The Swedish speed merchant
Koenigsegg's purchase of Saab is the sports car maker's latest fast-lane manoeuvre. Sean O'Grady reports
Wednesday 17 June 2009
The Koenigsegg CCXR is almost certainly the fastest car you have never heard of. It will accelerate from standstill to 60mph in 2.9 seconds and top 250mph, if your nerves can put up with it.
The corporate development of this Swedish supercar has also been rapid. Founded in 1994 by the businessman Christian von Koenigsegg, it has successfully emulated the established Italian exotica in an astonishingly short time, and has attracted a following among those who can afford around £1m for a toy. Some 45 staff hand-build about 20 cars a year. Koenigsegg reported sales of 106m crowns ($13.8m) last year. It is profitable, but not spectacularly so.
The aristocratic Von Koenigsegg was apparently inspired to make the ultimate sports car by watching a Norwegian puppet film that revolved around racing cars when he was a child. Years later, after he had made his fortune in a trading company, he founded the sports car firm that bears his name, and uses his family's coat of arms as its logo. That was in his twenties. Now, at age 37, comes Von Koenigsegg's greatest challenge: Saab.
The acquisition of Saab from the wreckage of General Motors' European operations is more or less complete – a memorandum of understanding was signed yesterday. Now all they have to do is haul Saab out of the garage and on to the fast lane to recovery.
According to Joe Oliver, a Saab spokesman, Koenigsegg Group was selected "because it is financially strong, takes a long-term view and fits well with our brand". Perhaps, but Saab's troubles are such that Koenigsegg needs its helpers.
The Koenigsegg equity interest in Saab amounts to 66 per cent, split between 23.4 per cent for the Koenigsegg car company and 42.6 per cent held by the trading company still controlled by Von Koenigsegg, called Alpraaz. The Norwegian investment firm Eker group will take a further 11.8 per cent of the shares, while a San Diego-based businessman, Mark Bishop, will take a 22.2 per cent shareholding. Eker Group, in turn, holds a 49 per cent stake in Koenigsegg. The Norwegian tycoon Baard Eker is behind the eponymous firm.
The European Investment Bank is expected to provide $600m (£365m) in financing for the deal, guaranteed by the Swedish government. And, while the old GM loses all of its former 100 per cent shareholding in the new Saab, it will continue to help Saab with "architecture" (car design) and "powertrains" (engines and gearboxes). GM added that "additional support is to be provided by GM and Koenigsegg Group to fund Saab's operations and product programme investments".
Some $500m in assets and cash plus the equipment needed for the planned 9-5 model will be GM's dowry to the new owners. Around $150m in cash is already with Saab, and most of the company's $1.3bn in debts are being dissolved as it reaches the final stages of its reorganisation under the protection of a Swedish version of Chapter 11 bankruptcy.
There may be other backers, too. A report from Associated Press yesterday said that, in an application to the Swedish Companies office, the company set up by Koenigsegg to buy Saab will have on its board one Augie K Fabela II, a US-based co-founder and former chair of the Russian telecoms operator VimpelCom. How much Russian money, if any, has been channelled into this deal is not clear.
For the time being, at least, Saab will continue to work closely with the former GM Europe, soon to be owned by a Russian-Canadian consortium that includes the Russian oligarch Oleg Deripaska. Most of Saab's new products are based on GM Europe/Opel designs, especially the new 9-5, related to the Opel/Vauxhall Insignia.
Koenigsegg is impressive but, longer term, Saab will need friends in the volume car business. The revived GM, partner rather than proprietor, will be one. The trend among car companies today is to develop a range of alliances. Peugeot, for example, works with Fiat on vans; with Ford on diesel engines; and with Mitsubishi on SUVs. Saab might eventually follow a similarly promiscuous lifestyle.
Such alliances should help address Saab's central problem: it is just too small. Last year, production of its executive saloons dipped below the 100,000 mark: by contrast, rival BMW makes about 500,000 of its 3-series alone in a good year. Saab has just two model lines, both ageing, at its home plant at Trollhatan in western Sweden. Fresh models developed in the latter stages of GM's stewardship should arrive soon, including a long overdue SUV.
The sad truth is that for the last two decades, when it was under GM control, much of Saab's brand equity was squandered. A reputation for building safe, stylish – if occasionally idiosyncratic – performance saloons was devalued by an over-reliance on GM-group technology and simple neglect. Saab missed out on the SUV boom, has seen only scant development of its current cars, and is unknown in fast-growing markets such as China. By contrast, Swedish rival Volvo, under Ford, has prospered, even if it too is to be offloaded.
Still, praise where praise is due. The Swedish government has been smarter in securing the future of its arm of the old GM Europe than its German, British, Spanish or Belgian counterparts. By deftly removing Saab from the rest of GM Europe, Saab avoided being lumped in with the Vauxhall/Opel wrangling. Getting in early was a clever move.
In the political thriller State of Play the brilliant but dishevelled journalist played by Russell Crowe drives around in an old Saab 900. It's a cool car. The casting was spot-on, and sums up Saab's appeal. Saabs were for architects, lawyers and, indeed, journalists (second-hand). They were always distinctive, sporty, and uncommon. Koenigsegg must preserve that ethos, but perhaps make Saabs just a little bit more of a more familiar sight.
Safety (and turbo power) first: The Saab story
* The Swedish Aeroplane Company (Svensk Aeroplan Aktiebolag – hence Saab) was founded in 1937. The company's first car, the Saab 92001 followed a decade later.
* Saab's reputation for safety dates from its pioneering work on features such as standard fitting of seat belts, and it was one of the first car makers to use turbo technology.
* General Motors acquired 50 per cent of Saab in 1989 and the rest a decade later, though it has come to regret the purchase. The Swedish company made just one annual profit for GM. It lost about $370m in the 2008 financial year.
* Saab employs around 3,500 staff directly in Sweden, mostly at its Trollhattan plant. It produced just over 90,000 cars last year.
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