- Mike Ricamato
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Venerable Swedish automaker Saab is unable to pay its employees and is likely headed into bankruptcy. Saab and Zeewolde, Netherlands-based owner Swedish Automobile NV, are in talks to raise cash, the company said. Options include selling and leasing-back the factory in Trollhaettan, Sweden. “There can however be no assurance that these discussions will be successful or that the necessary funding will be obtained,” said Swedish Automobile, which was previously known as Spyker Cars NV.
Saab’s chances are “slim,” according to Martin Crum, an analyst at Amsterdam’s Effectenkantoor BV. “The company is still not able to produce cars; that’s the main concern. If you don’t sell cars, you don’t get cash in.” The pending property sale “can provide some badly needed liquidity for the short term, but for the longer term they of course need more,” Crum said. Saab came close to being a casualty of GM’s brand shedding after its government-backed bankruptcy, when it stopped the production of Saturn, Hummer, and Pontiac cars. The Swedish unit was slated to shut down after a group led by Koenigsegg Automotive AB pulled out of talks. Spyker’s bid came after GM had already begun to shut down Saab, ultimately paying $74 million in cash and $326 million in preferred shares.
A spokeswoman for Saab admitted that approximately 2,200 office workers, designers and engineers might not be paid as Sweden goes into a holiday. Apologizing for leaving production line staff without paychecks, she said “The last thing we want is to be forced to come with this very sad news the day before a major Swedish holiday. We would not have done this if we were in a situation where we had an alternative.” She said Saab was not actively preparing for bankruptcy, but the carmaker is making an eleventh-hour bid for cash by negotiating a sale-and-lease back of its Trollhättan factory with unnamed parties. “(Bankruptcy) is not the scenario that we are working with. We are working very intensively on securing short-term financing to improve the situation of the company, of course to pay our employees and to work with suppliers to get production going again.”
Neil King, an analyst at IHS Automotive, said Saab seems to have been left behind by the emerging market boom in nations such as Brazil, China and India. “They suffered as a result of the financial crisis but unlike their peers, they have not capitalized on booming demand for premium cars in the emerging markets.” Saab production fell sharply from 123,000 in 2007 to 33,000 in 2010.
Swedes are mourning the waning of the Saab brand, which was established in 1937 and became one of two internationally known Swedish automakers along with Volvo. At present, Saab appears to be on its last leg as there has been no recent talk of a government bailout or rescue plan. Upon hearing the news, one employee said “It is dreadful. Completely unbelievable. I get chest pains,” worker Fredrik Almqvist said. “How on earth are we supposed to pay our bills?” “I have worked at the factory and know many who worked there. You should never give up hope, but right now it looks extremely bleak,” Veli-Pekka Saikkala, a representative of IF Metall, said.
Writing on the Automobile website, Donny Nordlicht says that Saab appears to have had a bit of a reality check, as its latest press statement says ‘There can, however, be no assurance that these discussions will be successful or that the necessary funding will be obtained.’ Saab’s newfound realistic outlook is not assuaging fears, however. IF Metall is demanding that the automaker pay its members wages, saying it needs to resolve the short-term cash flow issues immediately. If Saab does not pay up, IF Metall has threatened to enter legal proceedings to procure the wages, something that would most likely end only in bankruptcy for the automaker.”