Saab is building the new 9-4X but potential customers are still steering clear.
Time – and patience – may be running out for the embattled automaker Saab, a Swedish district court rejecting the maker’s request to go into reorganization, a process that would protect it from workers and others owed millions in cash while it comes up with plans to replenish its coffers.
Saab officials say they intend to appeal the decision by the Vanersborg District Court but observers have begun to believe that the financially strapped maker might now be forced into an involuntary bankruptcy – even though several Chinese companies are themselves waiting for regulatory approval on plans to acquire a majority stake in Saab’s parent, Swedish Automobile.
“It appears unclear if – and if so when – the relevant Chinese authorities will approve the agreements,” the court said to explain its decision.
Saab has been struggling for a number of years but appeared to get a reprieve in early 2010 when General Motors sold the ailing firm to Swedish Automobile, then known as Spyker Cars. But it soon became apparent that the new owners were woefully underfunded. And, in late March, unpaid suppliers began a boycott that forced the maker to idle its headquarters plant in Trollhattan.
Since then, Saab has been frantically seeking investors or lenders but a series of deals fell through or have been snagged in bureaucratic red tape. Several months ago, it appeared to have found a pair of white knights when China’s largest dealer group, Pangda, and ambitious domestic automaker Zhejiang Youngman Lotus Automobile, agreed to purchase a majority stake in Saab’s parent. But so far their bid has not been finalized.
Meanwhile, word of a possible $157 million loan from a major European bank has so far failed to come through prompting yesterday’s filing for reorganization. Under Swedish law that is a step short of bankruptcy and would allow the company time to work out its financial problems under a court-appointed administrator.
Saab officials responded to the Thursday ruling with a statement that said they are “disappointed…and will appeal the District Court’s decision.” However, it is unclear how quickly that could happen and whether the company would be able to avoid a forced bankruptcy before then.
Auto parts suppliers aren’t the only ones who want their money. Saab has fallen behind on its payroll for 3,700 Swedish workers.
“We are nearing 14 days without salary payments and the financial situation is becoming very difficult for some of our members,” said Hakan Skott, local club chairman of automotive union IF Metall. While Skott described the decision as “sad,” he indicated a decision on whether the union will push Saab into bankruptcy will be made within “the next couple of days,” according to the Associated Press.
Saab officials continue to see the opportunity to save their company, and the head of the maker’s U.S. subsidiary told TheDetroitBureau.com, on Wednesday, that negotiations for the bank loan are continuing.
But observers are becoming increasingly pessimistic. Independent automotive analyst Joe Phillippi said that, “If they can’t win on appeal…it would seem to me they will face bankruptcy.”
Phillippi said it is yet possible that the Chinese will come to the rescue – though perhaps not the two buyers Saab has currently been negotiating with.
Indeed, reports out of China suggest that regulators may not want to pair Zheijang Youngman Lotus with Saab but might be more open to another partnership. One name being raised is Beijing Automotive Industry Consortium, which earlier purchased tooling for several old Saab product lines.
The question, raised a source, asking not to be identified by name, is whether the Chinese will simply wait until a bankruptcy filing in a bid to further drive down the price they might have to pay for Saab’s assets.
Even if the company wins its appeal and then finds a way to rebuild its cash base and then reopen its factory, industry insiders question how much good that will do.
“They are a horribly damaged brand now,” cautioned analyst Phillippi, “and I wonder how many people familiar with their problems would be willing to buy a Saab.”
U.S. officials say they still have 9-5 and 9-3 sedans built in Trollhattan prior to the boycott available on dealer lots – and they continue to receive new 9-4X crossovers, which are produced at a GM plant in Mexico. But while August sales were up 25% over year-earlier levels, demand totaled just 363 vehicles last month, far below Saab’s once-promising forecast. That suggests that potential buyers are already steering clear.