Saab Auto Seeks Protection From Creditors
Saab Automobile, the 64-year-old Swedish carmaker that halted production in June, applied for court protection from creditors in a bid to raise money to restart operations and avoid a bankruptcy petition by unions.
“The reorganization is a move to stabilize the company in this tremendously rocky period,” Chief Executive Officer Victor Muller said in an interview today at the company’s headquarters in Trollhaettan.
The carmaker is seeking a court administered voluntary restructuring for the second time in as many years after previous owner General Motors Co. (GM) began liquidating Saab Auto at the beginning of 2009. GM eventually sold Saab to Spyker Cars NV in February last year for about $400 million in cash and shares.
Saab Auto traces its roots to aircraft company Svenska Aeroplan AB, founded in 1937 to secure production of Swedish warplanes, and is based in Trollhaettan, a cradle of the country’s 19th-century industrialization. GM bought one half of Saab in 1990 and took full ownership a decade later.
“Everyone here is rooting for Saab to succeed but this time it seems to be over,” said Martin Johansson, a 21-year-old cashier at a Trollhaettan gas station who has family friends working at the carmaker. “It would be wonderful if they make it but I don’t think they will.”
Saab ran into a cash crunch as sales suffered last year after it took longer than expected to restore production and roll out the new 9-5 sedan after GM had emptied the factory of equipment in January 2010 amid the planned shutdown.
The carmaker, which aimed to become profitable in 2012 and sell 120,000 autos, first suspended production in March as funding dried up. After brief restarts, the Trollhaettan plant has been silent since early June. Saab delayed paying wages last month, the third consecutive postponement, prompting labor leaders to start a process that could have led to a bankruptcy declaration. They said today they’ll hold off.
The filing, made at the Vaenersborg District Court, will lead to a voluntary reorganization that will last from three months to a year, Saab said today. The manufacturer plans to present a restructuring plan to its creditors within three weeks, it said. The court will rule on whether to accept the reorganization filing tomorrow, it said on its website.
Swedish Automobile, Spyker’s new name, has dropped 79 percent this year, valuing the Zeewolde, Netherlands-based company at 16.7 million euros ($23.5 million). Trading in the shares was suspended in Amsterdam at the request of the regulator, NYSE Euronext said.
“A reorganization makes sense because it buys Saab some time,” said Tom Muller, an analyst at Theodoor Gilissen in Amsterdam. “But they absolutely still have to come up with a lot of new funds very quickly.”
Saab entered the U.S. market in 1957 with the 93 model and became internationally known for aerodynamic design that gave a nod to its aviation history. The brand gained a reputation for being offbeat, practical and safe. Features and innovations that defined Saab for decades included headlight wipers, self- repairing bumpers and side-impact door beams.
Saab during the last two decades lost much of the quirkiness that had defined the carmaker as GM pushed it to share parts, engines and chassis with Opel and other brands in the group. In 2009, crisis-hit GM put Saab on the block as one of four brands marked for sale or liquidation.
Saab today proposed Guy Lofalk, the Swedish lawyer who oversaw its reorganization under GM two years ago, to handle the restructuring. The administrator can apply for state guarantees to pay workers and Saab expects wages to be paid shortly after court approval, it said.
“A reorganization would be much quicker than a bankruptcy process in ensuring that our members get their state salary guarantee,” said Darko Davidovic, counsel at the IF Metall union, which represents about 1,500 Saab workers. “It also gives Saab another chance.”
Saab owes suppliers about 150 million euros, Muller said, adding that the carmaker is “pretty” close to securing a bridge loan. The CEO has vowed to pay back 100 percent of the money, Lars Holmqvist, president of Clepa, the European auto supplier group, said at an industry conference in Gothenburg, Sweden.
“I’m still skeptical about Saab’s chances but am actually more optimistic than I was a week ago,” Holmqvist said in an interview.
Saab sales peaked at 133,000 vehicles in 2006 and have been on a downward trajectory since then. Last year it sold 31,696 cars, below an original target of between 50,000 and 60,000.
“We have done everything we can, given that we have to safeguard taxpayers’ money and not risk it in very insecure businesses,” Swedish Finance Minister Anders Borg told reporters in Stockholm.
Financing to exit reorganization would be provided by agreements with Pang Da Automobile Trade Co. and Zhejiang Youngman Lotus Automobile Co. if they receive approval, the carmaker said.
Swedish Automobile agreed in June to sell a 29.9 percent stake to Zhejiang Youngman for 136 million euros. Pang Da, China’s biggest dealer by market value, offered to pay 109 million euros for a 24 percent stake. Regulators and GM must still approve the deals.
“ We don’t want to see them go bankrupt,” Huang Zhiqiang, head of Zhejiang Youngman’s sales unit, said in an e-mail. “If they do so, they’ll suffer major losses to their assets, especially to their brands.”
Ally Financial Inc., Saab’s financing partner in the U.S. and Europe, said it would continue to provide loans to Saab dealers and consumers during the reorganization process, the company said today.
“We still have some hopes, but when they can’t pay salaries you know it’s near the end,” said Maria Salo, who runs a cleaning firm in Trollhaettan and whose husband works at Saab doing equipment maintenance. “I’m just glad we both don’t work there.”