Saab saved by investment from China's Hawtai

[May 03, 2011]  STOCKHOLM (AP) -- A small, privately owned Chinese automaker on Tuesday saved Sweden's Saab Automobile from imminent collapse through an agreement to provide $223 million (euro150 million) in funds for the ailing brand.

Saab's owner Spyker Cars said Hawtai Motor Group will take an initial 30 percent stake in Spyker in the deal which also includes joint ventures on manufacturing, technology and distribution.

The agreement is the latest in a line of efforts by Saab to raise capital, but the first that would provide enough funds to keep the carmaker afloat long-term. The automaker's production has been at a standstill since April 6 due to a lack of working capital, but on Monday it said it had secured short-term loans of $88 million (euro59.1 million) and aims to restart production within a week.

Shares in Spyker, which bought Saab out of liquidation from General Motors Corp. in January 2010, rose 16 percent to euro4.92 in Amsterdam on the news.

The deal is subject to approval from Chinese government agencies, the European Investment Bank and the Swedish National Debt Office, Spyker said.

As a part of the deal with Hawtai, the Chinese company will invest euro120 million for a 29.9 percent equity stake in Spyker and euro30 million in a convertible loan with six months maturity.

The agreement means Sweden's two big car makers, both previously owned by U.S. companies, are now in Chinese hands. Last year Ford Motor Co. sold Volvo to China's Geely for $1.5 billion.

Spyker CEO Victor Muller said the deal means Saab has secured "the required midterm financing" and allows the company to "enter the Chinese car market and establish a technology partnership with a strong Chinese manufacturer."

Meanwhile, Richard Zhang, vice president of Hawtai, said the deal with the "iconic" Saab brand will give his company access to innovative technologies and an international network which "would have taken us decades to build."

Hawtai, based in eastern China's Shandong province, is a relatively new automaker that parlayed a tie-up with Hyundai to build its market strength in China's fast-growing SUV segment. It also has licensed Italian engine technology and claims to have advanced know-how in clean diesel engines.

But Hawtai (pronounced whah-tie) lacks the scale of bigger domestic competitors such as Chery Automobile and Geely. It also has only recently begun making sedans.

Acquiring a ready-made platform and products for passenger cars is a key motivation for the investment in Saab, analysts say.

"Hawtai is taking a big risk there, but if Saab can enter the market quickly maybe they can quickly turn the company around," said Yale Zhang, an independent analyst in Shanghai.

"The first thing is to try to get access to the platform and technology and then to bring Saab directly to China, where it can find a large market," Zhang said.

Spyker previously put forward plans to raise cash by selling its property to Russian businessman Vladimir Antonov and allowing him to become part-owner of Saab.

Last week, the Swedish Debt Office recommended the government allow Antonov to invest up to euro30 million for a 29.9 percent stake in Spyker, while GM said it had reached a "tentative agreement" with Saab to that effect.

The EIB, which also needs to approve that move, has not yet made a decision.

[Associated Press; By MALIN RISING]

Elaine Kurtenbach in Shanghai and Toby Sterling in Amsterdam contributed to this report.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.