Hawtai Motor Group's $171 million bid to buy 30 percent of Saab, announced just last week, has dissolved. But Saab's just-in-time deal was always built on shaky ground, even though it was widely heralded for saving Saab while also giving a fledgling Chinese automaker a much-needed western foothold.
Behind the scenes, the deal appears to have been far more fraught than it first appeared. According to Swedish daily Svenska Dagbladet, Stockholm's ambassador to China raised questions about Hawtai last week, warning the country's foreign ministry that Hawtai may have inflated its auto output, and had also run through several CEOs in recent years. The paper also said that Saab's negotiations with Hawtai had proceeded "at record speed," reducing the time for background checks. Hawtai protested the reports, claiming that its production figures are verified by the government.
Hawtai's bid needed a government stamp
Hawtai -- a young automaker so far focused on the domestic market -- jumped into its Saab partnership without getting various approvals from the Chinese government, and that apparently sank the agreement. Saab Chairman Victor Muller is in China trying to revive the Hawtai deal, and also talking to another possible partner, Great Wall Motors.
It's unclear why Chinese regulators, who approved a similar deal between Geely Holding Group and Volvo last year, sank this one. But it's happened before, since Sichuan Tengzhon Heavy Industrial Machinery's bid to buy Hummer fell apart last year. And Hawtai definitely has issues. Saab may not have done as much due diligence as it should.
A carmaker for 11 years
Hawtai has only been making cars since 2000, and until recently almost all of them were Hyundais built under license. It has the capacity to build 350,000 cars a year, but it wanted to triple that by 2015. Clearly, having a foreign partner would enhance its standing at home and help it stand out in a very crowded marketplace. China has 100 carmakers, though the market is expected to consolidate to half of that.
Auto analyst James Bell, who follows the Chinese auto industry closely, said that Hawtai is low-profile in a country where who you know is incredibly important:
I've studied a lot of obscure Chinese car companies, and Hawtai hadn't crossed my radar before the Saab deal. The Chinese government gets more cooperative when automakers show an understanding of the western market or an affiliation with foreign companies -- that's why they come to the American auto shows and put on big displays, without actually selling cars here. Hawtai undoubtedly saw an opportunity to do what Geeley did with Volvo and get a preferred relationship with the government, which can mean funding and better taxation rates.The Hawtai/Saab axis would seem to have many advantages for advancing China's status as a world automaker, so if it didn't happen, Bell speculates it may just mean that Hawtai didn't have the right connections.
It's a mess
The whole thing is messy. Saab has an arrangement with another Chinese automaker, BAIC, which purchased the rights to make the Swedish automaker's old 9-5 last year. Saab's Muller denies as "nonsense" news reports that BAIC was interested in buying Saab, or had any distracting holds on current tech, such as the forthcoming 9-3 (built on the new Phoenix platform).
Saab may be floating in the wreckage, but it still has hopes of a lifeline. Its existing funding isn't enough to restart production. Saab spokeswoman Michele Tinson reminded me that Saab had secured a 30 million euro ($44.6 million) convertible loan agreement with Gemini Investment Fund Limited. Asked if it was enough to open the factory, she told me, "Obviously not, because we haven't."
Hope now centers on three investment possibilities:
- Longtime suitor Vladimir Antonov, a Russian banker who's made no secret of wanting to own at least part of Saab. But his murky past has meant a long, drawn out process getting approval from the European Investment Bank.
- A new deal with Hawtai. They're still talking, though Saab points out it's non-exclusive now.
- An alliance with Great Wall Motor Group. A source told Reuters, "The two sides have never stopped talking and have been in touch with each other despite the Hawtai/Spyker deal." Unlike Hawtai, Great Wall has foreign sales -- it sells the Hover X240 SUV in Australia and Italy. It's also talked to other foreign automakers, including Subaru, Jaguar and Land Rover.