Spyker’s Muller May Struggle for Cash to Revive Saab

Jan. 28 (Bloomberg) -- Victor Muller, whose Spyker Cars NV is buying Saab, says he has to sell 100,000 cars a year to make the business profitable. He may struggle to find enough cash to build the new model he needs to help reach his goal.

Muller, chief executive officer at Dutch luxury-car maker Spyker, may take four years to reach his sales goal, according to an estimate by IHS Global Insight. Saab, owned by General Motors Co. for 20 years, is expected to sell 53,000 cars in 2010, the Lexington, Massachusetts-based researcher said.

Spyker will probably need to invest more money to develop a successor to the mainstay 9-3 sedan because sales of the 9-5 coming out this year won’t be enough to fund the project, said Paul Newton, Global Insight’s London-based analyst. Spyker, which built 42 sports cars in 2008, hasn’t made an annual profit since its initial public offering and Saab had 198 million euros ($278 million) in cash at the end of last year.

“Saab risks burning through its cash if it invests on a new model before stabilizing sales and distribution of the 9-5, but delays in introducing another model could jeopardize long- term viability,” said Jim Hall, principal of Birmingham, Michigan-based consulting firm 2953 Analytics. “They’re damned if they do and damned if they don’t” proceed with new models.

Developing a second model could cost as much as 500 million euros and Spyker may not be able to finance that, said Stefan Bratzel, director of the Center of Automotive at the University of Applied Sciences in Bergisch Gladbach, Germany.

‘Intense Work’

Muller, 50, is keeping Saab CEO Jan-Aake Jonsson to help him halt a wind-down started by GM and restart manufacturing at the main factory in Trollhaettan, which employs 3,500 workers. He will also oversee the introduction of the new 9-5 model by mid-April and of future vehicles.

“Think about the opportunities going forward, we’ll have two beautiful iconic brands under the same roof,” Muller said in an interview. The CEO said he expects Saab to become profitable in “the foreseeable future.” Spyker could also raise additional capital for new models, he said. Spyker had 781,000 euros in cash as of June 30, according to the company’s most recent financial report.

Jonsson told reporters in Stockholm this week that while there’s “intense work” ahead, “we have secured the future for Saab.”

Trollhaettan, Sweden-based Saab’s loss before interest, taxes and depreciation widened to 400 million euros last year from 300 million euros in 2008. Deliveries slumped 58 percent to 39,903 cars and revenue fell 38 percent to 1 billion euros.

Backup Financing

“They’re buying an old platform and the license to a new one,” said Global Insight’s Newton. “It would take so much money to develop a new 9-3, that given the volumes it’s working on, it wouldn’t make sense.”

Under its agreement with GM, announced this week, Zeewolde, Netherlands-based Spyker will pay $74 million in cash and $326 million in preferred shares in the new company, called Saab Spyker Automobiles NV. As backup financing, Spyker received a 150 million-euro credit facility from New York-based GEM Global Yield Fund Ltd.

The transaction is subject to the approval of a 400 million-euro loan by the European Investment Bank, the European Union’s lending arm. The EIB originally signed off the credit in October based on previous bidder Koenigsegg Group AB before a deal collapsed. Detroit-based GM and Spyker said they want to complete the transaction by February.

M&A Expert

Muller began his career in 1984 as a lawyer at the Amsterdam office of Baker & McKenzie. In 1989, he became a member of the management team of offshore company Heerema in Leiden specializing in acquisitions. He later took part in a management buyout that made him president of Weismuller Holding BV, a Dutch harbor-towage and marine-salvage company.

A lover of classic cars, the 6-foot-4 bespectacled executive has traveled around the world to show off his own collection, which included the 1958 Ferrari 250 GT and 1928 Rolls Royce Phantom 1 Experimental Jarvis.

In 1998, Muller met Maarten de Bruijn, a speedboat builder who had designed and produced a sports car and was looking for a business partner and investor. The next year, the pair acquired the Spyker brand, which was founded in 1898 and went out of business in the 1920s.

Muller and De Bruijn took Spyker Cars public in 2004 at 15.50 euros a share. The shares fell to a record level of 1.49 euros on Oct. 9, 2009. They fell 1.56 euros, or 28 percent, to 3.95 euros as of 3:44 p.m. in Amsterdam, valuing the carmaker at 85 million euros.

Mubadala Development

Spyker’s new C8 Aileron nudges 300 kilometers (186 miles) an hour on the speedometer and costs 198,500 euros.

While Muller’s credentials included winning Mubadala Development Co. as Spyker investor, he struggled to turn around the loss-making Midland Formula One racing team Spyker took over in 2006 before selling it the following year.

“He moves fast, shifts gears quickly, talks easy and knows how to enthuse someone,” said Lex Roukens, a former Spyker chief financial officer who is now a partner at Value Recovery Group BV, a turnaround adviser in Hilversum, Netherlands. “He’s a good dealmaker.”

After Koenigsegg’s talks with GM broke down Nov. 24, Muller sent an e-mail to GM Vice Chairman Bob Lutz expressing interest in Saab, according to people familiar with the matter. Lutz responded within eight minutes, and Muller put in a bid five days later, the people said.

Russian Exit

To allay GM’s concern about financing from Vladimir Antonov, Spyker’s largest shareholder, Muller lined up credit that would allow him to buy out the Russian investor.

Saab has struggled since GM bought half of the automaker in 1990 from Investor AB, the Wallenberg family’s publicly traded holding company, and acquired the rest in 2000. The company has made a profit in only one of the last 20 years.

The carmaker, whose popularity peaked in the 1980s, when the 900 model drew buyers seeking a European car that stood for technical innovation, safety, luxury and idiosyncratic design, is still a niche brand whose potential can be exploited in areas such as low emission vehicles, said Pete Kelly, a senior director at J.D. Power & Associates.

“The biggest thing that Spyker has acquired is the Saab brand, the sporty brand with innovative technology and with safety and green features,” Kelly said.