The Saab cash situation is something that new owner Spyker would have to address should the deal be finalised on 15 February as proposed, IHS Global Insight auto analyst Ian Fletcher said in a research note on Wednesday.
“In unaudited accounts of Saab issued by Spyker, it is said to have current assets of EUR547m, of which EUR191m is inventory and EUR198m in cash, the latter likely to have come from its sale of [production equipment and tooling for obsolete models] to Beijing Automotive Industry,” Fletcher wrote.
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“Beyond this though, Spyker seems to have a provision in place for a further EUR150m of back-up financing as well as the [EUR400m] EIB loans, which seems to be a very small safety net in light of losses before interest, taxes, depreciation amounting to EUR300m in 2008 and EUR400m in 2009, according to Spyker.
“Although it will no doubt be looking to earn cash from its ongoing operations, such as the sale of cars, this will depend on whether customers will actually do this given the publicity over the possible winding up of the business by GM and its acquisition by a relative unknown. Spyker has said that sales of 100,000 units per annum should make the automaker profitable, so it will need to try and make use of the underlying sympathy for the brand that has come to light from the public as negotiations have gone along, and turn it into cold, hard cash.
“However, its earnings from the vehicles it sells will also depend on the deal that it has cut with GM on the licensing of its technology. Adding to these cost pressures will be the eventual necessity to develop its own technology and vehicles in future in order to be an independent, stand-alone business.”
Fletcher said Spyker had made a “brave move” taking on Saab and it had provided some hope for the brand’s future, rather than the demise that GM had planned, following the likes of Oldsmobile, Saturn and Pontiac into the auto history books.
“However, it remains to be seen whether this risk will pay off and the Swedish brand can enter the next decade in a far more positive position than it ended the last,” he wrote.
Fletcher noted that the deal would see Spyker’s share ownership structure change with Tenaci Capital, a company owned by CEO Victor Muller, acquiring 4.6m ordinary shares from Russian Vladimir Antonov, effectively disposing of his stake. Tenaci would also grant Spyker two loans – one of US$25m to pay part of the purchase price for Saab upon completion of the deal, while a second one for $57m would repay all of Spyker’s current loans to banks and financial institutions run by Antonov.
He noted that Spyker had worked hard to reach this stage, submitting three bids and engaging in difficult negotiations, but now the hard work had to begin.
“At present, the business is a loss-making concern that has not turned a profit for many years now, and much of the near-term work will need to be focused on achieving this if it is to have any hope of surviving.
“With no real experience of running a volume vehicle manufacturer, it will need to rely on the current incumbents, such as CEO Jan Åke Jonsson, to manage the business.
“This experience, combined with the flexibility of no longer being in the GM hierarchy, could promote far greater free thinking within the organisation to place the business on a far stronger footing,” Fletcher wrote.
The new 9-5, replacing a 12 year old line, was cause for some hope as was the 9-4X sport utility vehicle to be built on the same architecture as GM’s Cadillac SR-X. A replacement 9-3 is expected for 2012, also based on the latest GM technology.
“If all these models are launched on time, the automaker should be well positioned with the strongest vehicle line it has had for a long time, if not ever,” Fletcher concluded.
