Ailing Swedish carmaker Saab sought breathing space from creditors on Wednesday, filing with a local court for bankruptcy protection through a “voluntary?reorganization” while it continues to wait for promised new investments from two Chinese firms.
“Obviously a restructuring is preferable to bankruptcy. But receivership is still a step closer to bankruptcy. We’ve always warned investors it was extremely risky,” said Jann Maarten Slagter, director of the Dutch shareholders’ association, VEB.
Saab, rescued from closure by General Motors Co in early 2010 by Amsterdam-listed Spyker Cars — later renamed Swedish Automobile (Swan)– has struggled for several months while it pursues funding from an assortment of Chinese and other investors.
Production at its Swedish plant has been at an almost continuous standstill since April as suppliers refused to provide parts until they received payment. The company also failed to pay salaries in August.
In June, Saab said two Chinese car companies, Pangda Automobile Trade Co Ltd. and Zhejiang Youngman Lotus Automobil, had agreed to take a combined majority stake in the firm aimed at rescuing the struggling Swedish carmaker. The deals are still awaiting approval from the Chinese authorities.
“The eventual purpose of the proposed voluntary?reorganization?process is to secure short-term stability while simultaneously attracting additional funding, pending the inflow of the equity contributions of Pang Da and Youngman,” Swan said in a statement on Wednesday.
But the Chinese authorities have halted planned investments in the past, such as Saab’s failed deal with Hawtai Motor Group in May and Sichuan Tengzhong Heavy Industrial machinery’s bid for GM’s Hummer, which collapsed in 2010.
Swedish newspaper Dagens Industri said late on Tuesday that Youngman would not get the necessary Chinese official approval to take part in the deal, citing several sources.
Instead, state-owned Beijing Automotive Industry Holdings Co (BAIC) or sport utility vehicle maker Great Wall Motor, were seen by Chinese officials as being more suitable partners, the newspaper said.
A source told Reuters in May that Great Wall has been in talks with Saab’s owner about a possible tie-up.
“At this moment, there is no money and they (Saab) have been waiting for money for more than five months. The problem is still the same — they need the money,” said Theodoor Gilissen analyst Tom Muller.
Swan said that under the filing for voluntary?reorganization?Saab Automobile AB and two subsidiaries were asking the Swedish court to appoint an administrator with whom management would work to?reorganize?the company.
Saab said it will present the?reorganization?plan to creditors within three weeks of filing the?reorganization?plan.
Saab entered the same process in 2009 after GM pulled its funding and exited later that year.
According to Saab’s annual report, the company paid 1.9 billion crowns ($290 million) in wages, social contributions and pensions for 3,208 employees in 2010.
On that basis, the company had to pay out around 157 million crowns ($24 million) in staff costs each month last year. Saab now has around 3,640 employees.
The?reorganisation?plan aims to lower costs and create a “viable, competitive and independent organisation,” Swedish Automobile said.
Saab asked?reorganization?the court-appointed administrator to be the same lawyer who handled the 2009 Saab?reorganization.
The administrator will apply for a Swedish state wage guarantee scheme to cover Saab’s wages, Swedish Automobile said.
Trade in Swedish Automobile’s shares has been suspended and the stock will be put on a watch list if Saab’s court request is approved, Dutch market authority AFM said in two separate statements.
The company’s stock was trading at 0.72 euros per share at closing on Tuesday.
The main union at Saab, IF Metall, said on Wednesday it thought filing for?reorganisation?”could be a positive solution for Saab,” adding it hoped the court would process the request soon so its “members can quickly receive word about their salary payments.”
Wednesday’s announcement came just two and a half years after the carmaker last went through a large-scale restructuring to avoid bankruptcy, when more than 75 percent of its debts were written down.
But observers were quick to point out that the situation today is radically different than last time.
While the brand in February 2009 had a number of new models brewing, never halted production and enjoyed some protection from its owner GM, it is now in the precarious situation of having basically halted production since April with a current owner unable to even provide enough cash to pay salaries.
Bankruptcy expert and lawyer Rolf Aabjoernsson, who represented Saab creditors during the last?reorganisation, said Wednesday he expected the court to reject Saab’s request.
“How could Saab succeed when they have no money, no production, nothing?” he asked in comments to Swedish newswire TT.
“They have nothing besides dreams and they don’t stand up in court,” he added.
It is not yet known when the court will announce its decision.
FIRST HALF RESULTS
Saab announced its delayed financial results for the first half of 2011, in which it unsurprisingly made substantial losses. According to a statement released last week, Saab said that for the six-month period ending 30 June, it recorded a loss of ?201.5 million (USD290.6 million) in earnings before interest and taxes (EBIT) compared to a loss of EUR21.9 million during the same timeframe a year ago. It also added that its net loss amounted to EUR224.2 million against losses of EUR55.7 million in the first half of 2010.
The financial results for the first six months of 2011 only serve to underline the predicament that the company has been in, and certainly the situation since then appears to have got even worse, with workers having had wages delayed for three months in succession and suppliers beginning collections proceedings.
In a move that was more or less anticipated after the plague of problems, Saab announced its absence from the Frankfurt Motor Sow 2011 in August.
It’s been a rough decade for Saab. The Swedish carmaker was bought by General Motors in the 1990s to bolster the American manufacturer’s luxury and foreign divisions. However, the Scandinavian brand never became the international sales juggernaut GM hoped for and couldn’t build on the company’s legacy of producing quirky, upscale vehicles that appealed intellectuals and athletics alike.
Instead, it came out with models like the low-end 9-2X hatch and 9-7X SUV that were roundly panned by critics. Annual global sales reached their peak in 2003, when Saab sold 132,000 units, but have shrunk drastically since. In early 2010, GM unloaded the troubled brand to Spyker Cars NV.
Like Volvo, another Swedish car brand that struggled on its own and later as unit of the Ford Motor Co., Saab is deemed by many automotive experts to be too small to survive the rising capital costs of developing technology and acquiring global distribution. Ford ultimately sold Volvo to Chinese auto maker Geely last year for $1.8 billion.
General Motors? dealers in the Middle East reported a 25 per cent year-on-year increase during July total sales that reached 12,863 vehicles, driven by sales of crossover vehicles.
The sales figure was the result of continued robust sales throughout the region for the company?s line-up of passenger cars, crossovers, sport utility vehicles and pickups across the Chevrolet, GMC and Cadillac brands, according to a statement issued by General Motors Middle East.
?We are continuing to drive showroom traffic, which is reflected in our continued strong sales results throughout 2011,? said John Stadwick, President and Managing Director of GM Middle East Operations.
Sources: Reuters, Afp, ihs, Cnn, Khaleej times