Swedish Automobile Cements Investments, Plans New Models
STOCKHOLM (Dow Jones)--Saab Automobile owner Swedish Automobile NV (SWAN.AE) said Monday it converted its memoranda of understanding with Chinese partners Zhejiang Youngman Lotus Automobile Co. Ltd. and Pang Da Automobile Trade Co. Ltd. (601258.SH) into binding agreements, meaning that only regulatory clearance stands in the way of a much-needed EUR245 million equity investment.
Swedish Automobile said also it struck an agreement with Youngman subsidiary Zhejiang Youngman Passenger Car Group Co. Ltd. for the formation of a Sweden-based 50/50 joint-venture company for the development of three new Saab models.
The joint venture will focus on developing three new vehicles, the Saab 9-1, Saab 9-6 and Saab 9-7.
"This joint venture offers Saab Automobile the opportunity to develop models that were not envisaged nor funded in our original business plan: for instance, we will now be able to develop a small entry-level Saab, a car that has long been on the top of our wish list," said Victor Muller, chief executive of Saab Automobile and Swedish Automobile.
Saab Automobile will be responsible for developing the new models while Youngman Passenger Car will put up the money.
Saab Automobile, whose production has been halted for most of the past three months due to unpaid supplier bills, is continuing to fight for its survival and the Chinese investment would provide the troubled Swedish car maker with medium-term financing and an important platform for selling its cars in the fast-growing Chinese markets.
Under the terms of the deal announced last month, Youngman will acquire a 29.9% stake in Swedish Automobile for EUR136 million. Pang Da will buy a 24% stake for EUR109 million. The two Chinese entities together will control 53.9% of Swedish Automobile, formerly known as Spyker Cars NV, and each also has the right to nominate up to two members of the supervisory board.
However, there still are significant hurdles to overcome to get clearance and the Swedish Automobile needs more funding to secure its long-term future.
Two weeks ago, Saab Automobile said it didn't have enough money to pay employees' wages and it approached its suppliers with an offer to pay just 10% of their outstanding accounts in an attempt to resume production.
"It is important for our suppliers to see that there is a long-term plan," said Saab spokesperson Eric Geers.
By selling Saab Automobile property to a Swedish consortium, landing a bulk order to supply cars to a Chinese buyer and agreeing a EUR25 million bridging loan from the Bahamas-based shareholder Gemini Investment Fund, Swedish Automobile last week said it had secured enough money to restart production in the next two weeks, if it can reach an agreement with its suppliers.
"We aim for a production start sometime next week," said Geers. "We need to reach an agreement with all of our suppliers in order to get a steady supply of material."
The European Investment Bank Monday said it has approved the sale of 50.1% of the shares in Saab Automobile's real-estate vehicle to a consortium of Swedish property investors for a transaction value of EUR28 million. The property has been used as collateral for state-backed guarantees for loans to Saab Automobile from the EIB.
The agreements with Youngman and Pang Da are subject to regulatory approval from Chinese and Swedish authorities and the EIB.
Saab Automobile, which has outstanding orders of about 7,500 cars, last month reached an agreement with its workers to shorten their summer vacations from four weeks to two starting July 25 to allow it to reduce that backlog when production resumes, but that deal will be meaningless unless suppliers can get their employees to make similar concessions so that they can produce the parts that are needed.
"It is part of the discussion we have with our suppliers," said Geers
Saab NOT dead ?
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