Chinese Automaker Links Up With Saab

China automakers continue to push westward. Volvo already owned outright by China firm.

Swedish automaker Saab staved off collapse on Tuesday when Hawtai Motor Group agreed to purchase a 30% stake in the company for $223 million. The purchase by Hawtai, which is a small, privately held Chinese automaker, will also include joint ventures on manufacturing, technology and distribution.

The move gives Chinese companies yet another foothold in international car manufacturing. Just a year ago, Geely purchase Swedish carmaker Volvo from Ford. Several big Chinese banks invested in General Motors stock offering last fall. And in April, two Chinese companies purchased supplier Nexteer Automotive for $450 million, marking the largest international acquisition of an auto parts supplier.

The deal should help Saab escape yet another brush with death. The Hawtai deal will give Saab enough working capital to stay afloat for the midterm and comes on the heels of an $88 million loan the automaker secured on Monday that will allow production – which has been stalled since April 6 – to resume.

According to Victor Mullen, CEO of Spyker Cars – the Dutch company that currently owns Saab – the deal will be approved by the proper Chinese authorities in 6 to 12 weeks and should have no difficulties attaining European Investment Bank clearance.

Mullen said Tuesday that the deal would allow the company to enter the fast-expanding Chinese car market. Saab will initially export its 9-3, 9-4X and 9-5 models to China, and plans to begin producing cars in China in 2013.

But whether the Saab brand will resonate with Chinese consumers is a big question. The automaker is not well known in Asia and the brand lacks the cache enjoyed by Mercedes, BMW and Buick that came as a result of the dramatic rise of affluence within the Chinese population.

Spyker purchased Saab from GM in January 2010, saving the brand from liquidation. Since then, however, Saab has failed miserably in meeting its targets. In 2010, the company sold just 32,000 vehicles, well below its goal of 45,000. Sales woes have continued into this year, too, as Muller has stated that his initial goal of selling 80,000 vehicles in 2011 would no longer be feasible.

Saab's poor performance begs the question of why Hawtai would invest $223 million in a failing European auto company. What it comes down to, according to Richard Zhang, vice president of Hawtai, is that Saab will give his company access to much-needed technology and an international network that would have taken a long time – probably decades – to build.

Hawtai wants to compete with much larger auto companies in China such as Geely and investing in Saab is a step towards doing so, according to analysts. The company has only just started to produce sedans and purchasing an already-made platform and products for passenger cars will allow Hawtai to enter that segment much more quickly.

Saab's sale means that Chinese companies now own both of the big Swedish automakers. Ford sold off Volvo to Geely last year for $1.5 billion.

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