Saab Secures Short and Long Term Funding, Plans PR Blitz

[OmarKareem]

About a year into its independence, Saab began having problems with liquidity. The issues resulted in production stoppages at its Trollhattan plant as suppliers no longer continued supplying parts. The situation was dire – Saab’s business plan was supposed to have been funded for at least another year

With production stopped, the company began a scramble to secure funds for investment. Saab announced two days ago that it secured the short term funding needed to start production, via a loan from the Gemeni Investment Fund Limited

The loan is for €30 million Euros (approximately $44 million USD at current exchange rates). In addition to the new loan from Gemini, Saab is making a nearly €30 million EURO draw down request on its previous loan from the European Investment Bank

The big news though, is long term financing. Short-term funding to restart production isn’t enough – Saab needs to be carried through to a point where losses can slow, and hopefully be turned around into profitability

That funding has come in the form of a deal with Chinese automaker Hawtei Motor Group. The Chinese company is purchasing a 29.9% stake in Saab for $223 million. The agreement is expected to be approved by Chinese authorities, the EIB and the Swedish National Debt Office in six to twelve weeks

For Saab, the deal buys more time for new models like the 9-4X and next-generation 9-3 to hit the market. It also gives Saab immediate access to a large and growing market like China. If Saab can get a foothold in a country like China via Hawtei, its sales picture would improve dramatically. For Hawtei, the deal is attractive because the gains access to highly valuable intellectual property and development knowledge. Hawtei’s vice president Richard Zhang says the deal gives the company access to an international network that “would have taken us decades to build

A deal with Russian investor Vladamir Anotov for a 30% percent stake in the company is also in the works. That deal involves the selling of key assets like Saab’s Trollhattan plant, and then leasing them back at a low cost. Once the investments are approved by the proper authorities, Saab planning is a large public relations blitz that will include Anotov and Hawtei

The effort will be focused on restoring Saab’s image and showing that the company is able to survive into the future. It will aim to create positive media coverage after enduring over a month of bad publicity (and lot of other damaging coverage around its sale to Spyker a year ago). The marketplace is understandably reluctant to purchase Saab products, as up to this point its future has been in doubt