China saves Saab

China bails out Saab

Chinese automobile company Hawtai Motor Group strikes a deal to invest $223 million for a 30% stake in Saab.
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The state administration of auto builders?
<div style="text-align: left;"> The state administration of auto builders? </div>

Hawtai Motor Group Company is set to buy up to 30% of Spyker Cars, the owner of the Saab business, for €150 million ($223 million) in a strategic alliance that gives the Chinese company access to Saab’s manufacturing, technology and distribution.

Hawtai is a Beijing-based privately owned automobile firm. It has been in business for more than a decade and has the capacity to build 350,000 vehicles, 300,000 clean-diesel engines and 450,000 automatic transmissions a year. From 2002 until 2010, it worked in partnership with Korea’s Hyundai to make vehicles for the Chinese market. It has a stated aim to become an exporter of clean-technology components and vehicles.

“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,” said Victor Muller, chief executive officer of Spyker and chairman of Saab Automobile, in a written statement.

Hawtai will invest €120 million for up to a maximum of a 29.9% equity stake in Spyker and provide another €30 million by way of a convertible loan. The loan will have a six-month maturity, an annual interest rate of 7% and will convert at €4.88 per share. The deal allows Hawtai to use Saab’s international network and platform for its own products, while introducing Saab cars into the Chinese market.

The deal is still subject to approvals in China, from the European Investment Bank and the Swedish National Debt Office. It follows close on the heels of Spyker’s announcement that it has secured €30 million of short-term funding for Saab by way of a convertible loan agreement with Gemini Investment Fund.

Spyker bought the loss-making Saab business from General Motors early last year and combined the businesses into Saab Spyker Automobiles. However, earlier this year Spyker had to suspend production of Saab vehicles after its working capital dried up.

If the deal goes through, it will be the second Swedish automobile company to be bought by the Chinese. Last year, China’s Geely bought Volvo from Ford Motor Company for $1.5 billion. However, the Chinese government is likely to scrutinise the rationale for the deal and its likelihood of success before giving the go-ahead. Regulators shot down a proposal by Tenzhong Heavy Industrial Machinery to buy the Hummer business from General Motors. Sources said at the time that Tenzhong lacked the expertise to manage Hummer and China was reluctant to encourage acquisition of brands that were not environmentally friendly and high-tech.

¬ Haymarket Media Limited. All rights reserved.
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