Commentaries
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How Swedish is Saab now?
Less by the hour if there is any truth to the story in Reuters that China’s SAIC is considering funding the iconic Swedish car brand’s buy-out from GM.
The deal, announced in August, was originally supposed to be a patriotic flag-waving exercise, in which a tiny Swedish supercar maker, Koenigsegg, would “repatriate” Saab from American control. The Opelisation of the Saab range would be stopped. A new generation of quirky cars designed by Nordic designers in square specs would be manufactured at the company’s historic (and splendidly named) Trollhattan factory. Saabs would again be as Swedish as a meatball or an Ikea “Billy” bookcase.
A moving vision? Certainly. But how practical given Koenigsegg’s small size? Well, about as practical as owning an insanely fast Koenigsegg car in Sweden, where the speed limit is 60kph. Incidently Koenigsegg sells less than two dozen cars a year (although they are quite pricey), while Saab sells closer to 100,000.
Anyway, that as I say was the vision. What appears to be emerging seems more like a foreign-funded buy-out of Saab from GM. Assuming SAIC makes it, the Chinese group’s 3 billion kronor investment ($410 million) should help to unlock Swedish government support in the form of guarantees of some 400 million in European Investment Bank loans. That in turn will allow the company to fund a business plan that involves continuing to source components from GM.
Why the carmaker in front is cutting back
Good news: global car capacity is being cut by 700,000 vehicles. Bad news: the company doing the cutting is the world’s most efficient manufacturer, Toyota.
Across the world, governments are pledging money to keep local plants open, mostly plants which have no long-term future, and which are far less efficient than the production line in Japan that Toyota is closing.
GM coming to government’s rescue
Bankruptcy has certainly been kind to GM. It’s now able to dig into its own cash reserves and help the government out.
Auto dealers, fed up with government’s tardiness in sending out the rebates, started abandoning the program since they’re hardly in a position to float the up to $4,500 a pop given to those exchanging their clunker for a new, more fuel-efficient car.
GM negotiator slams Opel bidder’s Russian connection
The GM blogger is at it again. John Smith, General Motors’ group vice-president and chief negotiator for the sale of its stake in Opel/Vauxhall, lays into the bid by Canadian-Austrian car parts maker Magna –Â especially the Russian Connection –Â in his latest update on the state of the talks.
He also pours cold water on happy talk from German politicians of an early decision in favour of Magna, backed by the German authorities, rather than rival Belgium-based financial investor RHJ International, which clearly still has GM’s preference.
Politics, economics collide over Opel
Political and economic logic are set to collide in the byzantine decision-making over the future of German carmaker Opel, the main European arm of fallen U.S. auto giant General Motors.
If politics prevail, as seems likely, the cost to German taxpayers will be higher and the chances of commercial success lower.
The aim of the Berlin government and four federal states, which are sustaining Opel with bridging finance, is to save as many German jobs and production sites as possible. That makes political sense ahead of September’s general election. But the business logic is that only a greatly slimmed-down Opel can survive in an industry with chronic overcapacity.
In theory, it is up to GM’s board to choose among the three offers it expected to receive on Monday from Canadian-Austrian car parts maker Magna <MGa.TO>, Belgian financial investor RHJ <RJHI.BR>, and, less plausibly, Chinese state-owned auto maker BAIC. But there are several other powerful players with a say. They include the trustees responsible for the company since GM entered U.S. bankruptcy in June, the German federal and state governments, Opel’s works council and, last but not least, the European Commission, which must approve the restructuring plan as a condition for authorising the state aid.
Wiedeking makes millions betting the ranch
It isn’t only the investment bankers who have pay packages that offer perverse incentives.
Take Wendelin Wiedeking, for instance. The chief executive of Porsche <PSHG_p.DE> enjoys a package that most bankers could only dream of. And boy does it offer a perverse incentive. Indeed, arguably, it’s one of the reasons that Porsche has got itself in such a big financial hole that it may have to be rescued by Volkswagen <VOWG.DE>, a rival carmaker in which it has built a majority stake.
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Wiedeking is one of Germany’s best paid bosses. He is entitled to receive a performance-related bonus equivalent to 0.9 percent of Porsche’s pre-tax profits. He apparently secured this right when he took over as chief executive in 1993. At the time the company was losing money and almost bankrupt.
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The incentive has certainly worked. Wiedeking has turned Porsche into the most profitable car company in the world. The snag is that a large chunk of these juicy profits have come from financial sources rather than boring old car-making — initially from unspecified hedging activities and more recently from trading in VW shares.
Chicken and Koenigsegg
I received something of a flaming at the hands of some readers for making a few gentle digs at the presumptions of Koenigsegg – a tiny Swedish sports car maker that is trying to buy Saab from General Motors. In particular, I was chided for not having done my homework before pronouncing – the implication being that I was too lazy to uncover the vast host of facts lying around out there in the public domain that would reveal even to a total dunderhead the merits and sense of this transaction.
Well, it would certainly have made for a shorter post had I stuck to these “facts”.
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The Wall
