The last laugh, it seems, is on HAAH.
The California-based holding company said this week it will file for bankruptcy after scuttling plans to import Chinese cars.
In April HAAH Automotive Holdings signed a letter of intent, or LOI, with China’s SICAR Automotive Technology Development Co. That deal would have brought SICAR’s Vantas and T-GO brands to the U.S. market.
Industry veteran Duke Hale, who served as the founder and CEO of HAAH, isn’t ready to hang up his hat, however. He told Automotive News that he now is making a bid to pull another struggling automaker, Korea’s SsangYong, out of bankruptcy.
“If we were successful in our acquisition of SsangYong globally, that obviously means we would have the [right to] the U.S. and Canada markets,” Hale told the trade publication. He has formed a new company, Cardinal One Motors, to make a bit for SsangYong. It’s registered in Delaware.
Coming to America tougher than it seems
The collapse of HAAH is the latest setback for China and its increasingly ambitious domestic automakers, a number of whom have been promising to jump into the American market for more than a decade. So far, the only Chinese cars sold in the States are built and imported by Volvo and Buick.
In 2019, Hale and an assortment of other American auto industry veterans put together a deal with China’s Zotye– pronounced ZOH’-tee. HAAH expected to begin importing the T600, a Toyota RAV4-sized SUV, in 2020 or early 2021.
A key selling point was going to be a low price tag, Hale told TheDetroitBureau.com in May 2019. “Think in terms of 20% less than the targeted competition,” he said then.
But the plan was scuttled due to a variety of setbacks, the pandemic among them. When it fell apart, HAAH approached other potential Chinese partners, including Chery Automobile. Then it turned to SICAR, the automaker focused on battery-electric vehicles, rather than the gas models that Zotye would have provided.
“There is no question that electric vehicles are the future in North America, and we’re excited to let everyone know of our plans,” Hale said in a statement released on April 20.
The collapse of that deal appears to have triggered HAAH’s bankruptcy. But Hale has just moved on to his next idea.
Plan C for Hale
SsanYong has long been the weak player in the Korean market, bouncing around between owners and investors and, in recent times running up worsening deficits. Its 2020 operating loss widened to 449 billion won, or $401.76 million, from 282 billion won a year earlier, according to Reuters. Meanwhile, revenues fell 19% to 3 trillion won.
SsanYong’s major investor, India’s Mahindra and Mahindra, last year signaled plans to dump its majority stake. Since then, officials at Korea’s fourth-largest carmaker have been looking for a buyer but when none appeared the company was put into receivership. That matter, handled by the Seoul Bankruptcy Court, has now been put on hold, Korean news media report.
While local news reports have focused on a HAAH rescue, Hale said his old company is not part of the plan. Any bid for SsanYong will be made by Cardinal One.
Meanwhile, it is unclear whether Hale and Cardinal One actually have the resources to pull an acquisition off. He told Automotive News it would likely require raising $250 million to $350 million.“We did a lot of due diligence on this deal,” he said, adding, “It’s going to take a significant amount of money and a significant amount of effort” to complete.
2 responses to “HAAH Founder Looking to Get Last Laugh Jumping from Chinese to Korean Cars”
I have no comment on the current proposal, as my work is providing insights into the broader Korean corporate and automotive ecosystem.
What I can share is taking Ssangyong or any company out of a Korean receivership is complex. In most cases, the troubled firms are acquired by huge Korean and global groups with billions in assets.
That said, the SYMC Receivership is processing as scheduled.
1. The Korean Court has appointed an auditor who among their many roles has determined a possible starting base for a potential buyer at between $250-350 MM. The Court auditors are the local Korean Ernst and Young partner…so major firm.
2. Upon that, we need to add to the $250-350 MM price the outstanding Public Interest Bond debt that is now $350+ MM. As public money debt, it cannot be forgiven and the debt-holder The Korean Development Bank will require payment as part of the receivership settlement. They might at some point down the road and after SYMC recovers consider a new round of funding… but the Bank has been very concerned with both SYMC;s sustainability and those mentioned as potential buyers. Like the Court, they will have considerable say in any final buyer based on their own scrutiny.
3. Korean media and industry experts estimate the actual acquisition price is now in the $700+ MM range. This will need to be cash in hand, and with solid assets, too.
3. In addition with the receivership there is considerable SYMC worker back wages due. These are being accrued as well as severance pay to more than half the Union and staff workforce. Some of this can be paid over time but this is layer of debt. These figures total at least $60MM to $100 MM and growing.
4. The Court ordered plan is any potential buyer needs to submit their “detailed” plan and LOI by the EOM July.
5. The Court ordered auditors will then over August perform a strict due diligence verifying the potential buyer’s assets in hand, solvency, and ability to fund and sustain beyong the buyout.
6. At the end of August, a top candidate who has both the assets and a solid Korean business plan will be selected …Over the next two months further review will be undertaken, including a review by The Korean Development Bank, who they and other debt holders need to give an approval…. plus, the key suppliers and the Union.
The estimated cost of the buyout and assets needed even by potential SYMC buyer Edison EV has been just under the $1 billion mark.
Again, these insights have been well covered in Korean language media and Court statements over the past few months
One key point, too, is that the huge purchace price, debt, and uncertainty has kept Korean companies from stepping forward.
Some of these timelines may also be subject to change, but SYMC hopes to have a new owner by late fall 2021.
This is comical.. Cardinal Ones CEO formerly of BK’ed HAAH CEO. Has burnt so many dealer bridges and relationships, You can get dizzy of all the changes in market positioning and operational direction so many times you can only shake your head .
With no leveragable asset base; no financial institution conducting any low level due diligence would consider lending him a plug nickel .
Predict Edison Electric will win the deal.