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Chinese automaker signs on to Saab deal

TT/AFP/The Local · 9 Sep 2009, 12:30

Published: 09 Sep 2009 12:30 GMT+02:00

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Koenigsegg Group said BAIC, China's fifth-largest automaker founded in 1958, would become a minority owner in Koenigsegg Group as part of a memorandum of understanding signed between the two parties.

BAIC already has joint ventures with DaimlerChrysler Benz and Hyundai.

“This is an important step on the road to a new Saab. We have a well-thought out business plan, an important partnership, and we are now ready to go on without state financing,” said Christian von Koenigsegg, head of the Koenigsegg Group, in a statement.

According to the memorandum of understanding, BAIC will be a minority owner in Koenigsegg Group, which will own 100 percent of Saab Automobile.

“Koenigsegg Group will own 100 percent of Saab Automobile. The aim is to

sign a final agreement later this year. Because of the signed confidentiality agreement, no further facts can be discussed at present. The Swedish government has been fully informed of this memorandum of understanding,” the Koenigsegg Group said in a statement.

The Swedish group had been short 3.0 billion kronor ($412 million) to complete the purchase of Saab first announced in June, though the total purchase price has never been disclosed.

With Wednesday's announcement, Saab, which built its first prototype cars in 1947, has now moved another step closer to returning to Swedish ownership after an unhappy, largely unprofitable two decades under American management.

Koenigsegg, founded in 1994 by Christian von Koenigsegg, has just 45 employees and produces 18 high-end sports cars a year at more than a million euros ($1.4 million) each.

Saab, by contrast, employs 3,400 people in Sweden alone and sold just over 93,000 cars worldwide in 2008.

The Koenigsegg Group was created in May in order to buy Saab Automobile from GM, and was chosen from about 20 parties interested in purchasing the beleaguered Swedish automaker.

The group is controlled by a company owned by American businessman Augie K. Fabela, who also serves as chairman of the board; von Koenigsegg, who is the company’s CEO; as well as Norwegian businessman Bård Eker.

According to a previous business plan, around 11 billion kronor is needed to return Saab to profitability within two to three years.

GM has previously said it would contribute around 3 billion kronor in loan forgiveness and by paying for the equipment needed to produce the new Saab 9-5.

The deal also hinges on a loan from the European Investment Bank (EIB) worth nearly €400 million ($600 million), which required that the Swedish government act as a guarantor.

Koenigsegg still has to convince the Swedish government of the viability of its business plan for the iconic automaker.

Koenigsegg Group said it was "now focusing on the discussions" for the state guarantees.

Von Koenigsegg has previously said he wants "to transform Saab into a stand-alone vibrant entrepreneurial company and make it 'sustainable' by making it profitable."

"I see Saab as having its own niche as a post modernist, sporty, comfort car with an environmental aspect," he said in June.

But questions have abounded in Sweden over what the future holds for Saab, with some experts and commentators expressing doubts about whether Saab's new owners have the necessary expertise to run a major car company.

Under GM's stewardship, Saab rarely posted a profit and last year lost 3.0 billion kronor ($341 million at the time).

Story continues below…

Another Chinese carmaker, Geely Holding Group, has confirmed its interest in acquiring Sweden's other carmaker, Volvo Cars, from US group Ford.

BAIC is, according to the Koenigsegg Group, one of the leading and fastest growing auto manufacturers in China.

The Beijing-headquartered company is expected to sell 1.13 million cars this year.

“It’s gratifying that we can go out with this news now. It dispels concerns for both employees and customers,” said Anette Hellgren, the local leader for the Unionen labour union chapter at Saab Automobile, in a statement.

She thinks the solution gives hopes for the future.

“What’s important is that BAIC is a minority owner in Koenigsegg Group. It’s still Koenigsegg Group that is buying Saab. There won’t be any direct Chinese ownership, which feels safe. There is a lot of apprehension when it comes to Chinese companies, but I have faith in this case,” she said.

TT/AFP/The Local (news@thelocal.se)

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Your comments about this article

12:53 September 9, 2009 by bjinger
Thanks Chinese baic.
14:09 September 9, 2009 by Leprehcaun
"Thanks"?? You think they did it as a favor and not because they want Saab's technology? Seriously? Lol.

In the short run this saves Saab and is profitable from our point of view but not in the long run. Opposite situation for them. With the right guarantees this could be good for us, but it is because those guarantees aren't necessary for BAIC to give us that they go in with the money.
14:14 September 9, 2009 by falcon
Koenigsegg lacks funding and goes to China with its beggars cup? BAIC is owned by the Chinese Government with one of the worst human rights records in the world - a poor match for Sweden and Saab. The mistakes keep on coming! Saab will be closed or in China in a year. Goodbye Trollhattan, goodbye Sweden.
14:49 September 9, 2009 by ladyontop
it's just business falcon, learn to separate them. Saudi has it worse but does it stop anyone from buying their oil?
18:32 September 9, 2009 by jack sprat
The Chinese aren't known for charity where business is concerned.

They are unlikely to sit back and take a fairly passive part in proceedings for very long.

I'd be surprised if they dont have a cunning plan up their sleeves to take over the whole shebang on the cheap at just the right moment.

Its beginning to look more and more like Chinese Saabs and Chinese Volvos.
18:35 September 9, 2009 by Staffs
Another lose lose situation for the taxpayers and win win for Koenigsegg and BAIC.

I remember when SAIC took over Rover a few years ago. to much government and press fanfare. Reality struck and within 12 months the entire production line, along with the IP, had been shipped to China. The Longbridge plant is now mainly a festering pile of rats, scrap and weeds.

$400m guarantee not from the government, but by the taxpayer, which translates into reduced healthcare and social benefits for us taxpaying mugs when it all goes pear shaped, which it will.

The world is awash with overcapacity in the automotive sector, along with overcapacity in almost every other industry. The worldwide output gap is huge.

When will these Keynesian clowns get it?
19:05 September 9, 2009 by spy
Great news that Koenigsegg now has the cash to close the deal and also with a BAIC partnership a foothold in China too. BAIC will be a minority stakeholder in Koenigsegg Group and not Saab so they will have no control. Win,Win,Win.

I feel sorry for Volvo it looks like they will actually be controlled by a Chinese company.
19:24 September 9, 2009 by Staffs
Please note the following statements taken from the article:

1. The Koenigsegg Group was created in May....

2. The group is controlled by a company owned by American businessman....

This means Koenigsegg Group & Koenigsegg are two separate entities, if the Group goes down Koenigsegg doesn't.

Nobody knows the level of shareholding that BAIC has in the controlling company, or any other of the undisclosed facts due to the confidentialty agreement.

Anyone who thinks this is a good deal for anybody other than BAIC or a select group of shareholders is deluded, or a fool.
09:20 September 10, 2009 by sparkriver
Chinese have it all except the brand name :(

they produce cheap cars keeping workers in inhumane condition and has no sense of quality.

But now they also have a brand name :)

well my question is if they are short 3 billion Kr .whats the actual deal was for ?

I think its win situation for the China seem after all they will push their car under the name of saab to EU
20:37 September 13, 2009 by spy

It has been stated elsewhere (reuters, bloomberg, AFP etc.) that BAIC will only have a minority share of Koenigsegg Group so they will be non-controlling.

A partnerhip with BAIC could be very good for 2 reasons: 1) They have lots of cash to make the deal work 2) They have a foothold in China which is one of the fastest growing markets in the world. BAIC already has already had sucessful partnerships with Jeep, Merc and Hyundai. They don't sell cars in the EU but actually produce their partners cars under license in China and sell them there.
17:13 September 16, 2009 by rio
Yes, if BAIC sell SAAB in China, where this car brand holds a brand of lowkey and powerful, that'll be sure a good result for the Swedish.
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