB have set for the proposed sale of Saab Automobile Property AB. The proposal is now to be considered by the EIB Management Board.
After Tuesday’s meeting with Vladimir Antonov the head of the National Debt Office, Bo Lundgren, made a statement saying that they discussed what the ambition is, if Antonov is approved to act as a financier of Saab. According to Bo Lundgren, the NDO should be able to come to a decision within a couple of days.
In parallel with the dialogues with the EIB and the NDO, Saab has continuous contact with government representatives and is working on many different fronts to secure short and midterm funding. Negotiations with various, potential strategic partners, including Chinese car manufacturing companies, continue.
During Wednesday the plant staff were, for one day, back at their work sites. Employees concerned will be continuously informed via their supervisors about when to go back to work.
