Well, that were quite an eventful past few days last week. One moment I was in a taxi returning home from a business trip to Ireland, the next moment I found myself in an ambulance. So now back from five days in hospital I am catching up with the avalanche of different SAAB-related announcements. I guess the one that got the single biggest widest coverage is the news that NEVS will be starting the production line again. Yet, where is all the euphoria in the media and on the different forums on the web coming from?
New 9-3’s will be produced again!
Most people seem to be extremely excited about Mattias Bergman’s statements that NEVS is planning to start the production line in Trollhättan again very shortly. The plan to produce another 100 9-3’s is obviously good news; why have a car factory if you’re not making any cars, right? The first catch is however in the fact that the 9-3’s are going to be of model year 2014 and aren’t expected to have any updated features compared to the cars that left the Stallbacka factory earlier last year. The second catch is that the quantity is based on the existing parts stock- Bergman used the term “complete” (“fullföljer”) rather than manufacture. So more MY14 9-3’s will see the light of day (which is great as IMHO this is the best 9-3 ever built…), but this is by no means the restart of regular production process as some media were suggesting.
Money, Money, Money
So why would anyone consider making more of an already out of date car when the previous attempt last year only had extremely limited success in the market (only a few hundred 9-3’s were sold) and without a working reseller channel? The answer is like the title of one of ABBA’s most famous songs: money, money, money. Bergman was clear in his statements to the Swedish press last week that the main purpose for the completion of the 100 9-3’s was to generate cash. Not a surprise as such, as this is typically the goal for any manufacturer, yet in NEVS’s case the cash is urgently needed to avoid immediate catastrophe.
Rearranging deck chairs
The English expression “rearranging deck chairs on the Titanic” (“to do something pointless or insignificant that will soon be overtaken by events, or that contributes nothing to the solution of a current problem”) popped in my mind when I was reflecting on the announcements. Of course, the one hundred 9-3’s will eventually be sold and indeed generate cash, but the problem is both imminent (i.e. cash is needed now) and much bigger.
To keep the Titanic analogy, NEVS is heading for the metaphorical iceberg as there still isn’t any concrete progress to report on the negotiations with Mahindra and Dongfeng. When in December the Vänersborg District Court extended the reorganization process, they based their decision for a significant part on the Letter of Intent where Mahindra stated to intend to become majority owner and the fact that a Mahindra board decision about the matter was expected by the end of that same month. I actually don’t know whether that board meeting ever took place as no public record of it seems to be available, but what I do know is that without signed legally binding contracts and committed funding, any extensions of the reorganization process beyond the current March 1st deadline will be really hard, let alone lead to an outcome that is both positive and sustainable.
Brand identity, the key
Reportedly the core remaining problem that is causing the delays is a simple and familiar yet crucial four letter word: SAAB.
More specifically, the negotiations with defense and security group SAAB AB to secure the usage rights of the SAAB brand with the new potential owners. I don’t think I’ll have to explain how crucial the use of the SAAB brand is to any potential buyer and interestingly enough the brand question isn’t something really new. In fact, throughout the SAAB history discussions at different levels have taken place to agree on logo, font types and other crucial ingredients of the brand identity from the early years still as combined aircraft and car manufacturer under “Svenska Aeroplan AB” to the merger with Scania in 1969, the GM era at the end of the last century and more. More recently, the negotiations with SAAB AB were reported to be a significant obstacle with the takeover of SAAB Automobile AB by Spyker Cars, but also NEVS struggled in 2012. I consciously wrote “struggled” as I cannot imagine that Kai Johan Jiang will have been happy with the fact that SAAB AB limited him quite a bit in the use of the SAAB brand by forcing NEVS to use a black background (vs. the familiar SAAB-blue) in the logo and refrain from any references to the aircraft heritage. When you think about it, kind of a crippled license, supposedly based on SAAB AB’s bad experiences with the market mixing up a (formerly) bankrupt car builder with a prospering defense and security group. So this time Mahindra is reported to be in advanced discussions with SAAB AB to license the SAAB brand.
There are 15 working days left until the March 1st reorganization deadline. Mattias Bergman flagged this week already that NEVS needs more time and will likely file for a 3rd 3-month extension, but for this to get the green light from the Court concrete evidence of progress against the reorganization plan, sufficient funding and thumbs up from the creditors need to be shown again. It remains to be seen whether a Letter of Intent (or an updated version of it) from Mahindra will be enough to satisfy the former, so what other white rabbits will need to come out of the NEVS hat this time? On the funding side, announcing a plan to assemble another hundred or so MY14 9-3’s doesn’t mean cash in the bank in 3 weeks from now and it’s also questionable whether the proceeds of any sales will cover the actual costs of another 3 months, so if anything more short-term funding is needed. Then the question about the creditors: it’s been remarkably quiet on this front given the turbulence in December. I would assume (or rather: hope) that a healthy dialogue with all suppliers is still ongoing but I wouldn’t be surprised if Svea Ekonomi and LeanNova will be joined by more naysayers this time around.
So do I think “Captain Bergman” has ordered just the deck chairs on his ship to be rearranged? I sincerely don’t hope so because I do want NEVS to succeed and SAAB to live on. However, time is really of the essence. To use another metaphor, Indian elephants are pregnant for up to two years before delivering their offspring and while we’re arguably almost half way on this timeline already, NEVS won’t be able to last that long as at least money, trust and credibility will have run out by then.