Auto Industry

Second hand car companies

A buyer from Beijing picks up assets from Saab

Second hand car companies

"Let's bid for IKEA next?"

Up until the very last minute, few believed that General Motors would sell off Saab in pieces. Many thought that a white knight would appear and save the ailing Swedish carmaker from bankruptcy.

So there was some scepticism about reports that Beijing Automotive Industry Holding (BAIC) intended to pick up Saab’s assets.

Take Saab union leader Paul Akerlund. When asked by Reuters what he thought about BAIC’s alleged plans he was dismissive: “Naturally, I cannot know exactly what has been said, but that is something I take lightly. I simply don’t believe it.”

He should have taken the proposal more seriously. A few days later, BAIC transferred $197 million into Saab’s bank account. That was enough to postpone liquidation for another three months, according to Swedish paper Dagens Industri. In return, BAIC acquired the rights and equipment to manufacture Saab 9-5 and 9-3 sedans.

The deal is something of a coup for BAIC, since it finally gives the state-owned company two models of its own. Even though it is China’s fifth largest car manufacturer, BAIC has always made cars that bear the name of joint venture partners, such as Hyundai and Daimler.

BAIC will roll its first ‘Saabs’ off the production line in 2011, according to the company. However, after some initial confusion it has been made clear the cars will not carry the Saab brand. In this respect, the deal is very similar to the one executed by Shanghai Automative Industry Corporation (SAIC) which in 2005 bought the rights and equipment necessary to build several models from Rover after the UK firm collapsed. SAIC failed to purchase the Rover brand name from its owner BMW, and thus had to produce ‘Roewe’ cars instead.

One can only imagine what derivative of ‘Saab’ gets concocted by the marketing folk at BAIC – ‘Saabwe’ perhaps.

Few in China will likely make the distinction or probably realise that Saab itself is an acronym for Svenska Aeroplan AB ( i.e Swedish Aeroplane Limited).

As to BAIC this is not its first attempt to buy abroad. In the summer it made a bid to buy the Opel brand from General Motors, only to later miss out when the owner decided not to sell. But some question whether BAIC made the right move with Saab. The technology that the company purchased is hardly cutting edge. In fact, it has acquired rather old designs, warns the Yangtse Evening Post. And it might have been better for BAIC to wait until Saab went into liquidation, when it could have probably acquired the assets at a lower price.

China’s involvement in Sweden’s automobile industry may well not stop with Saab: the Scandinavian country’s other major car company, Volvo, is expected to be bought by one of BAIC’s domestic rivals, Zhejiang Geely Holding Group.

Volvo’s seller, Ford Motors, was not perturbed by the sudden announcement of the Saab deal. On the contrary, it reiterated its choice for Geely as the preferred bidder for its Swedish car unit, and stressed that negotiations are still underway.

And why not? By buying established brands local manufacturers are positioning themselves to take advantage of what they anticipate to be a series of bumper years in the world’s largest car market. As Chinese consumers become more sophisticated, having the right technology becomes more important too. Some companies, such as BYD with its battery-powered cars, prefer to develop their own products. Other companies are taking advantage of fire sale conditions in which beleaguered US carmakers ditch their non-core assets.

BAIC will be hoping Beijing’s bureaucrats will ditch their Audis for its newly acquired luxury sedans.

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