There might be some uncertainty as to what that will mean for Saab today. In short, whilst the MoU does indeed expire, all parties to that deal have agreed to continue talks.
General Motors, who must approve any sale of Saab under certain conditions, indicated that they would not accept a sale of Saab Automobile as per the terms of the MoU. Therefore the parties involved are negotiating to determine conditions that GM will accept.
As has been previously reported in the media, information has been sent to GM outlining Saab’s proposed business plan and intentions for the future, as background information for any further change-of-ownership proposals put before them.
It’s the beginning of what will surely be another big week in the history of Saab Automobile. I think I can speak for colleagues here at Saab and say that we’ve seen some wonderful things in the last few weeks – the support and happiness of people attending the dealer tours, as well as the recent and spontaneous gestures of support on several other fronts as well. We truly appreciate it.
I just wanted to quickly refer back to something that I wrote last week in a post called Waiting.
There’s no reason why Saab Automobile has to succumb to the circumstances that have plagued it this year. As I mentioned a few days ago, Ford managed to get a similar deal done to give Volvo a future. I think it can be done here, too. We still have a lot of very good reasons to be here in this industry. If there is goodwill in the room, there will be a way to work this out with an agreement that will work for all concerned.
I’d now like to invite you to read the Editor-in-Chief of one of the most important newspapers in the automotive industry, Keith Crain from Automotive News:
….GM should look at how Ford handled the situation when it sold its Swedish company, Volvo. That seemed like a very civilized transfer, and Ford acted gentlemanly the whole time. That might be something GM should study.
I’m not playing favorites. But if Saab is to die, it should happen in the marketplace, not in some corporate boardroom without even a fair hearing.
We have no plans that include dying. We just want to bring our new vehicles to market and knock a few people’s socks off.
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This week, Saab will have to try to extend its MoU with Chinese partners Youngman and Pang Da, as well as continuing negotiations with General Motors about what will constitute an acceptable deal in their eyes.
There is an important deadline looming with regard to our reconstruction procedure (on the 22nd), so time is precious.
As written above, I hope there is plenty of goodwill in the room. There has to be a way to work this out.
I know we have some shareholders in SWAN and other interested parties who visit here, so this is important information for them. It’s also interesting for those business-watchers following developments with regards to the sale of Saab.
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Zeewolde, The Netherlands, 11 November 2011 – Swedish Automobile N.V. (Swan) provides further information regarding the sale of the Saab Auto Group and the Spyker business, including the further consequences for Swan.
1. Sale of the Saab Auto Group
On 28 October 2011, Swan entered into a memorandum of understanding (the MOU) with Zhejiang Youngman Lotus Automobile Co., Ltd. (Youngman) and Pang Da Automobile Trade Co., Ltd. (Pang Da) for the sale by Swan to Youngman and Pang Da of the shares that Swan holds in Saab Automobile AB (Saab Automobile) and Saab Great Britain Limited (Saab GB) for an aggregate purchase price of EUR 100 million. In terms of the MOU, the total purchase price of EUR 100 million will be paid in the following manner:
EUR 50 million upon completion of the sale
4 instalments of EUR 12.5 million payable on the first, second, third and fourth anniversary of completion of the sale
Final agreement between the parties is subject to a definitive share purchase agreement (SPA) between Swan, Pang Da and Youngman, which will contain certain conditions. Amongst others, these conditions will include approval of the transaction by the Swedish Government represented by the Swedish National Debt Office (NDO), the European Investment Bank (EIB), General Motors (GM), the National Development and Reform Committee of the People’s Republic of China (NDRC), the shareholders of Swan and several other organisations.
The agreement in principle is that any outstanding intragroup loans and other financial obligations between Swan, on one hand, and Saab Automobile, its subsidiaries and Saab GB (together Saab Auto Group), on the other, will be set off or written off in accordance with applicable law without any actual payment being due and payable. The draft SPA will also be based on the principle that Swan is to be discharged of all Saab-related obligations.
The MOU is valid until November 15, 2011; its validity is also contingent on Saab Automobile remaining in reorganisation. The parties are currently in discussion about the SPA. GM publicly indicated on 7 November last that it will not agree to the continuation of the existing technology licenses or the continued supply of 9-4X vehicles to Saab Automobile following the proposed change in ownership of the Saab Auto Group. Swan and Saab Automobile are currently in discussion with GM. Without the GM consent having first been obtained, it is uncertain whether the parties are in the position to sign an SPA before 15 November of this year.
An important consideration for Swan to enter into the transaction is the commitment of Pang Da and Youngman to provide long term funding to the Saab Auto Group. With Youngman and Pang Da as new partners, the basis for a successful re-start of the Saab Auto Group would be established.
Pang Da and Youngman have assured Swan that their investment in the Saab Auto Group is driven by a business rationale that includes a long-term strategy for the group.
2. Sale of the Spyker business
Swan announced on 29 September 2011 that it had reached conditional agreement with North Street Capital, LP (North Street), a US based private equity firm, to sell to North Street the Spyker sportscar business for a purchase price of approximately EUR 32 million.
Swan is currently in discussions with North Street about the sale of the Spyker business and definitive transaction documentation.
3. Consequences for Swan of the sale of Saab Auto Group and Spyker business
3.1 Use of sale proceeds
If Swan sells the Saab Auto Group and the Spyker business as currently envisaged, the total (net cash) proceeds will amount to EUR 132 million. The exact use of these proceeds depends on the negotiations with the different stakeholders of Swan (i.e. creditors, lenders, etc.). Based on the current situation, the proceeds of the sales will not allow Swan to meet all its liabilities in full. The management of Swan will use its reasonable endeavours to come to a settlement that is acceptable to all its stakeholders, in line with applicable law.
3.2 Future of Swan
The future of Swan will depend on the outcome of the negotiations with the purchasers of the Saab Auto Group (Pang Da and Youngman) and the Spyker business (North Street).
If Swan is not able to complete a sale of the Saab Auto Group or secure further financing for the Saab Auto Group, management will likely not be able to safeguard the continuity of the Saab Auto Group, which will have negative financial implications for Swan and its stakeholders and may result in the bankruptcy of the Saab Group.
If Swan is not able to complete a sale of the Spyker business, Swan may continue the Spyker business, provided that the necessary funding for that business can be obtained.
If Swan were to sell the Saab Group but continues the activities of the Spyker business, as it did before it acquired the Saab Auto Group at the beginning of 2010, it will focus exclusively on the Spyker business.
If both businesses are sold, Swan will consider all of its options (including a voluntary liquidation of Swan).
The fact that the required approvals are not yet secured and that there are currently not yet final binding agreements in place with the purchasers of the Saab Auto Group and the Spyker business leads to uncertainty with respect to the completion of the various transactions described above and thus the future of Swan and any settlement with stakeholders.
Below a best estimate overview of the liabilities of Swan per 31 December 2011 (unaudited):
Most important creditors (amounts in million EUR):
As you may have read in news reports earlier today, discussions are ongoing with our Chinese partners as we try to negotiate a solution that will satisfy all parties.
China’s Zhejiang Youngman Lotus Automobile Co said it still wanted to invest in ailing car maker Saab after General Motors said on Monday it would stop supplying components and technology if Pang Da Automobile and Youngman succeeded with their acquisition bid.
Youngman director Rachel Pang said on Wednesday the company will do “everything they can” to support Saab’s survival. She told Swedish news agency TT Youngman still wants to buy Saab.
“Of course we do. If you are afraid you cannot succeed in business. There are always difficulties. One has to find solutions, not just give up,” she was quoted by TT as saying.
Saab Automobile AB said Wednesday that it is discussing a new ownership structure with its Chinese investors, trying to save plans of selling the cash-starved company after former owner General Motors Co. objected to the deal.
“The purpose of these discussions is to find an ownership structure that everyone can agree on,” said Saab Automobile spokesperson Gunilla Gustavs, noting that the proposed 100% Chinese ownership “was an issue for GM.” Ms. Gustavs didn’t provide further details of the discussions.
From an internal point of view here at Saab, we continue to pursue all of our current objectives, which include but aren’t limited to these discussions.
Since GM’s statement on Monday night, we continue to work with Youngman and Pang Da to prepare to respond to GM’s questions on the proposed sale transaction of Saab Automobile AB to Pang Da and Youngman.
The Saab management team is preparing an in-depth communication package that clarifies the new business plan and the intentions for the future. The purpose is to present this to GM and clarify the intentions with the operations in China, thus seeking GM’s consent for the transaction through discussion and negotiations.
In parallel, the other processes continue, both those regarding approvals and those referring to the reorganization. Project Cheetah goes on as well, with the aim to create a new cost structure for Saab next year.
We had a setback, but in the Saab tradition, we keep moving on toward the goal. If our recent dealer tours through Germany and Austria are anything to go by, then the product and the customers demand it.
I apologise if the lack of writing here today has been a cause for concern. Simply put, there was nothing I could say. I had my own thoughts, of course, but they were best left unpublished, especially on an official site.
For those who haven’t caught up with the news…..
Back when our Chinese partners made a low offer to purchase 100% of our operations, Victor Muller suggested that it would trigger a change of control clause that GM and other partners would have difficulty with. The more recent, higher offer, did actually trigger that clause, meaning that GM had to give their blessing to the deal. As of yesterday, GM declared that they do indeed have difficulty with it.
“Although General Motors is open to the continued supply of powertrains and other components to Saab under appropriate terms and conditions, GM will not agree to the continuation of the existing technology licenses or the continued supply of 9-4X vehicles to Saab following the proposed change in ownership as it would not be in the best interests of GM shareholders,”
So that’s where we’re at right now.
Various parties sit at tables and try to find a solution that everyone can live with. Again, there’s no more that can be said about it right now because it’s still in progress.
The ramifications are quite significant, of course, so we hope that the parties to the discussions take part in good faith and with a long-term view.
There’s no reason why Saab Automobile has to succumb to the circumstances that have plagued it this year. As I mentioned a few days ago, Ford managed to get a similar deal done to give Volvo a future. I think it can be done here, too. We still have a lot of very good reasons to be here in this industry. If there is goodwill in the room, there will be a way to work this out with an agreement that will work for all concerned.
STOCKHOLM (Dow Jones)–The former owner of troubled Swedish car maker Saab Automobile AB, General Motors Co. (GM), said Friday it would have a difficult time supporting a change in ownership of the company based on the information at hand.
“GM would not be able to support a change in the ownership of Saab which could negatively impact GM’s existing relationships in China or otherwise adversely affect GM’s interests worldwide,” said GM spokesman Jim Cain.
My brief thought as a Saab fan who’s followed this journey closely for nearly two years straight now:
Ford found a way to let Volvo keep going and protect its interests. So can you.
My hope for all the people on our side of the table….. Keep talking. Find a way. Never, ever give up.
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Something I just added in comments that I figured was appropriate to state here, as well:
GM have legitimate interests to protect. No-one’s arguing with that. But that doesn’t mean that those interests can’t be protected. Things can always be worked out where there’s an interest in doing so. I just hope GM have same view as the rest of us – the world is not a better place with Saab gone, and there’s no threat from Saab to their business.
The following plan was submitted to the Vanersborg District Court today as the background material for presentation to the Creditors Meeting.
It makes for some very interesting reading in all respects, both as a brief historical document (as in…. how did Saab get here?) and as a guide for the future. If you’re into following what Saab do, or plan to do, then this is your required reading for the week.
The sections:
1. Introduction and Background
2. Development since the last reorganization and Consequences thereof
3. The Way Forward
3.1. Immediate Action Highlights
3.2. New Owners and “Extended Saab”
3.3. The Restart
3.4. Long-Term Strategy and Viability
3.4.1. Positioning & Portfolio
3.4.2. Operations
3.4.3. Long Term Volume Forecast
4. Funding
5. Preliminary Reorganization Plan
6. Timetable and Next Steps
You can download your own copy of the document in English, here (pdf) or in Swedish here (pdf). The press release summarising the highlights of this document is available here.
I have reproduced the document in full, below.
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1. Introduction and Background
On February 20, 2009, while still under ownership of General Motors, SAAB was granted a first order for reorganization. This reorganisation was conducted until 20 August 2009 when the targets were considered fulfilled by the actions taken.
While still under reorganisation, former owner General Motors continued negotiations with potential buyers. An initially negotiated deal with Koenigsegg Group was, however, cancelled on November 24, 2009.
Trollhättan, Sweden: Swedish Automobile N.V. (Swan) announces that Saab Automobile AB and its subsidiaries Saab Automobile Powertrain AB and Saab Automobile Tools AB (together Saab Automobile) today present their preliminary reorganization plan to their creditors during a creditors’ meeting in Vänersborg, Sweden.
The preliminary reorganization plan, which was developed by Saab Automobile management and supported by the current and foreseen owners of Saab Automobile as well as its administrator of the reorganization, contains the following highlights:
Pending the approval from all relevant parties, short- and long-term funding for Saab Automobile is assured: Youngman and Pang Da have expressed their commitment to provide EUR 50 million, to fund Saab Automobile while in reorganization. In addition, the Chinese investors will provide a minimum of EUR 600 million in funding to restart production, to settle the company’s clear and due debts and to fund operations for the 2012-2013 medium-term timeframe. To provide funding for the revised business plan and provide long-term financial stability the new Chinese owners have also budgeted funding for the planned expansion of Saab Automobile’s portfolio and additional operations to be set up in China. Saab Automobile has not received the funds from Pang Da and Youngman that have been committed for today.
New strategy and structure to combine the strength of Pang Da, Youngman and Saab Automobile, with Saab Automobile’s brand equity and heritage, product portfolio and capabilities being the key elements of that partnership combined with the distribution capabilities of Pang Da in China and the manufacturing expertise of Youngman.
Key actions during reorganization: establish new ownership structure with Pang Da and Youngman as strategic partners; reach agreement with creditors on repayment of outstanding debt to restore Saab Automobile’s supply chain; reduce structural costs by SEK1 billion, among others through reducing headcount by 500 employees; and generally restore confidence and trust with all key stakeholders
Restart plan highlights include: seamless production restart supported by existing order bank; accelerate access to China as major growth market; new distributorship agreements in other emerging markets like Russia, new products for traditional key markets (65% of volume) and China which include the 9-5 SportCombi and the 9-4X.
Confirmation of the long-term strategy of repositioning Saab as a distinctive, near premium brand supported by a renewed and broadened product portfolio, a more flexible cost structure with global production footprint, cross-carline modular technology architecture generating synergies, provision of external engineering services and expanded operations to take advantage of growth opportunities available in China and provided by strong Chinese owners.
Sales targets for 2012 of 35-55,000 cars and 2013 of 75-85,000 cars based on realistic ramp up in line with sales development since last restart.
Long term volume outlook of 185-205,000 cars of Saab Automobile based on three main growth drivers: 1) broadened product portfolio in fast growing market segments; 2) capitalizing on access to Chinese market, and; 3) strong profitability focus.
2012 and 2013 seen as financial transition years, profitability expected no later than 2014. Long term margins and profitability in line with other near premium car manufacturers.
A complete version of the preliminary reorganization plan is available for download via www.swedish-automobile.nl (pdf) and http://media.saab.com.
Earlier today I wrote an article here at Inside Saab that may have left the impression that a vote would be taken at the creditors meeting underway today at the district court in Vanersborg.
That impression would be incorrect.
I’ve received some information internally that spells out the following, which should help those interested in the process Saab is currently involved in:
The main purpose of the creditors meeting is to give the creditors influence over the proceedings, i.e. if the proceedings shall be allowed to continue and also the conduct of the reorganisation. The judge leads the meeting. Normally the judge starts by explaining the purpose of the meeting and then leads the meeting. The judge then leaves the word to the administrator.
During the meeting a preliminary reorganisation plan will be presented and the creditors will be allowed to ask questions and express their view of the reorganisation. The meeting is only for arguments and no voting will take place.
During the meeting there will also be a possibility to appoint a creditors’ committee. The reason is often that the creditors want more insight into the reorganisation work.
After the proceedings the Court will rule for a cease or a continuation of the reorganisation process. This can take up to two weeks.
Trollhättan, Sweden: Saab Automobile AB (Saab Automobile) has appointed Göran Ejbyfeldt as new Vice President & Head of Manufacturing and Quality effective 1 December.
Ejbyfeldt succeeds Gunnar Brunius, the current Vice President Manufacturing & Purchasing, who will pursue a new opportunity in his career with Volvo Aero AB. Ejbyfeldt will assume responsibility of manufacturing on top of his current role as Executive Director Quality, Environment & IT.
Kjell-Åke Eriksson will be added to Saab Automobile’s top management team as Executive Director Purchasing and will report directly to CEO Victor Muller.
