Saab in distress Saab in distress
June 23, 2011
Some five weeks ago, it looked as if Saab might make it. The Dutch-owned company Swedish Automobile that owns Saab, and formerly operated under the name Spyker, had secured funding from China's largest publicly traded car distributor, Pang Da.
Pang Da said it would provide 45 million euros ($63 million) to Saab so it could resume manufacturing for export to China, and pay another 65 million euros for a 24 percent equity stake in Saab. Saab resumed production which had been idle since the beginning of April.
Then, in mid-June, another investor was found: Chinese carmaker Zheijang Youngman Lotus Automobile, who was to buy a 29.9 percent equity stake for 136 million euros. Saab's CEO Victor Muller hoped this investment would secure Saab's mid- and long-term financing.
But both deals remained pending while awaiting regulatory approval. And on June 23, this month's pay day, Saab was unable to pay the wages of its 3,700 employees.
Suppliers refuse break in debt repayment
This latest development in the Saab cash crisis came on the heels of a meeting with 800 suppliers on Wednesday night. Saab had asked the suppliers for a break in debt repayment - according to media reports, Saab owes its suppliers at least 50 million euros.
But negotiations failed and Saab announced it was unable to pay the wages as it had "not yet obtained the necessary short-term funding."
Saab spokeswoman Gunilla Gustavs told Radio Sweden the situation was "sad and regrettable." However, she refused to comment on media reports about the company's imminent filing for insolvency.
A history of financial troubles
Saab has been operating in the red for years. In 1989, US carmaker General Motors got on board, intending to boost its luxury car segment with the prestigious Swedish brand and taking full control of it in 2000.
Saab has boosted a continuously strong brand image, standing for stable, safe yet sporty cars which appealed to a wealthy but unassuming clientele.
Saab battled to maintain its individuality within the GM group, but sales refused to grow. GM became frustrated with Saab, which never turned a profit since 2001, and implemented a major turnaround plan in 2002 that included laying off almost a fifth of its domestic workforce.
But with GM hit badly by the financial crisis and in need of emergency government loans, GM announced its intention to sell Saab. When a deal with Swedish niche sports car manufacturer Koenigsegg fell through, it looked like the end of Sweden's second big car brand alongside Volvo.
Finally, a deal with the Dutch niche sports car group Spyker was completed in February in 2010 and kept Saab on the road.
Different ownership, same problems
But since then, Saab has continued to fall short of sales targets. Last year, Saab missed the 50,000 target aimed for, selling only some 30,000 cars. The Saab management also acknowledged that the target of selling 80,000 cars this year was unlikely to be achieved.
In the first quarter of 2011, only 10,000 cars were assembled at the Trolhättan factory, and hardly any in the second quarter, with production more or less at a standstill since April.
On Monday, management told workers on the assembly lines they didn't have to come to work before July 4.
The Swedish government has said it does not want to take the initiative in saving Saab, and that the company itself was responsible for finding solutions to its financial quagmire.
Author: Andrea Rönsberg
Editor: Thomas Kohlmann