Ailing Saab Looks for a White Knight

Drew Price, a 24-year-old mechanic who runs the Los Angeles Saab Club, celebrated the Swedish carmaker's sale to Spyker Cars last year by getting a tattoo. He had an airplane with oversized propellers—Saab's logo for its classic Sonett and 96 models made in the 1950s and 1960s—inked on his right arm. Price might have considered a less permanent way to show his enthusiasm. A little more than a year after General Motors (GM) sold the brand, Saab is again fighting for survival. Starved of cash, it's been forced to halt production and is trying to raise funds in a complex transaction involving the Swedish government, the European Union, GM, and a Russian billionaire. "I'd be crushed" if Saab doesn't make it this time, says Price, who owns seven of its cars.

Saab's Trollhättan factory in southwest Sweden has been idle all but a few days since Mar. 29 after some suppliers halted shipments and demanded payment. Saab owes at least 300 million kronor ($48.1 million) to suppliers, estimates FKG, a trade group representing Swedish auto suppliers. The man who says he can get Saab back in gear is Vladimir Antonov, a 35-year-old Russian banker with deep pockets and a love of fast cars. Antonov, a former Spyker chairman, was forced to sell his roughly 30 percent share of Spyker as part of the GM agreement.

Tenaci Capital, controlled by Spyker Chief Executive Victor Muller, eventually bought Antonov's stake. But the Russian banker wasn't out of the picture for long. In February, he agreed to pay up to $45.8 million for Spyker's luxury sports car business, which produces the C8 Aileron and other supercar models that sell for more than $200,000. The Dutch company at that time said the deal would provide it with more money to concentrate on reviving Saab.

Before he can put up an expected $71.7 million for up to 30 percent of Saab, Antonov must win approval to invest in the company from GM, the Swedish government, the country's debt office, and the European Investment Bank. All have deals, debt agreements, debt guarantees, or loans outstanding with Saab that give them a say in its future. Thousands of jobs are at stake in Sweden, including those at dozens of parts suppliers. GM, which remains a supplier to Saab and is slated to build the Swedish company's upcoming 9-4X crossover at a GM plant in Mexico, declined comment.

For now, Antonov, whose first car was a Saab 9000, is only buying Saab's properties, including the Trollhättan factory, and plans to lease them back to the carmaker, jump-starting its cash position. "I think he'd be good for Saab," Håkan Danielsson, a 31-year veteran aerodynamics engineer at Saab who sat on its board until last year, says of Antonov. "If we only get over this hump, we should have a great chance."

Sales at Saab, which began building cars in 1947 and gained a reputation for being offbeat, practical, and safe, have been disappointing since its sale to Spyker in February 2010. Last year Saab sold 31,696 cars, down from its original forecast of between 50,000 and 60,000. Spyker CEO Muller has said sales slipped because it took longer than expected to ramp up production after GM cut Saab's supplier ties and emptied its factory in January 2010. The Swedish automaker had predicted that by next year it would produce 120,000 cars and be profitable. The hand-over delayed the rollout of Saab's new flagship 9-5 sedan last year, however, slowing sales and contributing to the cash crunch.

Garel Rhys, president of the automotive research center at Cardiff University in Wales, says Saab cannot escape a core problem: its small size. "To be a stand-alone carmaker these days you really have to have volumes well in excess of one million," Rhys says. "There was a period about 25, 30 years ago when people mistakenly thought that things like lean production would allow the smaller carmakers to survive easily against the bigger companies. Nothing of the sort has happened."

Muller says the last couple of weeks, filled with long nights of fierce negotiations, have been "a horrible déjà vu" from early 2010, when he was trying to buy Saab. "You know what the difference is from a year ago?" he asks. "Then, I was battling to save a company that was not mine. If I failed it wouldn't be my responsibility. Now I'm battling to save a company that is mine, and that is much tougher."

The bottom line: A year after its sale by GM, Sweden's Saab has hit the skids. A wealthy Russian may be its best hope to provide fresh cash needed for survival.

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