Saab’s request for government protection denied – bankruptcy appears imminent
Saab claims to owe suppliers somewhere in the area of $210 million but their bigger concern right now is the fact that for the second month in a row, they were unable to pay their workers. Saab managed to find enough cash to pay the workers late for the month of July but as we are now 8 days into September, it doesn’t appear as though Saab is able to pay their workers. Swedish labor union IF Metall has around 1,500 workers with Saab who are currently unpaid and reports indicate that the union could force Saab into bankruptcy by early next week.
Saab plans to appeal the Swedish government’s decision to refuse them protection from their creditors but considering that the government stated that they decided to reject the request for protection during reconstruction because it wouldn’t work – things look bleak for Saab. They are facing bankruptcy claims from a variety of creditors including their labor union amounting to hundreds of millions of dollars and while dealerships around the world have been able to sell the vehicles that they have in stock (Saab sold 363 vehicles in the US in August 2011), the company’s plant in Trollhattan hasn’t built a car since April. Saab has put themselves into the “catch 22” situation as they need to build cars to make money but since suppliers wont deliver the components needed to build cars and their unpaid workers aren’t going to work for free – the Swedish automaker has no real way to make money right now.
Since things really went south in April, Saab has gotten by primarily by selling off assets and portions of the company. This includes the sale of their Trollhattan plant to an investment firm and the sale of a large portion of the company to Chinese firms as well as a hedge fund group. The problem was that the deal with those two Chinese firms (Pang Da and Youngman Lotus) is pending approval by the Chinese government and, in the past, the Chinese government has refused to let these kinds of partnerships happen. At this point, if Pang Da and Youngman do not get the clearance to close the deal with Saab and their parent company Swedish Automobile, the end could be near. Very near.
Saab’s first hurdle is figuring out a way to either gain protection from the Swedish government through the appeal process or find a way to get their hands on enough cash to pay their labor union workers. Provided that their request for protection does not happen but they DO find a way to pay the workers for August, they still have the problem of paying off their suppliers – who are also working to force the automaker into bankruptcy. Combine these issues with the fact that the company is broke and with production at a standstill, they cannot make sufficient money from normal business operations. While selling off chunks of the company can bring in quick money, their deals with the Chinese firms haven’t panned out thus far and in the long run – they only have so much company to sell.
Unfortunately for the people at Saab and Saab enthusiasts, as I write this piece Jim Morrison’s voice runs through my head…”this is the end….my only friend…the end”.
Other Saab News:
Saab files for government protection, plans reorganization
Swedish debt authority prepares to seize Saab assets
Saab will not display at the 2011 Frankfurt Motor Show
Saab pays the workers, avoids bankruptcy for now
European Investment Bank refuses access of Saab to Russian Antonov
Saab cannot pay salaried workers this month