Deal Puts Saab in Green Technology Driver’s Seat

The dark clouds over bankrupt Swedish car maker Saab have finally cleared.

Saab Automobile AB’s liquidator signed an agreement in mid-June with National Electric Vehicle Sweden AB (NEVS) to sell the company’s main assets to the Sino-Japanese investment group.

Jiang Dalong, president of NEVS, said Saab would no longer be a traditional automaker but a producer of electric vehicles.

The transformation of Saab will be backed by its new owners’ experience in new energy development. NEVS was formed in May in Sweden specifically to acquire Saab. It is 51 percent owned by National Modern Energy, a Hong Kong-based company that operates biomass power plants in China. The Japanese investment firm Sun Investment owns 49 percent.

Jiang, who controls National Modern Energy, said “eventually we will hold NEVS’ full stake.”

Second Chance

In early 2009, financial difficulties prompted Saab’s parent General Motors Corp. to put it up for sale. GM later sold Saab to Dutch super-car maker Spyker, and still holds a small stake in the company.

After struggling for months to stay afloat, the company finally petitioned a Swedish court for permission to declare bankruptcy. And last December, Saab was declared insolvent.

A dozen bidders tried buying Saab, including several Chinese companies including Pangda Automobile Trade Co., Zhejiang Youngman Lotus Automobile Co., and BAIC Group. GM’s main objection to each of these suitors involved access to intellectual property rights.

“GM doesn’t want to foster a new competitor in the traditional auto sector,” an industry source said.

Jiang said he was not sure his offer would be accepted by the liquidator until the last moment. “Our bidding price was not high, nor did we have car industry experience. At the peak, there were as many as thirteen big multinationals in the competition.”

NEVS’ background in clean energy distinguished the company from others. “Our operation in the field of biomass power generation is well-recognized,” he said.

The acquisition coincides with a boom in China’s alternative energy sector. Jiang is bidding to build a green industrial chain that linked power generation and end-users. Electric vehicles would lie at the downstream end of the chain.

Jiang’s willingness to negotiate the rights to use the Saab brand name may also have helped him win the deal. The brand name is shared by Saab Automobile, Swedish truck maker Scania AB, and Swedish defense group Saab AB.

“I’m sure all parties will eventually find the right solution,” he said.

An industry source said that if the trademark is not included in the acquisition, NEVS would probably have to pay tens of millions of dollars each year to use the Saab name.

No financial details were immediately made public, although there were media reports that the price was US$250 million. The purchase covers Saab’s major assets, including Saab Automobile AB; its subsidiaries Saab Automobile Powertrain AB and Saab Automobile Tools AB; and a Saab factory in Trollhattan, Sweden.

NEVS also bought the rights to Saab’s 9-3 model and technology for the new Phoenix model. It did not get Saab Automobile Parts AB nor the rights to the 9-5 and 9-4x models, which GM owns.

Electric Future?

Jiang, a native of China but a Swedish national, has lived in Sweden for twenty-three years. He said he started pursuing Saab in March after chatting with a cab driver about the company’s future en route to an engagement in downtown Stockholm.

The taxi driver suggested the company try a special path to revive its fortunes.

This idea actually matched with Jiang’s ambitions to build an electric future in China for Saab. He cited a report by the consulting firm McKinsey & Co. which said by 2020 there would be more than 200 million cars in China, and that a fleet this size annually would require what’s now a year’s worth of global oil production.

“Traditional cars are certainly not going to be sustainable,” Jiang said. “So we bought Saab and we will transition from its current 9-3 version to an electric version.

“Saab’s origin as an airplane manufacturer means it’s very specialized in the technology of lightweight construction and security. Thus is precisely what the future electric car needs.”

But there are skeptics. Experts say neither the technology nor the markets for electric cars are mature in China. They point out that no car manufacturer has been able to mass produce an electric vehicle and resolve safety, range, and charging issues.

Jiang remains confident. “Ten years ago, many people also questioned and opposed the idea of biomass power generation,” he said, “but we made it.”

Jiang’s main business covers biomass power generation, boiler and exhaust fan manufacturing, and energy storage. He founded National Modern Energy Holdings in 2004. It controls Beijing-based State Power Group, which operates twenty-eight biomass power plants in China.

But there are questions about the profitability of the industry. Cao Yin, director of energy and power businesses with U.S. consulting firm Martec Group, said biomass power generation companies in China “basically can’t make money” due to high costs and low sales. In 2010, Jiang admitted his company has relied heavily on government subsidies.

Jiang’s companies haven’t seen satisfactory profits in the energy sector, Cao said, and the Saab electric car project will require a huge investment.

Nevertheless, Jiang said Saab’s electric car business will be profitable within ten years because “if you do the responsible thing, profit will come sooner or later.”

Liang Dongmei and Pu Jun are Caixin staff reporters.