Friday, 14 October 2011

Company Focus – Swedish Automobile NV – Seeking to Avoid a “Swan-Song”

The automotive sector in Sweden has over the last few years endured what is - even by its tumultuous historical standards – an agonising period.

The decision by Ford to eradicate its Premier Automotive Group (PAG) back in the mid 2000s eventually saw Volvo Car Corp. sold in 2010 to the Chinese group Zhejiang Geely, as the tail-end exercise; after divestment the British brands: Aston Martin Lagonda, Land Rover & Jaguar.


GM under even greater strain to re-structure – ultimately via Chapter 11 – sought similar disposal having underpinned the SAAB Automobile brand with its platforms, yet having seen little financial return; arguably the result of enforced group R&D cost-absorption into the Swedish entity, itself paradoxically 'hands-tied' regards in-house technical & product development, marketing impetus and corporate budgetary spend. The heavy spiral of demise is seen SAAB's annual sales figures: 125.5k units in 2007, 89k units in 2008 and 21k in 2009. However, 2010 did produce an up-tick giving 32k units, though against an in-house target of 50K units.

During GM's disposal period, SAAB's former MD, Jan-Ake Jonsson effectively said that de-merger from GM was a blessing in disguise, enabling the company to start afresh with new investment and freer hand.

Notionally, this appeared the case, but the aftermath of the 2008 financial crisis combined with the complexity of the investment community, consisting of multi-party value-seeking from both PE and trade buyers - each trying to devise their own high-priced exit-strategies and conversely low-cost entry points – has made the secure future of SAAB a somewhat drawn-out affair. Seemingly at its heart are the two prime factors of a) the ability to set a valuation on a presently poorly performing company with illustrious brand history; thus the elasticity of accounting goodwill, and b) the tactical machinations that have arisen between seller and potential buyers, each trying to demonstrate their respective attitudes of a 'seller's market' vs a 'buyer's market'.

Emergence of Spyker NV / Swedish Automobile -

Recent history initially saw GM offer SAAB to Koenigsegg Group (backed by China's BAIC), the deal faltering, but with BAIC taking the vehicle platform IPR for previous generation 9-3 & 9-5 cars. Alternate SAAB company interest came from GENII Capital and Spyker NV, with a sale was finalised to the latter on 23.02.2010 for $400m, a seemingly ambitious task given the manufacturing size and methods chasm between the niche supercar maker that is Spyker Cars and SAAB AB. However, the Dutch based NV entity was/is a holding company controlled by Victor Muller which sits above the far more apparent manufacturing activity 'below', and was obviously tempted by the opportunity to continue SAAB operations, seeking new era possibilities, whilst supported by GM's platform and technologies contract-service agreement.

[NB For further background details and commentary, please view the investment-auto-motives web-logs dated June 2009, January 2010 and April 2011].

On 25.02.2011, it was announced that the supercar production arm Spyker Cars would be sold to Vladimir Antonov for E15m, with a further E18m consideration to be paid over successive stages; thereby valuing the Spyker Cars business at E33m That notional deal looked to have been tied into Mr Antonov's relinquishment of his previous interests in the company, necessarily sold-off as a condition bt GM for the sale of SAAB to the holding company Spyker Cars NV.
In mid 2011 Mr Muller announced that the corporate name Spyker NV would be replaced by Swedish Automotive NV, and continue in its public listing on NYSE Euronext Amsterdam using the ticker 'SWAN'. The new name obviously intendedly chosen to give far greater weight to the SAAB ownership, but also put an onus on the Swedish government and the European Commission to continue assisting the struggling SAAB during an 'intermediate' period. The almost poetic intonation was to proffer the idea that the 'ugly duckling transforms into the swan'.

Surviving this 'Intermediary Period' -

Thus far that intermediate period has lasted well over 20 months, and prior to the purchase consisted of 'soft bankruptcy' proceedings through the Stockholm courts for corporate restructuring and a E400m loan from the European Investment Bank in February 2010, this backed by Sweden's National Debt Office to allow ongoing operations and thus try to save jobs in Trollhatten and maintain a core competency of volume vehicle manufacture inside Sweden after the 'loss' of Volvo AB. By March 2011 E260m of that credit facility had been drawn. Exactly how long that intermediate period was to last was and seems still is indeterminate.

On 08.09.2011 Swedish Automobile NV filed for bankruptcy protection against its list of creditors, many from SAAB's supply-base who have themselves had to cope with income volatility as SAAB's financing taps have been turned off, on, reduced, stopped etc, thus affecting production and supply chain demand and payments.

Chinese Investment Hopes -

New investment finance for SAAB has apparently been discussed with a number of external parties, the most hopeful 'solution' originating from a Chinese share sale. Initial interest came in May 2011 from 'Pang Da Automobile Trade Co' from Tangshan, one of China's largest vehicle dealership groups, with 1,200 multi-brand franchise stores and retail sales of 470,000 units, thus offering a powerful and geographically broad point-of-sale outlet for SAAB in China. But the necessary intent to manufacture in market so as to reduce production costs meant that Pang Da required a manufacturing alliance. This appeared in the form of a joint partnership approach between 'Pang Da' and 'China Youngman Group' of Zhejiang. Youngman itself a manufacturer primarily of coach/bus and truck with increasingly passenger car content, using in each respective sector the licencing vehicle basis of Neoplan coach, MAN truck and assembly of Proton compact cars and Proton-Lotus sporstcars.

Global Contraction Woes -

But given the mixture of typical power struggle negotiations and heavily deflated stock markets across Europe and now China, the still relevant magic formulae of Swedish Auto & Pang Da & Youngman Group of Zhejiang, is looking increasingly fragile.

This is illustrated by respective stock prices.

Most notably Pang Da's price plummeted on Wed 10th October from 28 Yuan to 10 Yuan in a space of minutes, presently (midday Friday 14th October) hovering around 11 Yuan.

Swedish Auto (SWAN) presently sits at E1.03, thus giving a MarketCap of E25.6m (having seen 52-week highs and lows of E6.12 and E0.35).

Exacerbating Stock Volatility -

It appears that the release of contrastingly 'dour' and 'upbeat' comments from Pang Qinghua – Chairman of 'Pang Da' – sharply affected SWAN's share-price. His comments perhaps intentionally used to demonstrate Pang Da's influence and 'muscle' over SWAN, given his position as presently the only tenable strategic investor sat at the negotiating table. Moreover those contrasting statements may have been used as a (remote-control) 'depress and buy' tactic to gain greater (in)direct influence over SWAN – though it must be stated that this hypothesis is wholly unsubstantiated.

SWAN's Counter -

Recognising Swedish Automobile's ever more marginalised position - sat between headwinds from consumer & capital markets and the apparent machinations of its 'saviour' – Mssrs Muller (CEO) & Huganholtz (Chairman) have apparently sought to intentionally extend SAAB's period of 'animated suspension' by both:

- Seeking bankruptcy protection
- Divesting of the Spyker Cars business.

Bankruptcy Protection -

As previously mentioned, a filing was submitted on 08.09.2011, its intention to yet again clear the largely creditor-set hurdles facing SWAN, but with the undoubted intention of encouraging Swedish and European stakeholders to once again financially backstop SAAB with enforced creditor haircuts, and very probably further liquidity provision from the European Investment Bank (to protect original monies) and probably a second guarantee from Sweden's National Debt Office.

However, as is all too obvious, that government finances across Europe are being put under prolific strain, the cost of capital markets derived finance acting s a deterrent to additional sovereign borrowing, and that that which is probably majority directed at national banking systems; even if denied in principle. This in turn now profoundly effects the EIB's ability to raise finance and sharpens both the type of projects funded and the criteria therein; typically infrastructure based initiatives in fast-growing regions. Thus additional reliance upon the EIB may not be forthcoming. A possible secondary approach to the European Investment Fund – an operationally independent sub-division of the EIB – could be made. But its prime remit is the SME realm 'future-forward' companies and projects. Whilst SAAB could well highlight its R&D work as pertinent, its very scale could well disqualify any application, and even if accepted the funds provided only small relative to the magnitude required.

Thus, a second European 'bail-out' of SAAB looks increasingly unlikely. Instead, the less economically constrained homeland Sweden could provide a financial backstop...but at a price. Sweden has of course been a very light casualty of the EU debt crisis, having worked its own way through national busget 'fiscal contraction' over preceding years – indeed as an exapmlar to the UK. It could offer assistance via its own banking system with a lender such as the government owned SBAB Bank AB. However its own business headwinds (even excluding the impact of European economic contraction) has affected the banks's credit rating by Moody's – set as of 05.09.2011 on a “negative outlook”, thus increasing the cost of its wholesale funding and so lending rates.

[NB investment-auto-motives believes this “outlook” rating to be overly harsh given the comparatively strong economy, GDP growth rates of 5.5% in 2010 and 4% in 2011, and a respected 'Geni co-efficient' showing social cohesion / stability].
Thus the only provider of non-commercial assistance at this time is the Swedish government].

Sale of Spyker Cars -

The sale of the sportscar business has been muted over the last year, the CEO himself stating in the H1 2011 report that managing both SAAB & Spyker businesses only adds complexity and that more importantly innate share-holder value could be lost given the cash burn and future funding requirement demanded by Spyker Cars.

Muller and Huganholtz also well recognised that SWAN had to be seen to be proactive in financially supporting SAAB (as it could) if it was to garner external respect and so a greater likelihood of assistance.

The fact that no sale had been made to Vladimir Antonov through the year – as previously proclaimed – highlighted a changed mentality at SWAN, one in which investment-auto-motives believes Muller & Huganholtz recognised the 'foreign aid' power of America's QE programmes and the US$'s ability to meet the firm's immediate and possibly long-term financing needs.

Thus, the reported sale of Spyker Cars to North Street Capital (of Connecticut, Massechussettes, USA) for between $42m & $44m, looks to be at face value a semi-forced action, one which provides a the finances for a partial funding stream for SAAB, which it is hoped to be matched and bettered by external (state) lenders, as was the case previously; but moreover importantly creates the potential for a US funding bridge.

[NB North Street Capital LP is a dual aspect 'macro-play' and 'venture capital' investment house, based in Greenwich, Connecticut, USA]

Critically, the full cash-sale funds are able to be booked directly and immediately to the balance sheet, which would have not been the case with a sale to Antonov.

Advantageously, Swan has benefited from a rise of approximately E10m in Spyker Cars' valuation over the last 9 months. This then generates questions about the valuation methods North Street used, but probably in part answered by North Street's expectation that the US$ will continue its path of decline, thus allowing to 'over-pay' now, so as to 'over-book' later; with what is imagined as a healthier Spyker Cars business in the coming years boosted by the enlarged differential effect of the US$ vs Euro FX spread.

It seems only natural for a VC firm with PE money goes bargain hunting in the industrial margins, especially so in luxury goods arenas which have high (USA) potential and appear notionally under-valued at this point of the (unnaturally distended) economic cycle.

The problem Spyker Cars however does face is momentum and development headwinds. Sales have slackened over preceding years since its 2006 sales high, and it undoubtly requires substantial technical investment with probable 'piggy-backing' of a VM's support to grow its model portfolio . Namely the D8 and E8 models showcased thus far, and the ongoing development needs of current C8 and C12. (investment-auto-motives believes that the C12 body will in reality be the true next generation C8).

With SAAB's future presently unsecured - for all the PR rhetoric - the previously 'assured' Sedan & SUV platforms provision has been heavily undermined. In this light North Street Capital must surely have an industrial partner at hand with an MoU or greater in place, or a knowing demand from other PE firms in the US' 'secondaries market' who themselves have such holding interests.

Furthermore, besides the turnaround and FX-related potential, one can only assume that North Street investors will been placated of natural concerns about the acquisition of Spyker Cars with details regards (amongst other factors) the size of its wholly owned asset-base and size of deposit-paid order book. Only such 'backstops' would offer immediate purchase rational, but even then the substance of even these price-supports should be seen to be highly convincing.

However, investment-auto-motives believes that in the current climate that the hedge fund industry and associated PE houses are being forced to appear active, and as such may well be pinning deals on the eventual USA rebound, the rise in demand for niche luxury cars and the FX supercharger effect.

SWAN Forcing China's Hand -

Any funding bridge to date has been in the hands of Pang Da who had previously promised some weeks ago, but not yet delivered a goodwill payment of approximately Skr670m / $95.8m / E70m.

It had previously placed an order for 2000 SAAB cars in June and provided a deposit of Skr45m, but financing and production problems meant that those cars were not delivered by the September deadline and are still awaited.

SWAN's American deal – with its portence of an increasingly closer US relationship – appears to have ruffelled Pang Qinghua, who stated on 12.10.2011 that SAAB's bankruptcy appeal effectively distinguished the agreement between SWAN and Pang Da Auto Co. That set-off alarm bells in Holland and Sweden and a joint statement from SWAN and Pang Da was later made to re-enforce both parties commitment to the venture.

Though it is clear that Pang Da will have understandably become very frustrated at the absence of its vehicle deliveries, all the while China's car market demand waining in the midst of the country's heavy economic contraction; thus as and when the cars do arrive they may sit on dealer forecourts for some time and require discounting themselves, which only goes to undermine the premium character and pricing that both SAAB and Pang Da seek to grow both businesses.

The SAAB AB Sale -

Since the disposal of SAAB by GM the future of the company, whilst extolled as 'bright' by associated executives and enthusiastic brand fans, was also recognised as precarious by auto-industry knowledgables and the number crunchers of the investment community.

To buoy sentiment and maintain customer and brand loyalty a number of websites / web-logs were created by both Spyker NV / Swedish Automobile NV and supportive loyalists, These are the official 'insider' website named, and the 'unofficial' support website Though each appears to exist independently, investment-auto-motives assumes that there is a high level of information feed from the former to the latter to as best possible allay customer and investor fears and create interest stories during this 'intermediate period'.

That period of uncertainty appeared to start to draw to a close with the arrival of Pang Da and Youngman, the duo offering Skr2.2bn / E230m for a 24% stake in SAAB; thus valuing the firm at Skr9.16bn / E958m.

With the 2000 vehicle order presenting what appears a new 'promised land' for much boosted SAAB product distribution, immensely lower-cost manufacturing (even with China's inflationart climate) and the associative economies of scale available.

But will the offer, even if well intended as seems the case, be able to transform SAAB's fortunes? In short, can Pang Da and Youngman themselves deliver the goods? .

Credibility of the Chinese Approach -

The SAAB ambition undoubtedly bolsters the Chinese entrepreneurs' domestic ambitions, adding further premium European brands to Pang Da's dealerships, so raising its own brand equity, and providing a new industrial platform from which to operate effectively afresh.

All that Pang Da 'brings to the table' seems obvious enough, its broad dealer coverage able to penetrate the main metro centres of China and tier 1 & 2 cities. The only question for SAAB is to what degree those dealers are able to positively reflect SAAB's products, brand values and desired customer service levels. Unless a company is able to be hands-on to both proffer itself and by virtue protect itself, the stark price-led realities of the Chinese car market mean that there is a danger of even 'quality' products being heavily discounted as local dealers feel is necessary to 'shift metal'.

It has been muted that any new 'Chinese SAAB' would be dedicated to the home market, with little interest in global markets, thereby increasing the likelihood that any 'unprotected' foreign brand would become victim to the cost-down, scale-up business mentality that drives any 'commoditised' sector.

Thus to truly ensure SAAB's good fortunes in China, Swedish Automobile would need to create an agreement with Pang Da that their brand is not commoditised, to do so ensuring that SAAB is sold in an aligned or even bespoke retail environment. Given the level of hyper-competition inside China and the dealer expensed CapEx to create such showrooms, this appears very unlikely. And whilst SAAB could be mutually buoyed if sold with parallel brands such as Volvo or say Alfa Romeo or Nissan's Infiniti, the reality is that multi-franchise dealers (across the price ladder) tend to provide greater incentives to sell their better branded inventory, the innate sales mentality necessary in mainstream brands contaminating slow moving upper brand models.

So whilst the sales opportunity over the short, mid and long terms looks huge, pitching the brand as necessary is all important: a reason why European luxury fashion goods makers have been so hands-on with their retailing strategies.

The picture is further complicated by the 'manufacturing promise' offered.

Investment-auto-motives suspects that in its ambitions to become a major player in passenger car production,Youngman itself may well be trying to digest an opportunity / challenge that proves bigger than itself. And that stems from its present and intended manufacturing methods, what appears a leap-frog of (possibly misplaced) faith.

Whilst the manufacturing process is little different between coach/truck and niche sportscars, in its ciurrent domain, this is a world away from mainstream car production. The former is based upon low CapEx levels set against a high labour content for 'slow assembly'; with an ability to easily purchase and utilise low-tech tooling such as fabrication frames, roll-through carrier-dollys and the like, in effect very yesteryear operations. The process for volume car-making is wholly different, requiring high CapEx costs for 'fast assembly' via body-panel steel press tools, robotic welding stations, dip baths, paint shop, (hanging) car-body travelators, powertrain 'stuff-up' stations, etc etc.

This of course is philosophically well understod by Youngman, but the ability to 'leap-frog' in the desired manner is highly complex. It has some experience, but realistically very little, gained from exploring a partnership deal with Malaysia Proton, at a time when Proton had built its Proton City manufacturing plant, and latterly sought Chinese partners to access cheap componentry and ideally sell-on ownership of the new plant infrastructure.

However, Youngman's actual previous business arrangement (and experience) with Proton extended to little more than factory tours and ultimately resulted in simply the desired importation of fully built Gen2 model cars, re-badging as 'Eurostar' by Youngman for domestic sale.. An agreement was signed in 2007 with 'intention' for 30,000 cars yet it is understood that only a few thousand cars were actually delivered and re-badged. The highly hoped 'saving' of Proton from the Chinese did not emerge, and talks of selling Proton to Youngman, or indeed licensing the Gen2 model for Chinese manufacture, did not progress. So whilst Youngman managers no doubt learned more about high volume production systems its unwillingness or prohibited inability to proceed meant transferable and deployable learning was halted.

Proton itself may have felt misled, so 'giving-up' its production 'secrets' (overhead costs, input costs per vehicle, factory-gate pricing, organisational methods etc etc) whilst Youngman paid a small price by way of re-badged cars for the experience.

All at SAAB will of course be weary of a similar repeat by Youngman, especially given its lack of experience with quality-led vehicle mass-manufacture.

However, one of the greatest stumbling block and so barriers to credibility is that it that Pang Da – Youngman have openly stated that they yet to apply to the PRC leadership for approval of the SAAB deal, the former citing that it is for its smaller partner to do given that it would be necessarily judged by the PRC leadership as a merger of vehicle producers.

This 'handing-over' of deal progress responsibility appears to be part of the 'modus operandi' in stalling and negitiating, though ironically such a production-centric issue (as seemingly deemed by PRC M&A regulations) did not stop Pang Da's CEO from announcing the deal void when SAAB sought bankruptcy proceedings.

This seemingly intentional greying of responsibilities between the two Chinese partners then only serves to discredit what are presented (and periodically shown to be with cash deposits) as honourable intentions.

As things presently stand SWAN very possibly internally views the ultimate outcome of any deal as less than ideally desired.

A E70m bridging loan from Youngman agreed on 12th September, has now reportedly been received by SAAB which will be welcomed, with further monies expected on 22nd October. This then starts to cement the deal, though of course opt-out clauses and re-imbursement payments will have no doubt been agreed should the deal be terminated.

Youngman as Chinese Auto-Sector 'Intermediary Agent' -

Having described the core capabilities and general industrial shape of Youngman, which prescribes an 'unnatural fit' (unlike say BAIC,SAIC, FAW and similar large operational others) there may be reason to believe that Youngman may be operating as an 'Intermediary Agent' for want of a better title.

China's current Five Year Plan calls for rationalisation of domestic industry players, thus the biggest companies cannot be seen to be scouting for additional foreign brands to incorporate into their portfolios, whether JV or indeed wholly owned. Thus there is a real chance that Youngman is either being deployed or presented itself as a legitimate co-buyer for SAAB, its advantage being in that as a fringe player it has limited funding levels and so can legitimately pursue relatively 'low ball' bids. It would enlarg its stock-hold over time at a steady affordable rate, with its own strategic exit of selling what is ostensibly the SAAB brand and any other late stage advantageous IPR to another major Chinese producer, very possibly BAIC (which already acquired the previous generation platform design rights) or Geely (the buyer of Volvo).

This would then follow a similar play to the 'dissection and re-amalgamation' of MG and Rover (Roewe).

Moreover, with such a coupling the PRC leadership may wish to creates a 'pseudo-Trollhatten' metropolitan area, something that matches its 'pseudo-Wolfsburg' (relative to VW) as part of its own New Towns urbanisation programme. Each of which has specific globally-related architectural and cultural 'reflections' mated to specific 'industrial / service' local economies. These in turn intended to draw in FDI and immigrant (from home nations) advanced skills workers, so that a progression of (brand specific) technical advancement can be made where it was otherwise 'left-off' whence China bought the corporation.

SWAN & SAAB's Current Position -

Undoubtedly, Muller and all executives are seeking a way forward, away from what have been tortuous times; seemingly all avenues explored whilst obvioulsy still seeking the right avenue for SAAB's value maximisation and so SWAN's profitability and shareholder attraction.

Given the challenge, it represents a commercial situation that few would want to face, the size of the challenge well recognised by those PE firms that took an initial interest in SAAB yet walked-away.

Although the 'Chinese solution' is being progressed – albeit painfully for all – more advantageous alternative courses may become available if and when the global and so western economies start to gain positive traction. There is no doubt that Corporate America and portions of Corporate Europe sit on mountains of liquidty which their own investors are calling to be either used in logical, truly value adding acquisitions, or to be dispensed in the form of dividends. Thus American and European Chairmen and CEOs are now expected to plot wise courses for tomorrow's earnings levels.

This then broadens the picture for SAAB as to who else may be willing to 'adopt' SAAB. Given the present funding constraints inside SAAB, which very possibly could be maintained even with Chinese capture, Muller et al would be wise to re-think the notion of stitching together a harmonious JV or indeed JVs which allow SAAB to 'piggy-back' another's ready-made platforms and systems sets.

Ideal Strategic Options -

In reality SAAB must seek out a capable partner that can provide off-the-shelf and easily adaptable platforms spanning all major segments so that SAAB can create quickly and to budget a compelling family of properly develop, yet intrinsically differentiated vehicles for both global and Chinese clients.

The following provides a very basic overview of possibilities:

- Ford Motor Co: using well amortised but capable platforms and systems sets and providing development and procurement synergies with the up-scale Lincoln marque.

- Renault-Nissan: giving corollaries with Infiniti and assisting the Renault marques need to climb the price ladder, as being forged by competitor PSA.

[NB this being the 'preferred' route for SAAB proposed by investment-auto-motives when SAAB was put up for sale by GM, then being negotiated with GENII Capital, Bernie Ecclestone and the Renault F1 team, allowing for horizontal and vertical integration].

- Hyundai-Kia: able to use low-cost S.Korean produced sub-structures and devise a convergence and divergence technology strategy with Hyundai's Genesis marque
- Daimler AG: to lodge SAAB as a 'sandwich filler' brand, a feasible 'underling' to Mercedes whilst 'overling' to Smart, and so better defend against renewed competition from Alfa Romeo and other lower-premium sporty marques.

- New GM: leveraging the European arm, Opel, offering as contract manufacturers its new generation powertrain and platforms to SAAB, thus absorbing cost for both, and both co-creating mutually deployable technology strategies for the mid-premium (SAAB) and lower premium (Opel's new target position) segments. However, doing so might re-create operational constraint problems of old, especially if GM is unable to grow its profitability as first thought at its IPO – a very real possibility given global economic and consumer preference headwinds presently faced.

Any alliance idea would very probably exclude the majority of Japanese corporates since they tend to prefer 'sole control' of their own destinies; with perhaps Suzuki-Maruti in India a rare exception to the historically set rule.

However, the previous arrangement with Subaru – previously deployed via GM – could offer JV potential as Eastern and Western faces of the same technology sets, both maybe able to re-foster mutual histories in rallying (though very separate eras) thus deploying selectively applied USPs in AWD systems and low-centre of gravity boxer engines.

It almost very definitely excludes a tie-up with TATA's Jaguar Land Rover, since TATA would wish to retain aluminium-led advanced body-structures and new powertrain systems for itself as much needed differentiators, and look to be considering possible technology share with FIAT's Maserati (as both fight their way against the Germans & Japanese) through Ratan TATA's Italian relationship.

A multi-VM 'amalgum' approach might be optimal if seeking to secure as much design freedom as possible, utlising various sources for under-body body structures, power-train families and electronics systems,. But such a 'freedom path' would induce not only highly sets of JV agreements to be create and maintained by executives, but also a heavy management burden for procurement and engineering teams. The technical complexity of sourcing from different geneological DNA pools inly adds to the multi-product brand-coalescence challenge.

Conclusion -

Presently, the 'Chinese solution' appears theoretically ideal for the long-term security of SAAB, and for the profit maximisation SWAN. Indeed it is the only viable route forward available to Victor Muller and Swedish Automobile NV, and for investors with SWAN it seems to offer a 'big prize' reward for the troublesome and volatile ride.

But look more closely at the innate structure of the parties involved and that ideal starts to demonstrate some fundamental flaws. This is why investment-auto-motives suspects that the Youngman element of the JV arrangement may ultimately serve as an 'intermediary agent'.

This is not to say that SAAB and SWAN cannot access and capture the Chinese market, simply that the route into China, and so leveraging the Chinese market, may well be even more disconcerting than has been the case thus far.
Pang Da and Youngman may not be corporate assimilations of Lewis Carol's “Walrus & Carpentor” but SAAB is ostensibly at the behest of both when walking quite literally into a foreign territory.

Thus, it is imperative that SWAN start to re-assess the potential for working with a western VM that has presence, credibility and political leverage in China.
Whilst that had not been an option previously, due to 2008-9 'fire-fighting' and subsequent organisational restructuring, the subsequent financial cushioning inside many American and European corporates have put them in prime predatory positions. For Boards of Directors there is a stark choice emerging that either targets be sought or investor demands for increased dividends be satiated.

Unlike previous periods of exacerbated p/e levels, such value and growth hunting is becoming actively encouraged by progressive investors keen to see their own investments put to work.

This then is a very positive backdrop for SAAB and SWAN.
Since both has little choice but to traverse what seems a grey and winding commercial rouite into China, it could do far worse than encourage the accompaniment of a major western VM, preferably one already well established in China to provide financial and political support.

The ideal outcome would be for Swedish Automobile to create a commercial structure for SAAB that gives a 24% hold to Pang Da & Youngman, a 24% hold to another and 52% hold to SWAN.

The 'slow boat' analogy regards China entry is both over-used and unimaginative, but at least with a better balanced control of tiller and throttle, the comparatively little swan's own onward journey may be far less frenetic.