GM to sell Saab to Dutch carmaker Spyker
Published Tuesday, January 26, 2010 9:00PM EST
DETROIT - A small Dutch automaker will try to do what U.S. auto giant General Motors Co. couldn't -- make money by selling Saab brand automobiles in an increasingly competitive global marketplace.
GM signed a deal Tuesday to sell Saab to Zeewolde, Netherlands-based Spyker Cars NV for US$74 million in cash plus $326 million worth of preferred shares in Saab.
The deal hinges on a $550-million loan from the European Investment Bank, which the Swedish government on Tuesday committed to guaranteeing.
The sale is a coup for Spyker and a lifeline for Saab, which has lost money ever since GM bought a 50 per cent stake and management control for $600 million in 1989. The Detroit automaker gained full ownership in 2000 for $125 million more.
Saab employs around 3,500 people in Sweden and was within days of liquidation as part of GM's restructuring.
Now GM will continue providing vehicles and parts to the new company, to be called Saab Spyker Automobiles NV.
Spyker CEO Viktor Muller knows that Spyker faces a huge challenge to turn Saab into a money maker, but said he's confident it can be done.
"I think what we can bring to the table is entrepreneurship and tenacity," he told reporters.
Saab already was struggling as a niche brand with a small market share when GM bought it, and industry analysts say the Detroit automaker ruined Saab's unique character by supplying the unit with vehicles designed for other GM brands.
Before GM, Saab specialized in egg-shaped aerodynamic small cars with rapidly sloping backs and four-cylinder engines. But sales dropped as loyal followers found the GM offerings no different than those made by other mainstream brands.
But Muller said Spyker will harness "the Swedishness of the brand" to reconnect with Saab's loyal following of 1.5 million drivers.
"I think the unique heritage of the brand requires a very strong focus," he said. "If you are part of a very large conglomerate, it's very difficult to have focus on all these brands."
Spyker is estimating that it will make 100,000 Saabs a year, enough to be profitable. Asked whether production would stay in Sweden, Muller joked that it would be shortsighted to believe Saab buyers would remain loyal to the brand if the cars were made in Mumbai.
Spyker also must quickly sign deals with GM or other automakers to design and build new Saabs, said Michael Robinet, an automotive analyst with CSM Worldwide in Michigan.
Without deals, Saab will have to compete against global automakers with much lower costs that can pack features into their cars and sell them for less, Robinet said.
"They have to find a friend or work with other manufacturers to bring in the products that they want designed to their needs," he said.
The sale came after an earlier attempt to sell Saab to another Swedish automaker fell through, and after GM's bid to sell the Saturn brand also collapsed. Pontiac and Saturn now will be phased out, and GM is trying to sell its Hummer brand to a Chinese heavy equipment maker.
Robinet said GM's board pushed hard for the Saab sale, forcing management to move more quickly to focus on four core brands: Buick, Chevrolet, Cadillac and GMC.
GM expects to close the sale by mid-February. The company gets a relatively small amount of cash but it unloads an expense. GM also retains the preferred shares, giving it a stake should the company become profitable.
The Detroit auto giant will continue to provide engines and transmissions to Saab for "an extended period of time," and it will keep making the 9-4X crossover vehicle, said John Smith, GM's vice-president of planning and alliances. Crossovers have the interior room of an SUV but are built on a car instead of a truck frame.
Spyker also will continue to support Saab's U.S. dealers, Smith said. The Dutch automaker also will guarantee up to $10 million in Saab's obligations to GMAC, which is GM's financing arm.
For Spyker, it vaults the tiny company into the crazily competitive world auto market.
Spyker sold only 23 cars in the first half of 2009, its most recent reporting period, and posted a net loss of euro8.7 million. The 11-year-old company has yet to make money.
The Dutch automaker was founded in 1999 and received a stock market listing in 2004. It makes hand-tailored luxury cars that sell for more than $200,000.
As part of the deal, an investment company controlled by CEO Muller agreed to buy a 29 per cent stake in the company from Russian banker Vladimir Antonov for an undisclosed price.
Shares in Spyker have doubled in the past two weeks, and the company's market value as of Tuesday's close was euro61.7 million.
In addition, Muller's investment company will lend $105 million to Spyker to cover part of the first payment to GM and to take the place of loans ultimately controlled by Antonov.
It was not immediately clear how the investment company, Tenaci Capital BV, is funded.
Maud Olofsson, Sweden's industry minister, said the government made the decision to back the loan on Tuesday after analyzing a review of Spyker's business plan and financial situation by the Swedish National Debt Office and consulting firm KPMG. She said the money must be used for projects to develop environmentally friendly cars in Sweden.
GM has been trying to shed Saab for more than a year as part of a massive restructuring process after it emerged from bankruptcy protection in July.
Saab sold around 90,000 cars in 2008, a 30 per cent decline from 2007. With another sharp sales decline expected, it filed for protection from creditors while it reorganized in February 2009.
If Spyker is able to turn Saab around, it will have to follow its corporate motto: "Nulla tenaci invia est via," Latin for "No road is impassable for the tenacious."