Posted by: David Welch on January 26, 2010
Saab, it must be said, has more lives than a dozen cats. General Motors said today that it reached a deal with Spyker Cars NV to sell the Swedish carmaker. The deal is reportedly worth about $500 million. The sale comes after a year of trying to peddle Saab. One deal with Swedish sport car specialist Koenigsegg AB had already fallen through. GM was so certain that a buyer wouldn’t be found that they even sent two advisors in to start liquidating the company. Assuming the sale closes, the company will be called Saab Spyker Automobiles but will still use the Saab brand.
Give Spyker CEO Viktor Muller some credit. Through pure perseverance he managed to pull a deal together to convince GM to sell. GM was set on liquidating the company. All along, executives told me, GM was wary of selling the company to a player who couldn’t make it work in the long run. If a new owner failed to fix Saab, the company could have ended up back in GM’s hands only in worse shape than before. Muller convinced GM that he can save the company.
A few big things changed along the way to make the deal happen. Spyker upped its bid and proved to GM that he had the cash to get a deal done. The Dutch maker of exotic sports cars also got Russian banker Vladimir Antonov, who owned 29.9% of the Spyker, out of the picture, according to a source close to the deal. GM was not comfortable going into business with him, just as the company was not keen to sell its German Opel unit to a consortium that included Russia’s OAO Sberbank. The Russians want access to automotive technology to help grow their own industry. Since GM engineered future Saab models using platforms and engines shared by Opel and Chevrolet cars, the company will be doing business with Spyker for years to come.
This is great news for industrial Trollhaetten (Sweden) and college professors all over the Northeastern U.S. Seriously, Saab does have a cadre of loyal followers, especially in New England. It just never had enough of them for GM to make real money on the brand.
Of course, Saab’s failure under GM also came from a serious lack of investment. GM never really gave the brand the resources to grow. Saab sells two models—the 9-5 and 9-3—and spent very little on marketing in recent years. GM’s efforts to add models were usually rebadged versions of something else. The 9-7X wasn’t much more than a Chevrolet Trailblazer with a Saab grille and a few interior touches. The 9-2X was basically a Subaru WRX in Saab clothing.
Can Spyker make it work? Muller clearly has enthusiasm for the brand. He has put together a $500 million package to buy it. GM will get $75 million in cash, $325 million in preferred shares and $100 million of Saab’s existing liquidity, Bloomberg reported today before the official announcement.
Now Muller has to turn that enthusiasm into new products and sales. GM has some new cars in the pipeline, which Saab will be able to sell. But making this work won’t be easy. With less than 100,000 sales globally last year, Saab is tiny and won’t have the economies of scale to get parts as cheaply as competitors. The brand has respect among its die-hard fans, but doesn’t command the pricing that makes low-volume luxury brands profitable. Muller will have to get the company in the black, generate the cash flow to freshen models and market them and invest in tomorrow’s automotive technology. It’s going to be a challenge. For now, anyway, Saab has a new lease on life.