Saab signs a memorandum of understanding with Chinese partner Youngman

When General Motors sold Saab to Spyker more than a year ago, the results were different from what most people expected. Spyker became the winning bidder instead of Chinese automakers flocking to buy the brand. As a tiny foreign manufacturer with no experience in the major leagues, many people are skeptical.

We all know how that has turned out; not so well so far. Saab has been beset by continued problems with liquidity, resulting in numerous production stoppages at the company’s Trollhattan plant. The troubles have come the introduction of a new 9-5 and an all-new 9-4X crossover on the way.

The company recently completed a short-term lifeline deal with Chinese distributor Pang Da Automotive. Pang Da purchased millions of dollars worth of Saab cars for sale in China, with another likely purchase on the way later in the year.

These deals are an important source of badly-needed short term funding for Saab. Now Saab is completing another, longer-term deal with Chinese manufacturer Youngman Automotive that puts a heavy emphasis on the Chinese market.

The deal involves the Memorandum of Understanding signed on May 16th with Saab and Pang Da. That deal setup a manufacturing joint venture that required a production partner, as well as a distribution joint venture. In can get quite complicated; Chinese regulations require every foreign manufacturer to setup joint corporations with existing homegrown companies.

The ventures for manufacturing and distribution will include joint ownership between Saab, Pang Da and Youngman. Pang Da has no experience in automotive production; it is simply a large national dealer network. Youngman on the other hand has manufacturing facilities in the country.

To kick off the deals, the two companies are taking large stakes in Saab – stakes large enough to give them the option to nominate two members each to Spyker’s board of directors.

The overall deal between the three companies including joint ventures is worth about 245 million euros (about $352 million USD overall at current exchange rates). This is a significant investment and most likely will lead to further Chinese ownership in the future.

All parties involved seem to express strong confidence in the deal and in Saab’s potential in the Chinese market. What Saab needs right now in the marketplace is certainty; most people are holding off Saab purchases or avoiding them all together due to its financial condition.

But don’t celebrate now; the Chinese government still needs to approve these transactions before they can pass.