A well-heeled but little-known Chinese company has once again come to the rescue of a fading foreign auto brand.

This time Pang Da, a mainland auto dealer, has signed a 110 million euro (1 billion yuan) pact with Dutch firm Spyker Cars NV to keep its Saab brand on life-support.

But now that the ink is dry and the champagne put away, the two sides face the sobering reality of one remaining, but knotty issue -- winning the blessing of the Chinese government.

Winning that approval is always a daunting and opaque process, but the outcome this time is particularly uncertain and the decision could prove instructive for future suitors in the auto sector.

Indeed, analysts studying the deal's fine print say a pact that adds one more niche player to China's burgeoning auto industry flies in the face of Beijing's goal of anointing just a few local champions that can compete on a global scale.

"While the deal illustrates the value placed by Chinese companies on European brands, it is highly unlikely that the government will approve such an alliance when it works against China's policies to work toward fewer, stronger national brands," said William Russo, an industry veteran who runs a Beijing-based consultancy called Synergistics.

Even so, both Spyker CEO Victor Muller and Pang Da's top boss, Pang Qinghua, are optimistic as Pang Da finishes its due diligence review of Saab.

Saab's Trollhatten plant, which had been idle for six weeks after parts suppliers ceased delivery because of unpaid bills, is now up and running again after getting an initial 285 million yuan injection from Pang Da, a straight product-purchase part of the deal that did not require regulatory approval.

Pang Da is already contacting Chinese regulators, including the National Development and Reform Commission (NDRC), a powerful agency that will decide the fate of Saab. Pang said the talks had been held in "good spirit."

The partners aim to set up a manufacturing venture in China within a year and have 50 Saab sales outlets in place before the end of 2011.

"I am much more optimistic in this particular case that we would be able to get a positive decision," Spyker's Muller told Reuters shortly after announcing the Pangda deal. "We don't need that decision tomorrow. We have time to prepare any questions that the government may have and demonstrate that this is a proper investment.

"In the worst case, we would have a fantastic distribution partner who would sell a tremendous amount of Saabs in this country," Muller added.

Given its track record of handling Audi, Mercedes-Benz, Subaru and other foreign brands in China, Pang Da would indeed be a good distribution partner, analysts say.

It is Saab's local manufacturing ambition that remains a big question mark.

UNFOCUSED BRANDS
Even though China surpassed the United States as the world's largest auto market in 2009, China's indigenous auto industry remains weak and highly fragmented. Major Chinese cities are flooded with American, European and Japanese cars.

There have been a few rising domestic stars, such as SAIC Motor Corp., but most home-grown players still are struggling to shed their image as makers of cheap, less-sophisticated models, popular only in smaller, less affluent inland areas.

China could be a lifeline for bankrupt Western brands and a foreign tie may lend an obscure Chinese company more bargaining power amid the government-driven industry reshuffle, observers say.

But a dying brand with a tally of a little over 30,000 units in 2010, roughly 2 percent of Audi's China sales for the year, adds little value to an industry already plagued by too many inefficient, tiny players.

"Saab has been on the ropes for years," said Michael Dunne, president of industry consultancy Dunne & Co Ltd. "It's always been a quirky, niche brand that appeals to a narrow strand of loyal consumers. I'm not sure how much brand punching power Saab would offer a Chinese firm."

The best solution for the Chinese auto industry is to foster a few big, strong players that have the potential to be the next success stories modeled after Toyota Motor Corp. and Hyundai Motor Co., which first became dominant players at home and then moved abroad, observers say.

"If you look around, all these big exporters need to be dominating in their home markets first, that's the normal rule," said Scott Laprise, China auto analyst with CLSA. "It's very rare that could happen if they are inefficient automakers or unfocused brands at home."

SLOW CONSOLIDATION
Technocrats in Beijing have long envisioned having only a few big but strong national brands, but the industry is still crowded with more than 100 players, some making as few as several thousand units a year.

Ultimately, China will have two or three big auto groups with annual production of more than 2 million vehicles respectively, plus four or five players making more than 1 million vehicles each, according to a blueprint unveiled in 2009.

Consolidation, however, has been slow and painful due to foot-dragging by local governments eager to build their own auto kingdoms.

Brilliance China Automotive Holdings Ltd. in the northeastern province of Liaoning has successfully torpedoed years of relentless pursuit by larger rival China FAW Group Corp. in the neighboring province, Liaoning's governor, Wang Min, told Reuters in March.

Chery Automobile Co. and Jianghuai Automobile Co., mid-sized cross-province rivals in eastern China, are still locked in a head-to-head rivalry despite repeated merger calls by regulators.

After two major reshuffles since 2007, China's top three automakers, SAIC Motor, Dongfeng Motor Group Co. and FAW Group, still accounted for less than half of overall national sales in 2010.

"China doesn't need more car companies," said CLSA's Laprise. "If we keep going through this process of all these foreign companies running into trouble and Chinese keep buying them, this probably is only going to prolong the pain it needs to go through in the consolidation."

MEDIA OUTCRY
China's track record in overseas acquisition has been mixed at best.

Regulators endorsed Zhejiang Geely Holding Group Co.'s 9.7 billion yuan takeover of Volvo Car Corp., which gives the Chinese full control of the famed Swedish marque, but they rejected an attempt by tiny machinery maker Sichuan Tengzhong Heavy Industries to buy the now-defunct Hummer brand in 2009.

In the case of Tengzhong, China's government-directed media gave hints about the outcome. One day after the Hummer deal was announced in June 2009, the state-run Xinhua news agency put out a harshly-worded commentary, warning Tengzhong and others of the consequence of "having their grand dream smashed to pieces" for rushing into dubious and risky deals.

This time, Chinese media are equally critical of the Saab-Pangda tie as well as the earlier engagement with Hawtai that broke up after 10 days. Major financial newspapers and websites carried stories about the NDRC not being very supportive of the Saab tie-up, citing unnamed sources.

Saab's best hope, observers say, is to bring on board a major state-backed Chinese auto group that would have bargaining power with regulators.

But each of the top makers already teamed up with as many as three mainstream global players years ago and would not be easily lured into a Saab tie as a minority shareholder.

Beijing Automotive Industry Holding Co. (BAIC), which paid 1.3 billion yuan for some of Saab's old platforms in 2009, is seen as a possible candidate.

"BAIC had a chance to buy the company earlier and decided against it. The feeling then was that it could build its own brand into something much more substantial than Saab," said Dunne & Co.'s Dunne. "If the price and terms now become super attractive, then you could see BAIC coming back for the brand."

BAIC, which has invested billions to build its own upscale cars based on acquired Saab technologies, declined to comment.