Volvo buying Saab: Sweden to play major role
Volvo and Saab have long since been rivals in the automotive industry. Recent years have seen a decline in this competition, but the two still share much in common. After General Motors was finished running Saab into the ground by making re-branded Chevrolets with their nameplate, it was sold off. One of the most unique companies in the world, Spyker, bought Saab and has been running it since 2010.
Earlier today a Swedish newspaper has reported that Volvo in conjunction with the Swedish government were in talks about buying Saab. Volvo spokesman Per-Ake Froberg said, “No such talks have been going on and no such talks are scheduled.” The idea of this merger is rather interesting and has several implications on capital markets.
The De Telegraaf newspaper mentions that the Swedish government would like Volvo to take over Saab because that would mean a greater chance that a loan from the European Investment Bank (EIB) granted to Saab, which was guaranteed by Sweden, would be repaid. This type of acquisition would also help Saab deal with its cash problem. Spyker had its 2010 sales fall below forecasts and has therefore struggled to pay suppliers. Sweden has also come to the rescue here by approving financing to help get production on the move once more.
The Swedish government is not the only player in this transaction seeing as China is essentially the owner of Volvo. Geely Automotive Holdings took over the Volvo brand after its sale from Ford. This acquisition was the largest of any automaker by China. You may also remember the acquisition of the Hummer brand, but that paled in comparison to this. The Saab CEO, Victor Muller, has said, “the Swedish carmaker is negotiating with a wide range of Chinese car makers about a tie up.” It will be interesting to see how this situation plays out and whether these two monikers can rise from the ashes of their U.S. ownership and become profitable once again.