UPDATE 3-BAIC in overdrive to develop brand with Saab tech

Wed Dec 23, 2009 4:26am EST

* BAIC aims to sell 100,000 self-developed vehicles in 2011

* Spending heavily on product development after Saab buy

* Plans IPO, but no details yet

* Dutch Spyker Cars remains interested in Saab assets (Adds Spyker comment in paragraphs 19-21)

By Michael Wei and Alison Leung

BEIJING/HONG KONG, Dec 23 (Reuters) - Beijing Automotive Industry Holding Corp (BAIC), China's fifth-largest automaker, will launch an aggressive campaign to develop its brand both at home and overseas, after buying car designs from General Motors' [GM.UL] Saab unit.

BAIC said it will invest 33 billion yuan ($4.8 billion) in vehicle R&D over three years, after paying $200 million for the Saab technology, including the rights to three overall vehicle platforms and two engine technologies.

"Someone has commented that the purchase of Saab's intellectual property can help cut short the development time for Beijing Auto's own-brand passenger vehicles by 4-5 years," BAIC Chairman Xu Heyi told reporters on Wednesday.

"We basically agree with the view."

The Chinese car maker plans to immediately start integrating Saab technology into its vehicles with an aim to sell 100,000 self-developed passenger vehicles in 2011, Xu said.

Construction of a production facility with annual capacity of 150,000 passenger vehicles will be complete in 2011, he added.

The sales target is a bit aggressive, said Tan Kunyuan, an analyst at Changjiang Securities. "It will take at least a year for the market to recognise the brand and BAIC probably would need to modify the appearance of Saab cars to fit with Chinese market demand."

China overtook the United States this year as the world's largest auto market, as sales soared after Beijing rolled out a series of incentives designed to stimulate consumer spending during the global downturn.

However, there is still a significant technology gap between domestic Chinese automakers and their global rivals, which has left Chinese looking for acquisitions of overseas technology and designs as the global auto industry restructures.

Homegrown car maker Zhejiang Geely Holding Group, parent of Geely Auto (0175.HK), is in talks to buy Ford Motor's (F.N) Volvo unit, and Sichuan Tengzhong Heavy Industrial Machinery is buying GM's Hummer brand.

Xu said BAIC posted net profit of 6 billion yuan on revenue of 116 billion yuan for 2009, selling 1.24 million vehicles.

The Beijing-based automaker is in production partnership with Daimler (DAIGn.DE) and Hyundai Motor (005380.KS), with most of their joint output for sale in the domestic market.

IPO PLAN

BAIC, which has a 20 billion yuan line of credit from Bank of China (601988.SS) (3988.HK), is also making plans for an initial public offering, Xu said, though he declined to give details, including where the company would list.

Morgan Stanley (MS.N) advised BAIC on the Saab deal, but it was unclear whether the investment bank is also involved in the IPO plan.

BAIC -- which hastily arranged the Saab purchase after a group led by Swedish sports car maker Koenigsegg pulled out from a deal to buy all of Saab -- said it was buying technology such as manufacturing blueprints and the management systems that will let it continuously develop and produce high quality vehicles.

Besides exporting its vehicles directly, BAIC also plans to set up joint ventures overseas to facilitate sales, Xu said.

The company will roll out two new models of its own-brand vehicles next year and will develop new energy cars in tandem with the new models of its self-developed vehicles.

The Saab acquisition includes the intellectual property for Saab's 9-5 and 9-3 sedans and some equipment to make them, leaving the fate of the Swedish-based automaker up in the air.

Dutch-listed luxury car maker Spyker Cars SPYKR.AS was still in talks to buy Saab from GM despite BAIC's development plans, a Spyker spokesman said.

"I have no information that this would affect the interest of Spyker in the Saab business," he said, adding it was positive that a Swedish metal workers' union backed Spyker's bid for Saab. The spokesman declined to comment on reports of a billionaire supporting Spyker's takeover plan. [ID:nNLDE5BL0D] (Additional Reporting by Jason Subler in BEIJING and Gilbert Kreijger in AMSTERDAM) (Editing by Doug Young and Ian Geoghegan)

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