Image: Saab logo
JOHN GRESS  /  Reuters
Saab’s future has been a constant source of uncertainty even before its former parent General Motors decided to either sell or close the brand nearly three years ago.
Image: Paul A. Eisenstein, contributor
By contributor
updated 5/18/2011 8:36:58 AM ET 2011-05-18T12:36:58

Barring yet another last-minute hitch, cash-starved Swedish automaker Saab should have a new partner — and as much as $170 million in cash coming from its deal with Chinese auto retailer Pangda.

News of the alliance emerged just days after another tie-up between Saab and China’s Hawtai Motors collapsed unexpectedly, raising growing concerns about the European carmaker’s survival. Indeed, analysts and customers alike have been asking whether Saab can pull itself back from the brink for several years, and despite the carmaker’s optimistic statements, the Pangda partnership doesn’t mean the skeptics are going away.

“Will this be enough to get them on sound financial footings? I’m just not sure,” said Joe Phillippi, a longtime Wall Street investment analyst and now head of AutoTrends Consulting.

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Saab’s future has been uncertain since even before its former parent General Motors decided to either sell or close the brand nearly three years ago.

Suffering years of declining sales and worsening losses, GM began “winding down” the Swedish subsidiary in late 2009, and by the time the Dutch firm Spyker Cars negotiated a purchase, early in 2010, Saab was effectively insolvent. It took seven weeks after the sale for the new owners to get the headquarters assembly plant, in Trollhattan, running again.

Spyker Chairman and Acting CEO Victor Muller insists that shutdown was the proverbial monkey wrench that led sales and income to fall short of plans last year. Whatever the reason, Saab was struggling to pay bills, and by the end of March a key supplier demanded payment before delivering essential parts. Muller decided to “call their bluff,” and in retrospect now admits he triggered the disaster that would follow, that one supplier being joined by dozens of others boycotting the Saab factory.

With its plants closed and creditors circling, Saab started a frantic search for cash.

Among other proposals, it turned to Vladimir Antonov, a Russian banker and one-time investor in Spyker. Antonov offered a lease-back deal where he would buy Saab's plants and other assets, then lease them back to Saab, an approach that would have provided the Swedish carmaker a quick cash infusion. The deal won the backing of the Swedish government but has been blocked by the European Investment Bank, which provided the initial loan Spyker used to acquire Saab from GM.

With time running out, Dutch entrepreneur Muller turned to China. He had plenty of reasons. For one thing, that nation’s domestic carmakers had long hoped to gain traction by expanding into Europe and North America — even as Saab desperately needed access to China, today the world’s largest automotive market.

The Hawtai deal, Muller proclaimed earlier this month, was “the best available.” Almost immediately, it would have generated more than $100 million in desperately needed cash. It also would have opened access to Chinese distribution, and Saab hoped eventually to start building some of its products on Hawtai assembly lines. (The deal was similar in concept to the sale of the other Swedish automaker, Volvo, to China’s Geely last year.)

Why the Hawtai deal quickly unwound is a matter of debate. Some reports claim the carmaker couldn’t get the approval of Chinese bureaucrats. A similar roadblock scuttled the proposed 2009 sale of GM’s Hummer brand to a small Chinese automaker. But Muller has also hinted that Hawtai may have tried to change the terms of their agreement after the Saab deal was signed.

“It’s not uncommon that the real negotiations often begin after the contract is signed for the Chinese,” said one industry source who has spent several decades dealing with the Asian nation and who asked not to be identified by name.

Story: Chinese car distributor comes to Saab’s rescue

Whatever the actual reason, Saab had to move fast. But even before it lined up the aborted Hawtai deal, Muller had already been negotiating with other Chinese makers, and he was able to find another partner faster than anticipated.

The new Pangda alliance, he said, “will secure Saab automobile’s medium-term funding,” and give it an immediate outlet through the 1,100 dealers operated by the Chinese firm. Pangda is one of China’s 200 largest enterprises. The company completed an IPO just three weeks ago, raising $1 billion. It will now spend some of that money on a 24 percent stake in Saab.

But will the latest partnership hold?

“We’ve seen how fast these rescue deals can fall apart,” warned Dave Sullivan, of AutoPacific, Inc. “Everyone is going to be cautious, and rightfully so.”

Sullivan also stresses that while Saab may be able to pay off past-due parts bills, its vendors will likely drive a tougher bargain on future deliveries, even demanding cash up front, something that will be difficult for Saab to do; the carmaker hasn’t been producing cars to sell since March 29.

There are buyers to deal with too. Saab’s problems have been in the headlines for months, so potential customers “are going to be skeptical before spending $50,000 on a Saab 9-5,” Sullivan noted. Consumers want to know that the company they buy from today will be there to back them up with service and parts for years to come, he said.

The good news is that Saab has been getting solid reviews for the 9-5 and the new 9-4X — its first crossover-utility vehicle. Saab buyers have always been a bit of a different breed, looking for something out of the mainstream, noted Phillippi. So Saab customers are possibly more willing to take a risk and stay loyal to the automaker.

At least Saab has to hope so. If the deal with Pangda holds, Saab will have some cash to deal with its most immediate problems, but the carmaker will likely take time before things can get anywhere close to what might be described as normal again.

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Explainer: Ten cars with surprising gas mileage

  • Image: 2011 Chevrolet Corvette Coupe
    GM  /  Wieck
    The 2011 Chevrolet Corvette Coupe delivers an impressive 26 mpg on the highway.

    Everyone and his goldfish knows that you can get good gas mileage by driving a Toyota Prius. But many of us want to buy cars with features that typical high-mileage economy cars don’t provide.

    Those requirements don’t have to doom us to terrible fuel economy; we just have to choose our cars more carefully. So here’s a list of 10 vehicles with unexpectedly good fuel economy for their size and/or vehicle type.

    (Note: This is not a list of the 10 vehicles with the best fuel economy; you can find that list on the EPA’s website).

  • Audi Q7 TDI


    EPA MPG city/highway/combined: 17/25/20
    Drivetrain: 3.0-l V6 diesel, 8-sp man.
    Vehicle category: 7-seat SUV

    With the Q7 you really can average 25 mpg on a long trip in a sure-footed quattro all-wheel-drive, three-row, seven-seat SUV. You do have to fuel it with diesel, which costs a bit more than gasoline, but you will only have to do that every 600-something miles. And you won’t pay any other penalties because the performance and smoothness of the drivetrain are indistinguishable from that of a comparable gas turbo V6.

  • Buick LaCrosse eAssist

    GM  /  Wieck

    EPA MPG city/highway/combined (estimated): 25/37/31
    Drivetrain: 2.4-l 4-cyl. Hybrid, 6-sp auto
    Vehicle category: mid-size car

    Here’s a midsized Buick — with all the luxury the brand implies — that delivers 37 mpg on the highway. The old advertising slogan was “Wouldn’t you really rather drive a Buick?” The answer to that question for many

    years was “no,” but now that the company’s products have become excellent, if the alternative is some cramped, buzzy econobox, here’s your 37 mpg solution. Because of the compact size of the “eAssist” mild hybrid system, the rear seats fold flat for a pass-through from the trunk — a feature that isn’t available in full hybrid sedans because the space behind the seat is occupied by electric drive electronics.

  • Chevrolet Equinox

    GM  /  Wieck

    EPA MPG city/highway/combined: 22/32/26
    Drivetrain: 2.4-l 4-cyl, 6-sp auto
    Vehicle category: SUV

    Compact SUVs are the new family cars for many consumers, but even though they aren’t gargantuan ground-pounders, they can still get pretty mediocre fuel economy, especially when equipped with a V6. Chevy has dropped in a brawny-but-smooth four-cylinder that delivers 32 mpg in highway driving, and buyers have been snapping them up as fast as the company can build them.

  • Chevrolet Corvette

    GM  /  Wieck

    EPA MPG city/highway/combined: 16/26/19
    Drivetrain: 6.2-l V8, 6-sp man.
    Vehicle category: two-seater

    No one buys sports cars for their fuel economy, but wouldn’t it be nice if some ludicrously fast 430 hp rocket also delivered 26 mpg on the highway? Well, here it is. The Corvette will crank out mile after mile of mid-20s mileage while you’re on the highway driving to the best curvy mountain roads or some distant race circuit for a bit of track day fun.

  • Ford Fusion Hybrid

    Ford  /  Wieck

    EPA MPG city/highway/combined: 41/36/39
    Drivetrain: 2.5-l 4-cyl. hybrid, CVT
    Vehicle category: midsize car

    Here’s the most efficient vehicle on this list, with 39 mpg in combined driving — the 41 mpg city, 36 mpg highway Ford Fusion Hybrid. It doesn’t carry the humpbacked styling or overt political connotations of a Prius, but it does deliver nearly the same gas mileage in a vehicle with a more comfortable ride and vastly better handling.

  • Ford F-150

    Ford  /  Wieck

    EPA MPG city/highway/combined: 17/23/20
    Drivetrain: 3.7-l V6, 6-sp auto
    Vehicle category: full-size truck

    It takes energy to move a load, and that energy comes from gas. Trucks burn more gas than cars even when they aren’t hauling loads because they are built big and sturdy enough to withstand heavy-duty use. That has typically meant that gas mileage ranged between “dismal” and merely “bad.” But Ford’s new V6-powered F-150 has achieved the widely accepted threshold of “decent” gas mileage — 20 mpg. That’s the truck’s combined EPA rating, and they EPA says it can do even better on the highway at 23 mpg. Our testing scored 20 mpg highway too, but other reviewers did better. Regardless, it is a big step forward considering that old trucks wouldn’t go 20 miles on a gallon of gas even if they started driving atop the Continental Divide.

  • Honda Odyssey

    Honda  /  Wieck

    EPA MPG city/highway/combined: 19/28/22
    Drivetrain: 3.5-l V6, 6-sp auto
    Vehicle category: minivan

    Remind me: Why do we call these things “minivans” again? They were pretty small when they started out, but now they are 4,500-pound, eight-passenger behemoths. It would be asking a lot for something this big to get reasonable gas mileage, but the Odyssey delivers, using cylinder deactivation to run on three cylinders when possible, along with a six-speed transmission to get the power to the wheels as efficiently as possible.

  • Hyundai Sonata

    David McNew  /  Getty Images

    EPA MPG city/highway/combined: 24/35/28
    Drivetrain: 2.4-l, 6-sp man.
    Vehicle category: large car

    The Hyundai Sonata has a smidge more interior space than the Fusion or LaCrosse and rates 35 mpg highway with its base engine and transmission. Hyundai also offers a hybrid version, but the everyday model provides 35 mpg on the window sticker, and anecdotal evidence says it will even get 40 mpg on the highway.

  • Hyundai Elantra


    EPA MPG city/highway/combined: 29/40/33
    Drivetrain: 1.8-l 4-cyl, 6-sp auto
    Vehicle category: Compact car

    Forty mpg might be a stretch for the Sonata, but the compact Elantra should do that without breaking a sweat, according to the EPA’s 40 mpg highway rating. As with the bigger Hyundai, the Elantra achieves its segment-benchmark fuel economy rating with its base drivetrain, so the hundreds of thousands of Elantras the company sells will all contribute to the fleet of 40 mpg cars on the road. This is in contrast to the special, high-efficiency models from competitors, which cost more and will account for a paltry few percent of sales.

  • Volkswagen Passat


    EPA MPG city/highway/combined (estimated): 31/43/35
    Drivetrain: 2.0-l 4-cyl. diesel, 6-sp. dual-clutch auto-manual
    Vehicle category: large car

    If the diesel engine in the Q7 can get 26 mpg on the highway, what could one in a slippery sedan achieve? According to VW, the answer will be 43 mpg when the EPA’s official numbers are announced. That means the Passat will go more than 800 miles on a tank. Those of us who love pumping gas in the freezing cold or blazing heat might miss standing out in the weather regularly, but for the rest of us, incredible efficiency matched with a large fuel tank combine to provide unprecedented freedom from pumping fuel.


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