Why Chinese companies are wary of Saab

Yang Jian is managing editor of Automotive News China.
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SHANGHAI -- Despite Spyker CEO Victor Muller's efforts to portray his Saab unit as a valuable prize worthy of Chinese investment, Chinese companies seem to be wary of a tie-up.

"I had a pretty good negotiating position. I positioned what I could sell as a stake in the last premium, independent European car company," said Muller, describing his effort to form an alliance with Chinese automaker Hawtai Motor Group Co.

But that was two weeks ago. Since then, Spyker Cars NV's deal with Hawtai has collapsed, and its distribution deal signed this week with China's Pangda Automobile Trade Co. is a memorandum of understanding, not a binding agreement.

Two weeks ago, Muller boasted that several Chinese suitors were interested in Saab. But only Pangda has surfaced in the wake of Saab's failed alliance with Hawtai.

Why are Chinese companies apparently wary of Saab? Well, they have good reasons to be cautious and here's why.

First, of the international mass-market auto brands, Saab probably is the least known in China. It is not perceived to be as valuable as other global brands.

And this is because Saab has very limited sales in China. Saab has no plant in China, and its vehicles have long been imported into the country by General Motors Co.

With China's high tariffs, it's difficult for imported cars to compete with China-built models. Last year, Saab sold only 257 units in China, according to J.D. Power and Associates.

This is in sharp contrast to another Swedish brand, Volvo Car Corp. Before Zhejiang Geely Holding Group Co. bought the company, Volvo had established a modest niche in China.

Several Volvo models are built in Ford Motor Co.'s joint-venture plant in the southwest China city of Chongqing. In 2010, about 30,000 Volvo vehicles were sold in China.

Geely hopes to vastly expand Volvo sales in China, improving its own image in the process. But the acquisition of an international brand no longer is the only way for a Chinese company to improve its image.

Another private Chinese automaker, Great Wall Motor Co., has consistently improved its brand image by boosting product quality and selling vehicles in mature markets such as Australia and Italy.

Chinese automakers also have learned that overseas acquisitions are risky. SAIC Motor Corp. illustrates this point. Having failed to turn around the Ssangyong brand, SAIC is having a difficult time reviving the MG brand that it acquired several years ago.

Finally, Saab's troubles apparently are worse than Chinese automakers expected.

Hawtai blamed the collapse of its alliance with Saab on unspecified "commercial and economic realities."

Swedish media speculate that Hawtai's executives discovered deep problems at Saab after visiting the automaker's plant in Sweden.

Pangda Chairman Pang Qinghua has told Chinese media he will visit Saab's plant this month. There is no guarantee Pang will not change his mind after seeing Saab's troubles with his own eyes.

Last year, Spyker lost 221 million euros (2.1 billion yuan) as Saab's sales collapsed. In the first quarter of 2011, Spyker lost another 728 million yuan.

Muller is anxious to sell equity stakes in Saab to Chinese companies to raise capital. But in the face of increasingly wary Chinese suitors, he will have a tough sales pitch.

You can reach Yang Jian at yangjian@autonewschina.com.

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