Saab Automobile, excluding operations outside of Sweden, files for reorganization, citing limited financial stability and the need to buy more time to secure new funding.
Saab, which reorganized two years ago assought to unload the unit after its U.S. bankruptcy, awaits a major investment from a pair of Chinese partners that remains under regulatory scrutiny.
The auto maker has delayed payments to its 3,700 employees and suppliers, some of which cut off parts shipments and have forced Saab to idle its Trollhattan, Sweden, assembly plant since April.
Swedish Automobile, Saab’s new parent company, expects the reorganization, equivalent to a bankruptcy filing in the U.S., to take three months, during which time government wage guarantees will pay its employees’ August salaries.
Saab’s various creditors will provide backing to pay supplier debts. Pending investment totaling some €245 million ($350.6 million) from the Chinese partners, dealership conglomerate Pang da and auto maker ZhejiangYoungman Lotus Automobile, will be used at least partly to exit bankruptcy.
“Since securing the long-term funding through conditional agreements with Pang Da and Youngman, who both support this voluntary reorganization, we have focused on securing funding to bridge the period until we receive their funds,” says Victor Muller, CEO of Swedish Automobile and chairman and CEO of Saab.
Muller bought Saab from GM in a cash-and-stock deal valued at $400 million. GM planned to liquidate the auto maker.
“We have concluded that a voluntary reorganization process will provide us with the necessary time, protection and stabilization of the business, allowing salary payments to be made, short-term funding to be obtained and an orderly restart of production to be prepared,” Muller says in a statement.
Muller and his management team have begun a new business plan, although many elements of an original draft some experts saw as overly optimistic will remain in force. The emphasis will be on creating “an independent, lean and competitive organization,” the auto maker says.
Muller will work with a court-appointed administrator to carry out the reorganization. He expresses confidence Saab can become a viable entity.
“The potential for Saab Automobile as a viable, independent premium car manufacturer is there, as shown by the rejuvenation of our product portfolio, approximately 11,000 orders and the conditional long-term funding already in place through the binding agreements with Pang Da and Youngman that will give us access to the Chinese market,” Muller says.
Saab last year launched a new 9-5 large sedan, although it has met a tepid response in the U.S., the auto maker’s most important market. More recently, it brought to market the 9-4X cross/utility vehicle, which received generally positive reviews. But Saab’s cash position has left it without resources to adequately market and manufacture the product.
GM builds the 9-4X for Saab on a confirmed-order basis.
A new 9-3 sedan is expected next year, a bread-and-butter product for Saab and one that reportedly has taken significant cash from Saab’s coffers for development.
The Youngman investment includes a joint-venture agreement to launch several new vehicles for the Chinese market, including a 9-1, 9-6X and 9-7, the auto maker revealed in its latest financial report.
The quarterly report released last week showed a first-half loss of €224.2 million ($324.4 million) for Swedish Automobile and negative working capital, and warned about the possibility of a bankruptcy filing.
The reorganization filing is restricted to Saab Automobile, Saab Automobile Powertrain and Saab Tools. Overseas entities such as its Saab Cars North America unit and Saab Britain are not included and continue to sell and service vehicles, the auto maker says.