Saab Making Progress

Saab fans will know that it’s been a difficult few months for our favorite little car company. It’s been well covered inside and outside of these pages.

When you get news in bits and pieces with a whole lot of ‘analysis’ in between, it can be a little difficult to keep view of the bigger picture. What I’d like to cover today is some of the progress that we’re making on a few different fronts.

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Business

Our immediate problem has been short-term cashflow. Cashflow usually involves inflows from finance, investment and operating activities. It’s stating the obvious, but there has not been a lot happening in terms of operating activities in recent times. Building and selling automobiles is normally the backbone of Saab’s inward cashflow and we’ve been crippled by a lack of production in recent times. It’s why the situation went from bad to worse when we couldn’t pay employees for a few days at the end of last month, an instance which has since been resolved.

We’ve been working extremely hard during this time to build up our cash inflows through investment and finance activities and this is where most of the news has occurred in recent times. It’s not just for our immediate needs, either. One should look at much of this activity as long-term in nature, building our company to provide a greater base for future operations.

We recently secured 25million Euros in bridging finance from Gemini Investment Fund Limited, the first step in overcoming our immediate cashflow issues. This loan can be fully repaid within six months, at which time it would mature and convert into equity if not repaid. Saab intends to fully repay the loan when finance from other deals is secured following regulatory approval.

And those other deals?

We have recently had a bulk order of vehicles from a Chinese buyer, totalling 13million Euros, which they have agreed to pay up front. Of course, these vehicles still have to be built and that requires materials and labor, necessitating that this financial inflow is managed well, however some of the immediate inflow has been used to help negotiate payment terms with our suppliers.

We have also announced the completion of our sale and leaseback property deal, which will see Saab bring nearly 23 million Euros into the company in the short term. Like the Gemini loan, this is funding that is not tied to anything in terms of production requirements and can be used freely to shore up our immediate liquidity position.

These arrangements are all in addition to vehicle purchases (one and two) made by our new Chinese distribution partner, Pang Da, which purchased 45million Euros worth of vehicles in two separate orders. These orders add to our already considerable order bank, which has continued to grow during our production stoppage.

Taking a longer-term view, Saab recently announced progress in one of two deals between themselves, PangDa and Youngman from China. When both deals are completed, we will see our Chinese partners inject approximately 245million Euros worth of equity into the company as well as the creation of two joint ventures for distribution and manufacturing that will see Saab’s activities expand dramatically in the coming years.

Another joint venture, initiated earlier this week, will see Saab design, develop and test vehicles for production by the joint venture company, which will be owned 50% by Saab and 50% by Youngman. There will be three new vehicles developed for production under this deal: a new 9-1, 9-6 and 9-7. The value of this new joint venture is immense for Saab and its Chinese partners, and it creates a long term outlook that has Saab’s expertise (eg, Saab Engineering Services) and the new global power of the Chinese market as a centerpiece.

Yes, we’ve had our challenges in the last few months, but we’re working very hard to overcome these challenges.

In addition to the deals mentioned above, we’ve been working hard with our supplier base to negotiate and pay them for outstanding work, thus enabling us to re-start production on a consistent basis again after the traditional Swedish vacation period has ended. We have a lot of customers waiting for vehicles and we share their frustration at not being able to deliver them.

We are, to a certain extent, dependent on the decision-making of others when it comes to securing our future.

We rely on the European Investment Bank, for example, for some of our research and development funding and this has been difficult to secure in the current environment. We also have an investor in the form of Mr Vladimir Antonov, who is passionate about this company and wishes to invest a significant sum of money into Saab. His participation in the company is subject to approval from various regulators who have remained reluctant to admit him quickly, regardless of approvals from other parties (such as the Swedish National Debt Office).

We are hopeful that our recent announcements and more secure base will loosen the burden felt by these decision makers and provide them with sufficient reassurance to allow us to meet our present demand, as well as grow into the future.

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Product

The recent stoppage means that our vehicle program is a little behind what it should be. We have markets waiting for our new Saab 9-3 Griffin range, customers waiting for their Independence Edition 9-3 Convertible and of course, the much awaited Saab 9-5 SportCombi. We’re very eager to get these out to market, but until then, a quick look at what will be available and some additional comments.

The Saab 9-4x, which has received rave reviews in the motoring press, is currently being delivered to dealers in the US and the first vehicles should be available for customer delivery very soon. The full allotment of 2011 vehicles has been sold to the United States market and other markets will come online from the 2012 model year. We were pleased to receive the Top Safety Pick award for the Saab 9-4x earlier this week. This award, from the IIHS in the United States, follows fast on the same award being given to the Saab 9-5 sedan just a few weeks earlier.

Speaking of the Saab 9-5 sedan, the vehicle will be joined soon by it’s SportCombi sibling in all markets.

The Saab 9-3 Griffin range is the best 9-3 we’ve ever made, with a great powertrain addition in terms of the new direct injected petrol engine from the Saab 9-5. Of course, we also have our low-emissions TTiD diesel range that delivers great fuel efficiency as well as real ownership cost savings for specific European markets due to it’s low 119g/km emissions (whilst retaining full family car power levels). This includes not only the 9-3 Sport Sedan, which has been available in low-emissions form since mid-2010, but also the Saab 9-3 SportCombi, which is a very popular body style in the European market, particularly here in Sweden.

This is the biggest and most current range that Saab has had in its lifetime – and it’s only getting better.

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Other issues

There are several other issues that one might consider a little more behind-the-scenes in nature. This not a complete list, but just a few quick references to give you an idea about other things that are happening at Saab.

We will soon expand our market with additional dealers coming online in China and Russia, two key emerging markets for Saab. Other markets are being worked on all the time and we hope to expand into other markets soon, as well as solidifying our existing key markets. We know that our dealers and distributors have had a tough time and we look forward to getting vehicles out to them soon.

Related to this is the carving out of some of our support services. Certain services were still provided by General Motors and Saab has been working hard to prepare infrastructure to take responsibility for these areas.

* Customer support in the US, for example, is being transferred from a GM support base to Saab’s own support base from the beginning of July.
* We have also had to prepare new IT infrastructure and are in the process of cutting over to that right now, which has been no small task at all.
* We have been preparing new databases and new global website templates, which will be rolled out progressively in the very near term. When you sell in over 50 countries around the world, this is once again, no small task.

This is not an exhaustive list. It’s simply meant to be indicative of some of the non-vehicle technical stuff that’s been happening behind the scenes here at Saab.

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There is plenty going on right now. Obviously we’d like there to be plenty more happening on the factory floor but that will resume after the Swedish vacation.

We’d like to thank everyone who has shown us such great support over the last months. We know that we haven’t always made it easy. We know that the things you might read in the press may not be reassuring. We just want you to know that we’re doing everything we can to get this great little company running on a consistent level once again. Hopefully you can see evidence of this in the deals that have been done to underpin Saab’s immediate and longer term future.

Posted By Swade on Inside Saab http://inside.saab.com/

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