AMSTERDAM - Spyker will have to raise more cash in order to make its $400-million acquisition of Sweden's Saab sustainably profitable amid gut-wrenching changes in the global automobile industry.

Spyker Chief Executive Victor Muller clinched an audacious deal last month to buy Saab, helping it avoid closure, but now the Dutch maker of custom-made sports cars will have to double Saab's production, roll out new models and build a robust distribution network.

That will require hundreds of millions of dollars in new investment, and Spyker, which built only a few dozen cars last year -- will have little choice but to tap investors for additional capital, said Tim Urquhart, analyst at IHS Global Insight.

I think they have their work cut out, Urquhart said Muller will try to prove what Spyker can do with the business.

Spyker says there is enough financing -- $1 billion -- to develop new models and become profitable by 2012, including the new Saab 9-5 based on an Opel platform.

So far, with Saab's $200 million in the bank, a 400 million euro EIB loan and the preference shares issued to GM -- which carry hefty dividend payments of 6 percent from 2012 and 12 percent from 2014 -- Saab can keep operations afloat. There is also a 150 million euro credit facility.

But in a sign that Spyker may be prepared to tap new investors for cash, Muller told shareholders last week that he would seek to list Spyker shares in London and Stockholm, and possibly delist from Amsterdam. Asked whether that would make it easier to raise cash, Muller said the goal was to be closer to investors.

Muller's ability to attract investors has saved Spyker several times in the past, most notably after an ill-fated attempt to break into Formula One racing in 2007.


Analysts estimate Saab must sell upwards of 75,000 cars per year to be cashflow positive, up from 39,903 last year and dwarfing the approximately 300 Spyker has sold during its entire decade in business.

The combined group also faces the challenge of establishing a robust distribution and service network so that it can offer customer service, warranties and replacement parts.

Competing in this sector requires significant investment at the best of times, said Stuart Pearson, analyst at Credit Suisse. It will be very difficult for Saab to get back to previous production and sales levels.

All this underscores criticism that Muller is better at doing deals than making cars, and the challenges that a combined Saab-Spyker will face. One market analyst called Spyker an investment vehicle that happens to make cars.

But given the fact that Saab sales have sunk so low and Muller's drive to make the deal pay off, event a modest improvement could ultimately prove him right.

Any reasonable effort will pay off, Richter said.

Spyker, which went public in 2004 and has a market capitalization of 52 million euros, is set to close the deal within the next few weeks, which will allow it to restart the 3,400-worker Saab factory in Trollhattan, Sweden.

Next month's Geneva auto show and delivering a final payment of $24 million by July will be key to proving that the two loss-making businesses can become a profitable one.


Saab's steep sales drop in 2009 shows customers are unsure if they are buying a car that can be serviced in the future.

Apart from ramping up production, Saab will also have to distribute, sell, service and offer parts and warranties to customers, especially in the United States where an estimated two-fifths of sales are generated.

Brands that have not paid enough attention to distribution have failed, said Jim Richter, an operations consultant for the U.S. automotive industry at Net Profit Inc.

Saab will likely stick with GM's existing distribution and support network, but then will either have to sign up with a private distributor and give away margins, or build its own network, which could take years of careful, painstaking work.

To make this work, Muller, a hard-charging former fashion executive and mergers and acquisitions lawyer, is focusing on bringing what he calls an entrepreneurial spirit back to Saab.

Muller has already dropped hints that he is very interested in developing a new 9-1 series model to add to Saab's lineup of 9-3, 9-5 and 9-4X sport utility models.

Producing over 100,000 cars per year -- which Saab did just a few years ago -- is quite different from the careful construction that goes into each 200,000-euro Spyker C8 Aileron that features handcrafted leather seats, chrome-laden bodies and a tuned Audi V8 engine which can top 300 kph (186 mph).

They're not really cars, they're more like art, said Urquhart of Spyker's custom-made cars.