IHS Global Insight Perspective | |
Significance | The deal is expected to close by the end of this year but is subject to funding agreements and other closing conditions. |
Implications | Saab plans to exit reorganisation shortly, as it was scheduled to do whatever the outcome, but this news appears to secure the company's immediate future. |
Outlook | Koenigsegg certainly faces a massive task in returning Saab to a state where it is a profitable and vibrant premium passenger carmaker, but there is still a good amount of goodwill towards the Saab brand across Europe and given the investment from Europe and GM, it could just pull off one of the most remarkable turnarounds in automotive history. |
General Motors (GM) has confirmed that it has reached an agreement with Koenigsegg Group AB for the sale of 100% of the shares of Saab Automobile AB, according to a company press release. The deal is expected to conclude before the end of 2009 cut-off date when GM will cease to fund Saab. The sale involved conditions including expected funding commitments with Swedish government support and guarantees for essential European Investment Bank (EIB) loans, as well as transitional assistance from GM, as Saab becomes independent. The deal had looked shaky in recent weeks as investors were rumoured to be pulling out of Koenigsegg and the Swedish government pressed the company for plans (see Sweden: 26 June 2009: Swedish Authorities Request Clear Plans for Saab from Koenigsegg and Sweden: 12 August 2009: Investor Sells 22% Stake in Saab Bidder—Report).
Saab is about to launch a number of new models, developed with GM, that are in the final stages of development. GM and Saab confirmed that they will continue to share technology and services during a defined time period managed through licences and service agreements. Saab plans to exit legal reorganisation shortly, the Swedish equivalent of bankruptcy protection.
"This contract is an important step in the journey to a potential deal", said Carl-Peter Forster, president of GM Europe. "Saab's great cars, its unique design, safety- and engine-technology, as well as its excellent brand image, combined with Koenigsegg Group's unique combination of innovation and entrepreneurial spirit, bode well for a successful future for the brand. We will continue to work with all parties to define the final details and ensure a fast closure of the deal, which we expect to take place in the next few months. The closure of the deal is contingent on the funding commitment from the European Investment Bank, guaranteed by the Swedish government."
"We have now concluded another important step in realizing the great potential of Saab," said Christian von Koenigsegg, CEO of Koenigsegg Group. "Our plan is to transform Saab into a stand-alone vibrant entrepreneurial company and make it 'sustainable' by making it profitable. We will revive Saab's Swedish heritage of ecological sensitivity, safety, design innovation and 'fun to drive' experience!"
Jan Åke Jonsson, Managing Director of Saab, said: "This is excellent news for everyone connected to Saab around the globe. This is an important step to secure jobs and our long-term future as a Swedish carmaker. In the short-term, it will enable us to move forward with exciting new cars starting this month with the all new Saab 9-3X."
Outlook and Implications
The timely news from GM, Koenigsegg and Saab has allayed recent rumours and with the sale agreed, Saab can exit its reorganisation protection. Doubt was cast over the deal after last week's news that a key North American investor, Mark Bishop, sold his 22% stake in Koenigsegg to a new owner. However, with Saab due to come out of Swedish reorganisation protection any day now, the details of the sale have finally been agreed. While we await financial details of the sale, the likelihood is that little cash was involved, as the initial agreement in June saw GM agree to invest more into Saab after its spin-off to a new owner than it would receive from the buyer. The Koenigsegg consortium of investors offered a relatively small sum initially, but are backed by contingent financing, to be repaid to GM if they were to succeed in making Saab viable.
For GM, heavily criticised for its handling of the Saab brand over the 19 years of its stewardship, this deal is really about the technology licensing and other agreements which will bring the company some small return for the development of the new 9-5 model, which shares its Epsilon 2 platform with the Opel Insignia and is to be debuted next month in Frankfurt. Useful volumes could well accrue for both Saab and GM as the early indications show a return to form for Saab in the new 9-5.
Koenigsegg certainly faces a massive task in returning Saab to a state where it is a profitable and vibrant premium passenger carmaker. Although there is still a good amount of goodwill towards the Saab brand across Europe, there is no doubt that Saab's brand values of innovation, safety and original design have been significantly diluted and undermined during the period of GM ownership. However, Koenigsegg can play a part in revitalising the company's brand values as well as extending them to include the development of green technologies, as specified by the conditions attached to the EIB loan.