Saab Retreat Hits China's Auto Ambitions

Posted by: Bruce Einhorn on November 25, 2009

Koenigsegg Group’s decision to walk away from a deal to buy Saab is not just a blow to GM, which now probably has no choice but to shut down Saab completely, and the automaker’s workers. It’s also a setback for China’s auto industry’s global ambitions. Beijing Automotive Industry (BAIC) had been one of Koenigsegg’s partners in the Swedish sports-car maker’s proposed acquisition; under the terms of an MOU signed in September, the Chinese company was going to be become a minority shareholder in Koenigsegg, which in turn was going to take Saab from GM.

That kind of minority role would have worked well for BAIC. As my colleague Ian Rowley wrote in September, when BAIC first made its deal with Koenigsegg, Chinese automakers have typically not been all that successful in their attempts to expand beyond China. And as BusinessWeek columnists Anil Gupta and Haiyan Wang wrote in August, BAIC “has no experience in mergers and acquisitions, whether domestic or cross-border. Success at postmerger integration requires highly cultivated and deeply embedded organizational capabilities. Such capabilities have to be built through experience. They can be neither bought nor rented.”

That’s why the Saab deal could have been such a good fit for BAIC. As a shareholder of Koenigsegg, the Chinese company would have been well-positioned to have its managers observe the integration process and gain the sort of experience that could help BAIC if or when it decided to do an acqusition of its own. Now BAIC won’t have that chance.

Reader Comments

Haav

November 25, 2009 3:25 PM

Beijing Automative is a lagard in the fractious Chinese auto industry. Despite enjoying the support of the powerful Beijing city goverment, this outfit failed to link up with a major foreign car company. Not only it has no M&A experience, its ability to design and market its own brands are much weaker than even other state-owned car companies.

In China's stated plan to consolidate the car industry. BAIC is one that should be folded into other more successful and advanced companies. This is a GOOD thing if the Beijing city goverment stop wasting money on BAIC.

Shunjing

November 25, 2009 3:33 PM

BAIC should have expected it . America is fighting a war with China. That is a war of attrition without direct confrontation . Nothing like a cold war.

Hu Jintao

November 25, 2009 4:24 PM

Excellent. I'm always glad to see the Chinese stymied.

jcage

November 25, 2009 7:23 PM

The biggest loser here is Saab and the Swedish people. China can just wait for it to go bankrupt and then buy it at a much lower price and at better condition. No hurry in that!

Robert

November 25, 2009 8:14 PM

Why would an American business columnist care about the Chinese learning how to manage/enable a luxury car company to succeed? When the Chinese Empire supplants the American Empire - Beijing will praise corporate America for its triumph!

blowfish

November 25, 2009 9:11 PM

Perhaps this collapsed deal created a better opportunity for BAIC, as GM is going for the fire sale now, the asking price will further retreat.
BAIC if were to give up such a deal now, u think another better deal will come along? Or another deal just before the Haley's comet or Kohoutek swings around.
If China were going to break into the Euro market, SAAB is one of the option now.

Or could someone call Mr. Tata quick.
I am not so sure, the Jag, Landy deal had given him indigestions kind of trying hard to sooth his Delhi Belly.

No question GM has ran SAAB deep into the ground.

Back in the early 90's a bloke I knew who has a Mitsubishi turbo AWD and a SAAB. Probably we would vote the AWD would out drive the SAAB. Since the bloke drove them thru the famous Whisltler BC Sea to Sky Autobahn.

Anyways he was partialled to the SAAB.
Being front wheel drive he says it handles better than AWD.

C. H. Ng

November 26, 2009 1:35 AM

I admit I'm a nobody when come to business issue but I still can't see any logic for BAIC to be interested to buy into Saab. Volvo seems to be a better option where Geely's interest is concerned.
Even though Saab might be a good car to the Swedish people, it's still lag behind Volvo in terms of name, quality & most of all, it's salesability. No wonder they are losing money for years!

I wonder whether the Chinese auto companies are using their deep pockets to try to buy a short-cut route to success? If they really are, I doubt they will succeed. A better way is to use their surplus fund to invest in their own technology & brand rather than buying another foreign brand. It would be like a Chinese saying which literally sound like this.."Using another person's backside to stick on your face".

rob

November 26, 2009 10:36 AM

Either Saab will be shut down, or it will decline further. Someone suggested Chinese could buy Saab at an even lower price. When? After a few months have gone by and instead of 92,000 cars a year, they're only selling 40,000 a year? What good is it by that point?
REMEMBER: every day that GM delays a decision, rival carmakers are moving ahead while Saab stagnates.
If GM takes 2 years to find a buyer for a brand, that's the same as killing a brand. During those 2 years, no progress is being made, the brand is declining.

Husin O'Bama

December 9, 2009 12:34 AM

BAIC is likely to go the Dodo way.

forson kojo

September 7, 2010 6:38 PM

There is no way GM will allow the chinese to save SAAB.They want to kill it.

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