Beijing Auto to buy Saab know-how

PUBLISHED : Tuesday, 15 December, 2009, 12:00am
UPDATED : Tuesday, 15 December, 2009, 12:00am

Beijing Automotive Industry Holding Co (BAIC) is buying certain technology and equipment from General Motors' Saab unit in a deal that can help the state-owned company produce its own brand of cars.

After six months searching for car-making assets to acquire, BAIC said yesterday it was buying the intellectual property behind the Swedish firm's Saab 9-3 and 9-5 executive sedans and some tooling equipment for an undisclosed amount. The fifth-largest state-backed carmaker is trying to upgrade its technology.

Although the 9-3 and 9-5 technology is about 10 years old, the turbo engines and gearboxes can still be used as the basis for a BAIC domestic brand of car, analysts say.

According to a statement released by cash-starved GM, the 9-5 tooling will move to China to be used in making BAIC vehicles. Saab will assist the mainland firm in integrating the technology.

Mainland media said BAIC had been granted a 20 billion yuan (HK$22.7 billion) loan from Bank of China for the acquisition.

The deal with BAIC is separate from the sale of Saab as a whole, for which negotiations are continuing. Dutch sports-car maker Spyker is in talks to buy the firm. BAIC joined Swedish sports-car maker Koenigsegg Group to bid for Saab in September, but Koenigsegg later dropped out.

'We have developed a good relationship with BAIC and look forward to working with them to integrate this Saab technology into their future vehicles,' said Jan Ake Jonsson, the managing director of Saab.

A spokesman for BAIC said the arrangement laid a good foundation for further collaboration between the two companies in the future.

Since May, analysts in Beijing have reported that BAIC was examining different potential overseas acquisitions, including GM's Saab, Opel and Vauxhall. BAIC, one of the few major mainland carmakers without its own brand of vehicle, is hoping to catch up with its competitors.

The government issued an internal directive early this year telling the country's top 10 carmakers to achieve annual sales of one million to two million units each.

BAIC is the second mainland company but the first state-backed carmaker to close a deal to buy overseas car-making assets.

Private firm Sichuan Tengzhong Heavy Industrial Machinery signed a definitive agreement to buy GM's Hummer in October. No financial details were disclosed. The deal has not yet received official approval.

The central government has been cautious about buying overseas assets after the country's largest carmaker, SAIC Motor Corp, failed to turn around its South Korean subsidiary, Ssangyong Motor, which filed for bankruptcy early this year.

BAIC submitted an indicative, non-binding offer for Opel in July to compete with Canadian car-parts maker Magna International and Russia's Sberbank. But GM later called off the deal, saying Opel/Vauxhall was important to its global strategy.

The global economic crisis has hit the vehicle industry especially hard, and Chinese carmakers are among the few able to afford acquisitions.

Privately owned Geely Automobile Holdings' parent firm is bidding for Ford's Volvo passenger car unit and is said to have the support of Bank of China, China Construction Bank Corp and Export-Import Bank of China for its acquisition plan.

Changing gears

Key developments in the bid by Beijing Automotive Industry Holding Co (BAIC) to acquire assets of General Motors? Saab unit

BAIC reported to be exploring opportunities to take over GM?s Saab, Opel and Vauxhall units

BAIC reported to be interested in bidding for GM?s Saab assets

Early July
BAIC submits non-binding offer for Opel

End of July
GM turns down BAIC?s offer for Opel

BAIC joins Swedish carmaker Koenigsegg Group to bid for Saab

BAIC says it will reassess options after plan to buy Saab with Koenigsegg collapses

Early December
BAIC says it will move faster to secure GM?s Saab assets by itself

BAIC and Saab close deal on sale of certain Saab 9-3, current 9-5 and Powertrain technology