Is Time Running Out for Saab?

With the collapse of the deal between Spyker Cars NV and China’s Hawtai Motor two weeks ago, some in the auto industry are predicting the imminent demise of Saab.

Describing the negotiations between the two automakers prior to Hawtai’s withdrawal, Sypker CEO Victor Muller said, “I had a pretty good negotiating position. I positioned what I could sell as a stake in the last premium, independent European car company.”

There are also serious questions about whether or not China’s Pangda Automobile Trade Company will now move forward with its distribution deal with the Swedish automaker. Pangda is the only company to step forward despite Muller’s assertion that a number of other Chinese distributors have expressed an interest in a tie-up.

Chinese companies are wary of Saab for a number of reasons. Unlike many other global brands, Saab has low name recognition in China. Saab also has manufacturing presence in China. The company’s former owner, General Motors Company, imported all of its vehicles for sale within the country.

High import tariffs make it more difficult for foreign automakers to compete in the country and, according to J.D. Power and Associates, Saab managed to sell only 257 units in China in 2010.

Another Swedish brand, Volvo, has fared better in China. Volvo which is owned by Zhejiang Geely Holding Group Company has the advantage of domestic production of a number of models through a joint-venture with Ford Motor Company. Last year Volvo sold approximately 30,000 units in China.

Hawtai’s decision not to move forward with the proposed tie-up with Saab was based on what it called “commercial and economic realities.” Some have speculated that Hawtai did not fully comprehend the depth of Saab’s problems until a recent tour of the company’s headquarters in Trollhättan, Sweden.

Without the financial resources of GM to prop it up, Saab’s financial situation has gone from bad to worse and disputes with labor and suppliers have led to repeated production shutdowns.

In a recent interview, European Association of Automotive Suppliers CEO Lars Holmqvist said suppliers have grown weary of what he called “empty promises” and an overall lack of information being provided by Saab. “Suppliers”, he said, “feel duped and therefore Saab is now standing there with a factory at a standstill.” He went on to say, “I think that the patience has more or less run out.”

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