Youngman Representative Voices Continued Interest in Saab As Warranties Are Suspended on North American Vehicles

A representative for Chinese automaker Zhejiang Youngman Lotus Automobile has said that the company remains keen to acquire Saab Automobile and its assets despite the latter's bankruptcy filing. The company's lawyer and representative in Sweden, Johan Nylen, told Reuters News: "I feel as if the discussions and plans that took place between the Saab management and Youngman may well be realised even at this stage, but excluding the technology that GM provides." He went on to say that among the assets that remain of interest to Youngman is the Phoenix platform architecture, which had been set to underpin the next generation of the Saab 9-3 due in 2013. Although 10% of this platform's components reportedly come from General Motors (GM), which quashed a deal between Youngman and Swedish Automobile for Saab because of fears over the use of its intellectual property, Nygen said that this could be overcome. He stated, "It will be done by developing the parts that GM provide in-house instead. Then it will be completely decoupled from GM." However, the representative added that completing the development of this vehicle architecture would be extremely costly and time consuming, taking between one and two years. He also said that any new owner would need permission from aircraft and defence company Saab AB and truck-maker Scania to gain the rights to use the Saab brand name.

On a related note, Chinese dealership group PangDa Automobile Trade, which had previously partnered Youngman in plans to acquire Saab Automobile, has said that it will take part in the bankruptcy process. Wang Yin, an assistant to PangDa chairman Pang Qinghua, was quoted by China Business News as saying that, "PangDa will participate in Saab's bankruptcy liquidation to assess the losses incurred during the bid." The company paid EUR45 million (USD58.7 million) as part of an order for vehicles that were planned to be sold through its dealership network in China.

Saab Suspends North American Warranties

As the bankruptcy process gains momentum, Saab has instructed its US dealers to suspend all warranty coverage and work on vehicles immediately. Effective from 19 December, "Warranty coverage is suspended indefinitely for all new Saab vehicles sold. During this period, the warranty booklet must be removed from the owner information packet", Saab Cars North America said in a statement provided to Automotive News. Saab has been approved for bankruptcy and liquidation, and as a result any new vehicles must now be sold "as is" through dealerships in the US. "Saab owners should be advised to keep receipts of all related warranty work done or services performed until further notice", Saab Cars North America said. The vehicles had been covered by a four-year, 50,000-mile warranty including no-charge scheduled maintenance for three years or 36,000 miles.

Outlook and Implications

The words of Nylen contrast with those of Youngman president Huang Zhiqiang, who was less enthusiastic with regard to the automaker's future involvement in Saab Automobile. The senior executive was quoted at a press briefing by China Daily as saying that it "would not continue to negotiate with Saab following the company's declaration of bankruptcy". It could well be that the company has had a change of heart as the dust has settled. However, it is more likely that Youngman is considering the benefits of acquiring assets as part of a sale by the receivers. This option would enable it to bid for the rights to the Phoenix architecture and other Saab engineering and technology assets that are free from GM's ownership in order to progress its own ambitions as an automaker. However, it seems unlikely that it would want to acquire the local manufacturing assets of Saab given the costs of producing vehicles there and the potential liabilities. It also seems unlikely that Saab AB or Scania would be willing to license the brand name to such an unknown entity, and there are questions as to how much value this would have, given the protracted demise of the company. Shanghai Automotive Industry Corporation (SAIC) is already facing similar issues with its resurrected MG brand in the UK, and it could be argued that it may have been better for SAIC to have started from scratch, as many other Chinese automakers plan to do with their first forays outside of China.

What could be the final nail in the coffin of the Saab passenger brand ironically comes at a time when the automaker was starting to see some slight sales increases in North America thanks to the arrival of two new models based on GM underpinnings that are now likely to become rare collectors' items. What the suspension of warranties will mean for the 2,400 Saabs still in inventory across the US is not yet known, but these models are likely to be available soon at considerably discounted prices, seeing as how they cannot be sold with warranties (at least not warranties through Saab; private-party warranties might be available for a fee, as are available with used vehicles). It is also unclear what kind of recourse owners and dealers might have in terms of transferring the warranties, as the official bankruptcy is still in its very early stages. Meanwhile, it would be no surprise to see similar announcements in other markets around the world.