SWEDEN ASKS FOR U.S. VIEWS ON CHINESE PURCHASE OF VOLVO AND

UNCLAS SECTION 01 OF 02 STOCKHOLM 000625

STATE PLEASE PASS TO USTR DAVID WEINER

TREASURY FOR RON BLOOM, DAVID WRIGHT, ERIC MEYER

SIPDIS

SENSITIVE, PLEASE HANDLE ACCORDINGLY

E.O. 12958: N/A
TAGS: KIPR EINV ETRD PREL SW CM
SUBJECT: SWEDEN ASKS FOR U.S. VIEWS ON CHINESE PURCHASE OF VOLVO AND
SAAB, AND WHETHER WE'D WANT TO PRESS CHINA BEFOREHAND

This is an action request. Please see paragraph 2.


1. (SBU) Summary: During a meeting with the Ambassador, Swedish
State Secretary for Enterprise Goran Hagglund described "very strong
Chinese interest" in buying 100% of Volvo-cars, which is owned by
Ford, and 30-40% of Saab which is owned by GM. He said his
government had asked the companies to hold off any announcing any
deals involving China to give the Swedish government time to talk
with the Chinese government about IPR and other trade concerns (i.e.
Chinese tariffs on cars imported into China.) He argued that China's
eagerness to buy into these U.S. companies gave Sweden and the U.S.
a limited time with leverage to press for IPR and trade-related
guarantees. Hagglund asked whether the possible sales to China
posed concerns for the USG, and whether we'd like to coordinate with
Sweden on raising such concerns with the Chinese government.
Regarding the future of the Saab sale, Hagglund said GM and the
Swedish Government would have to plan future actions based on the
fact that the designated Norwegian buyers Koenigseeg had been less
than forthright in their dealings with GM and the Swedish
government. He also briefly discussed the sale of Opel and areas for
broader U.S.-Sweden cooperation. End Summary


2. (SBU) ACTION REQUEST: Please provide guidance on how Post should
respond to the question of whether the USG has concerns over the
possible sale of Volvo and GM to Chinese firms, and whether we'd
want to join the Swedish government in raising such concerns with
the Chinese government. Please also advise whether rules for USG
review of foreign investments would apply to Chinese purchases of
Volvo and Saab. End Action request.

Good Communication with Ford and GM
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3. (SBU) On September 28, the Ambassador paid his initial courtesy
call on State Secretary for Enterprise Goran Hagglund. Hagglund
described the good communication and cooperation he has with Ford
regarding Volvo and GM regarding Saab. He said he talks with Ford
every other week, and with GM every day.


4. (SBU) Hagglund said that Ford is not in a position where it must
sell Volvo, but has decided that it has no room for Volvo in its
future focus on "one Ford." Despite the fact that GM is driven by
economic necessity to sell Saab, Hagglund said, his government would
treat both companies equally. He noted his government's position
that there would be no Swedish government ownership of either
company.

Koenigsegg Problems with the Saab Purchase
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5. (SBU) The Ambassador asked about recent press reports that GM's
designated buyers for Saab the Koenigseeg group of Norwegian
investors might not go through with the deal due to ownership
conflicts within the company. Hagglund responded that there was
"some mistrust" within the Koenigseeg group, and in what Koenigseeg
had been telling the Swedish government and GM. Based on the latter
Hagglund said, "We need to draw our own conclusions from that about
what we do in the future."


6. (SBU) Comment: On August 18 GM announced it had signed a deal
for Koenigseeg to buy Saab, although certain financing details
remained to be completed. The September 30 Swedish press reports
that Koenigseeg is meeting with the European Investment Bank, which
will not provide Koenigseeg as large of a loan as they need for the
purchase. End comment.


Possible Chinese Purchase of Saab and Volvo
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7. (SBU) Hagglund said discussions about Saab included possible
Chinese co-ownership of 30-40% over the next year. He said there
were discussions about 100% Chinese ownership of Volvo. He explained
that because financing was so difficult for the purchase of any car
company, "unconventional financing, which will involve China in some
way" was being considered. He noted, however, that the European
Investment Bank "was not keen about loans to brands owned by a
Chinese company," but he did not know if they made a distinction
between 100% or 30-40% ownership.


8. (SBU) Hagglund said his government had told GM it would be good
for GM to retain part of Saab in some way for several years in order
to control IPR, and as a message to Sweden and European audiences

STOCKHOLM 00000625 002 OF 002


that they are not just "letting it all away." Ministry of Enterprise
Deputy Director for Research, Innovation and Industry Development
Hans Pettersson, said his government had advised GM that it could be
useful to keep a good eye on the business from the inside to detect
any theft of IPR, and to follow up in the event of any problems.

What Does the USG Think About Chinese Ownership?
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9. (U) Hagglund asked what USG views were on Chinese ownership or
co-ownership given serious IPR concerns if these valuable companies
should come under Chinese ownership. He speculated that suppliers
and others might want to stop a deal for 100% Chinese ownership of
Volvo due to IPR concerns. He noted that Sweden believed in free
trade and open societies, "but we have to deal with real
circumstances."

Would the U.S. Want to Join Sweden in Raising Concerns with China?
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10. (SBU) Hagglund stressed how eager the Chinese government was
for Chinese firms to purchase Volvo and Saab in order for China to
become a major player in the global automobile trade. He argued
that Chinese eagerness gave the U.S. and Sweden a limited period of
leverage to press for guarantees related to our IPR trade concerns.
He said the trade concerns were China's 40% tariff on foreign cars
that prevents Sweden and others from importing cars into that
market.


11. (SBU) Hagglund said he had told Ford that if China is the only
option at the end, the Swedish government would like enough time
before announcement of the deal so that governments could talk to
the Chinese government about "some specific issues."


12. (SBU) Hagglund asked whether the U.S. would like to join Sweden
in an approach to the Chinese government seeking guarantees related
to IPR and other trade concerns.

Opel Forced to Sell to Magna?
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13. (SBU) Discussion then turned to the Opel sale. Hagglund said
he had heard that Magna was a political, rather than the
economically efficient choice. He said the German Ministry of Trade
had been forced to accept the sale to Magna due to the pressure of
the German Parliamentary elections. Now, he said Spain, Belgium,
Poland and the United Kingdom were closely watching how Germany
handles the deal.

Other Areas for U.S.-Sweden Cooperation
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14. (U) The meeting ended with discussion of possible areas for
U.S.-Sweden cooperation beyond currently robust cooperation on
alternative energy and clean technology. Hagglund agreed with the
Ambassador that there was potential to enhance cooperation between
Swedish and U.S. entrepreneurs in other areas, and said his
government would be willing to introduce programs to enhance such
cooperation. Specific areas of cooperation would need to be
discussed further, Hagglund said, but he suggested innovation and
women entrepreneurship. Hagglund said Sweden had done a
considerable amount of research on women entrepreneurship, and would
be pleased to share its experience with the United States.

SILVERMAN