What next for Saab, as Koenigsegg pulls out?

Koenigsegg dramatically walked away from its proposed deal to buy Saab yesterday evening – leaving General Motors’ Swedish outpost in a precarious position this morning. And the question on everyone’s lips is, what’s next for Saab?

The options are limited at this stage. GM could decide to keep Saab after all, mirroring its U-turn on selling Opel and Vauxhall. However, its finances – while much improved since emerging from bankruptcy this summer – are still stretched and much of its attention will be focused on its GM Europe business. It has tried for many years, and at great expense, to make Saab work and failed. Why should new chief Fritz Henderson’s strategy now come good where Rik Wagoner’s failed?

So if GM decides to seek another buyer of Saab, that leaves the question: who would buy a small-volume, sub-100,000-cars-a-year, quasi-premium car maker in the tail end of the worst recession for generations?

Possible buyers of Saab

Chinese car makers have already been linked to the purchase of Saab. While Geely is no longer in the frame after being named as the preferred bidder for Ford’s neighbouring Volvo division, Dongfeng Motor Company was one of 27 businesses expressing an interest in buying Saab at the start of the bidding process.

The buyer needn’t necessarily be another car maker. Private finance houses have sounded out several manufacturers in the past few years: New York ‘vulture fund’ Cerberus famously bought a majority stake in Chrysler with exquisitely bad timing; Brussels’ RPJ was in the bidding for Opel/Vauxhall; and US investment specialist Renco Group was reportedly in the frame to snap up Saab in the final stages.

But City money is more restricted now than in the good times and any potential investors will want a knockdown price with guaranteed returns from a business already squeezed ’til the pips rattle.

Other possible outcomes for Saab

There will be numerous stumbling blocks for any potential buyer. Koenigsegg’s deal to buy Saab reached advanced stages and yet even then they realised they couldn’t make the numbers stack up. For all the promise inherent in the fresh-dawn 9-5, the supercar specialist’s bean counters clearly doubted the long-term sustainable prospects for a low-volume brand tarnished by decades of mismanagement.

Which leads to two doomsday scenarios. One is the Swedish government, which could in theory prop up Saab for longer in the hope that a realistic purchaser is found. The state could even run Saab as a Swedish Motors Inc, although it would be a risky long-term strategy and industry minister Joran Hagglund appeared today to rule out nationalisation (see quotes on next page).

The harsh business reality is that Saab could now go to the wall. So far not a single car maker of any scale has collapsed without resuscitation – as politicians around the globe have stepped in to save national pride and local jobs. Is it possible that Saab could be the first to go?

GM has already shuttered its Saturn sub-brand in the US. Today it seems that Saab could be another brand that could end up as a museum relic, unless a last-minute saviour is found.

Reaction from around the world to Koenigsegg’s decision not to buy Saab

‘Many have worked tirelessly over the past several months to create a sustainable plan for the future of Saab by selling the brand and its manufacturing interests to Koenigsegg Group AB. Given the sudden change in direction, we will take the next several days to assess the situation and will advise on the next steps next week.’
‘Given the sudden change in direction, we will take the next several days to assess the situation and will advise on the next steps next week.’
GM president and chief executive Fritz Henderson

‘We had hoped this deal would go through. We have a good business plan, but now Koenigsegg has pulled out, so we will have to see what will happen.’
Eric Geers, Saab spokesman

‘You can’t, by state aid, keep a company ongoing, if you don’t have any chance for a competitive company. That can only be assured by a private owner who really is familiar with the market conditions… But we can facilitate with loan guarantees and we also have this tool of a rescue loan with very hard conditions. We are willing to discuss that with any potential buyer for Saab.’
Joran Hagglund, Swedish industry minister

‘This is a shock. We had expected the Koenigsegg takeover was a done deal – it now looks like Saab’s future is up in the air once again. Is this MG Rover all over again?’
Greg Fountain, CAR managing editor

‘I think GM will now simply maintain Saab. Saab may currently be loss-making, but GM desperately needs to have a prestige brand in Europe. But if it does now seek to find another buyer, there are a number of Chinese firms who would love to have Saab, such as Beijing Automotive.’
Robin Roberts, analyst