Saab concept car
In the past few weeks we got increasingly dire news regarding Saab‘s cash situation. Saab has recently stopped producing cars after it could no longer pay its suppliers. Victor Muller, Saab’s chairman is approaching anyone with a wallet and a pulse looking for new investment. So far, no investor has came forward and this might spell the end of the storied Swedish automaker.
Fisker Karma
Meanwhile in the same week Fisker, a new automaker that has yet to deliver its first car, announced that it has just raised an additional 100$ million USD investment. This is on top of a 190$ million investment they announced in March 2011. Basically, Fisker is accepting investment, even if it doesn’t need it now. Raise when you can, not when you need it.
Some Detroit journalists cried foul as they see Fisker and Tesla as not as deserving as GM, Ford or Chrysler. For them, this whole EV thing is a fad and they can’t understand why anyone would invest in such risky ventures.
Here’s the great thing about investment: it’s all about the future growth. Nobody invests to maintain the status quo. The fact is that Fisker even with an expensive hybrid car has more growth potential than Saab ever had even if the later can produce more cars. This is the same reason Apple is now worth more than Microsoft: investors are excited about the possibility of future growth, even if Microsoft is still a very profitable business. Future growth means the possibility of a stock going higher in the future, which is what you are looking for as an investor.
Our advice to Saab: stop screwing around with the ICE cars. They are from the past now. Finish your EV conversion and reinvent yourself as a leader in electric transportation. At the very least, this will allow you to get the financing needed for low volume production. It’s better to be a living EV company than a dead ICE one.
