Saab lines up a deal to sell nearly 600 vehicles, raising $18 million in desperately needed cash.
It’s getting hard to tell the players without a scorecard, especially as Saab continues to spread its net hoping to come up with cash that can keep the financially struggling company afloat.
Less than a week after admitting it doesn’t have the resources to make payroll, the Swedish maker has announced yet another Chinese company has offered to lend it a hand, this time agreeing to pay $18.4 million in cash for 582 unsold Saab cars. Meanwhile, efforts continue to win the approval of regulators in Europe and China needed to ensure that several other proposed deals can be completed, giving Saab enough cash to get it beyond the current crisis.
“I am pleased to announce this agreement as it secures part of the necessary short-term funding for Saab Automobile and allows us to pay our employees’ wages before the end of this month,” Chief Executive Victor Muller said in a statement.
But it remains to be seen whether the latest bailout will be enough to get Saab back into production again, observers caution.
Saab won’t say who the latest white knight is, other than the help comes from an unidentified Chinese company. The automaker’s parent, Dutch-based Swedish Automobile, recently inked tentative agreements with Chinese dealer chain Pang Da, as well as the local automaker Zhejiang Youngman Lotus Automobile Co., that would eventually yield $352 million in cash – but give the two Asian firms a majority stake in Saab.
While that money could eventually give Saab the foundation it desperately needs, the three-way partnership must go through a complex approval process, with approval needed from both Chinese bureaucrats and Swedish regulators, as well as from the European Investment Bank.
The EIB provided the loan used by Swedish Automobile – then known as Spyker Cars – to purchase Saab from General Motors in early 2010. The EIB has become a major hurdle, however, repeatedly dragging its feet on a variety of potential deals Saab has tried to line up in order to raise cash.
The maker has been struggling for years, which led GM to decide to sell Saab off after the U.S. company emerged from bankruptcy in mid-2009. Despite predicting Saab could survive on sales volumes significantly lower than it had achieved in the past, Muller’s business plan proved overly optimistic, and in March, suppliers began boycotting the company over unpaid bills.
Saab’s headquarters assembly plant, in Trollhattan, Sweden, has been idled for the past three months and Muller last week advised workers not to return until July 4th, when he hopes to have enough cash to both meet payroll and give parts makers the money they’re demanding.
However, the latest inflow of cash may not be enough to do both, warned Svenake Berglie, chief executive of the Swedish auto supplier organization FKG. “It’s enough money to pay the wages, but not to pay the suppliers,” he cautioned.
Along with the partnership agreement with Pang Da and Youngman, Saab continues to press the EIB to approve a proposal by Vladimir Antonov. A one-time partner of Saab Chairman and CEO Muller, Antonov wants to buy the Trollhattan plant and other company assets then lease them back to the Swedish automaker. The bank has resisted the transaction as those assets are already part of the collateral for the loan used to buy Saab from GM in the first place.