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Spyker seeks Saab funding, sets tough profit goal

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Spyker seeks Saab funding, sets tough profit goal

February 2, 2010 07:01 CET

UPDATED: Feb 2 15:20 CET

AMSTERDAM/STOCKHOLM (Reuters) - Spyker Cars has set Saab an ambitious 2012 profit target as it stressed development funding was secured despite needing more cash to fund its acquisition of the Swedish brand.

The Dutch luxury carmaker, which produces just a few dozen handmade cars per year, clinched an audacious deal to buy Saab from General Motors Co. last week.

Spyker hopes to win back customers for Saab by focusing on three or four niche models, eating up an anticipated $1 billion in development costs.

Spyker, which will hold a shareholders meeting on the deal on Feb. 12, also said Saab would return to profitability by 2012 -- a timeframe called into question by an Amsterdam analyst.

"It is quite ambitious to be profitable by 2012. I don't think sales will rebound that quickly," Jeroen Willard at Dutch brokerage AEK said. "I think it will be more like 2014-2015."

Spyker said Saab's development costs will be partly financed through $326 million in redeemable preference shares to be issued by Saab to GM, $200 million in cash and a 400 million euro ($556 million) European Investment Bank (EIB) loan.

That together gives the new company about $1.08 billion in funding, while Spyker said Saab will also be granted favorable terms for supplies by GM and deferred payments from Saab to GM.

"With the EIB loan, which is still to be granted, Saab's funding is secured and no share issues will be required, provided the developments at Saab will be in line with the Saab business plan," Spyker said.

Spyker said its statement -- which spelled out how much cash it would have -- was issued after incorrect media reports, some of them in Sweden, which cast doubt on its development funding.

Saab produced just 20,791 cars last year as sales slumped to 39,903 from 94,751 in 2008, but aims to raise production to pre-crisis levels of about 100,000 to 125,000 with the help of a new sales and distribution strategy.

Saab, which Spyker will run as a standalone company, will focus on three to four models: the 9-3, the new 9-5 and the new 9-4X sport utility vehicle for the U.S. and European markets.

It will look into adding a fourth smaller car line, the 9-1, but this model is not part of the business plan and additional financing would be needed.

Spyker said it is committed to the business plan, which was drawn up by Saab management over the past 10 months with the aim of becoming a performance-oriented niche car company.

Both Spyker and Saab are loss-making, however, and IHS Global Insight auto analyst Ian Fletcher said in a note one of the key issues will be the ongoing cash situation of Saab. "It remains to be seen whether this risk will pay off," he said.

Spyker CEO Victor Muller has said that restoring confidence in the Saab brand and regaining lost customers is a key to its future.

One of Muller's first tasks, however, will be to shore up financing for the $74 million cash part of the deal.

Spyker said the first instalment of $50 million consists of $25 million borrowed from a Muller investment vehicle, and $25 million from an issue of shares, largely to GEM Global Yield Fund Ltd.

A second instalment of $24 million - payable on July 15, 2010 - has not yet been funded.

"Spyker has been approached by various investors to fund this instalment. Spyker intends to finance this amount primarily through senior debt," the company said, adding it has pledged assets to GM as security for the final payment.

Muller told Swedish newspaper Svenska Dagbladet that the company had quite a lot of time to obtain the funding and had "many opportunities" to get the money.

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Not that relevant if it posts an accouting profit or not, it has to be cash positive. I believe the Business Plan prepared by SAAB management focuses on cash, and apparently they are able to break even (I assume cash-wise) at around 100K units per year. If they were able to sell 130K/year before on a lineup of 2 old Opel-Vectra-platform-based models, maybe the Business Plan goals are attainable.


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