Beijing Auto buys Saab savvy

Beijing Auto has agreed to buy car and engine technology from General Motors' Saab subsidiary.

Parts for a Geely Automotive Holdings Ltd. Emgrand EC718 are stacked at the company's factory in Ningbo, China, on Tuesday, July 28, 2009. Geely Automotive Holdings Ltd., China's biggest private automaker, introduced its first car specifically designed for Europe as it seeks to break into more profitable overseas markets. Photographer: Kevin Lee/Bloomberg

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BEIJING // Beijing Auto has agreed to buy car and engine technology from General Motors' (GM) Saab subsidiary in the latest purchase of overseas expertise by a Chinese car maker. China is working to build up a handful of globally competitive car makers by buying troubled foreign car makers or their technology, and gaining access to their networks of dealerships.

The manufacturers, which are owned by the Chinese government, are looking for expertise in power-train technology and are also eager to use well-known brands to sell Chinese products. "Automakers have to tap into leading technologies to win out in this market," Vivien Chan, an analyst with SinoPac Securities Asia in Hong Kong, told Bloomberg. "Beijing Auto will need time to fine tune what they will buy to fit the preferences of local consumers."

The deal with China's fifth-largest car maker could also clear the way for GM to sell the rest of Saab to another buyer, a key part of GM's efforts to revitalise the Swedish car company. News of the deal came as Chinese media were buzzing about the news that car maker Geely Automobile was lining up the cash to buy another bastion of Swedish reliability, Volvo, from Ford Motor. In October, Ford announced that Geely was its preferred bidder.

In June, the manufacturer Sichuan Tengzhong Heavy Industrial Machinery unveiled a tentative deal to buy GM's Hummer brand of sports utility vehicles. Beijing Auto is joining Geely and others in chasing western brands to help them improve the quality of the models they build for the booming domestic market, which is now the biggest in the world. China's ultimate aim is for its car makers to start exporting in a major way. Under the agreement, the state-run Beijing Auto would take over power-train technology, including intellectual property relating to engine and gearbox technology, for Saab's 9-5 and 9-3 platforms.

The production equipment used to make the 9-5 will be moved to China to produce Beijing Auto's cars and Saab would help integrate the technology. Saab will also help Beijing Auto's efforts to use the technology it has bought to build up its own car brands. "This arrangement is excellent for both parties, now and for the future," said Jan Ake Jonsson, the managing director of Saab Automobile. "We have developed a good relationship with BAIC- and look forward to working with them to integrate this Saab technology into their future vehicles."

"The deal is an important milestone in [Beijing Auto's] co-operation with Saab," the Chinese firm said in a statement. "It has also laid a fairly good foundation for the two sides to further explore win-win co-operation," the Chinese firm said. There were no details given about the cost or timing of the acquisition of car and engine technology, although Beijing Auto was believed to have been seeking a line of credit of 20 billion yuan (Dh10.75bn).

GM is in talks with another buyer to sell the entire Saab brand. The US car maker was getting ready to close Saab if no buyer was found by the end of this month. Last month, the Swedish sports-car maker Koenigsegg Group unexpectedly dropped a bid for Saab. Beijing Auto had been putting the finishing touches on a deal to help Koenigsegg finance that acquisition, in exchange for which the Chinese company was supposed to secure access to Saab's technology and know-how.

Beijing Auto was originally part of the Koenigsegg team and said it would re-evaluate Saab after that deal fell through. The private equity firm Renco Group and the investor group Merbanco are reportedly also interested in Saab, as is the Dutch speciality car maker Spyker.