Spyker Cars NV said it’s aiming for Saab to return to profit by 2012 and that the business plan for the Swedish carmaker requires about $1 billion in “peak funding” to restore earnings.
Saab, which Spyker is buying from General Motors Co. for $400 million in cash and preferred shares, will compete with Volkswagen AG’s Audi and Bayerische Motoren Werke AG, the Dutch manufacturer said in a statement. Saab can make a profit by selling 100,000 to 125,000 cars annually, and will consider adding a smaller model, the 9-1, to the lineup, Spyker said.
GM agreed on Jan. 26 to sell Trollhaettan-based Saab to Spyker in a transaction that would save the 72-year-old brand from extinction. Saab, which is among four brands GM is shedding after exiting bankruptcy in July, was unprofitable for most of the two decades the Detroit-based carmaker owned it.
“What steps are they going to take to make a profit on these volumes when GM never managed to do that?” said Pete Kelly, a senior director at J.D. Power & Associates research company in Oxford, England. “They either have to raise the price of their vehicles or cut costs or both. My guess is they will be looking for a leaner cost structure.”
Saab’s average annual production from 1997 to 2007 was about 123,000 cars, Kelly said.
Name Change
Spyker, the manufacturer of the C8 Aileron sports car, is scheduled to hold its annual shareholders’ meeting on Feb. 12. Investors will be asked to rename the combined company Saab Spyker Automobiles NV, the carmaker said.
The $1 billion Saab needs will mainly come from $326 million in the creation of preferred shares from GM receivables on Saab and a planned 400 million-euro ($558 million) loan from the European Investment Bank as outlined in the sale agreement, Spyker said. Another $200 million will come from available cash, Spyker said in a separate statement.
Payments for Saab will start with $50 million at the time of the deal’s closing planned for this month, with half financed through borrowings from Spyker Chief Executive Officer Victor Muller’s Tenaci Capital BV investment company and half through a share sale, Spyker said. The manufacturer said it hasn’t yet confirmed investors to fund another $24 million payment due on July 15 that it plans to finance primarily through senior debt.
Saab probably won’t need to raise more money in the future before returning to profit, Zeewolde, Netherlands-based Spyker said. Muller wasn’t immediately available to comment.
‘Rare Opportunity’
The company “has a rare opportunity to acquire and rebuild a global car brand which will be repositioned toward an independent, performance-oriented niche car company with an industry-leading environmental strategy,” Spyker said.
The potential addition of the 9-1 “makes strategic sense,” J.D. Powers’s Kelly said. “Smaller models obviously tend to be cheaper to produce and you can get higher volumes.”
Tougher European legislation on carbon-dioxide emissions will also push carmakers to have smaller models in their lineups, Kelly said.
