Saab and parent company Swedish Automobile were once again unable to pay their workers in August and with creditors from around the world bearing down on them for money owed, Saab has officially filed for government protection with the intention of reorganization to save the struggling automaker.
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The news of Saab requesting government protection for their creditors comes after the Swedish debt enforcement agency began contacting Saab’s banks with an interest in claiming assets. In filing for protection from the government, Saab has a chance to protect themselves from the bankruptcy demands being put forth by their creditors but it comes with a cost – as a government appointed administrator will oversee Saab throughout their reorganization process. This means that what money Saab does have is “safe” for now but the Swedish automaker will now need to present their reorganization plans within the next three weeks. Should the government approve Saab’s plans to get back on their feet, the company will then have 3 months to implement the reorganization although the government can grant extensions up to one year.
Saab’s reorganization process seems to rely heavily on the sale of a share of the company to Chinese firms Pang Da and Youngman Lotus but since those deals were announced, they have not been completed due to the Chinese government’s lengthy approval process – that some believe may not go through. The Chinese government has already put a stop to Chinese firms attempting to buy into foreign automakers but since announcing their prospective partnerships with Pang Da and Youngman, all involved parties have been surprisingly confident that the deals would go through.
Saab CEO Victor Muller has likely spent a few sleepless nights during 2011 as he tried to lead his company through some very difficult times and while they aren’t getting any easier, the Saab boss offered the follow confident quote in light of the request for government protection from creditors:
"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. 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.
While the voluntary reorganization process will no doubt present us with a number of tough issues and decisions, I believe that Saab Automobile will emerge stronger from this process. 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.
I would also like to express my deep gratitude to our employees, dealers, suppliers and all other stakeholders who have been so patient and understanding in the past trying months. I realize that we have severely tested their patience, but it has been heartening to see that in general, our employees, dealers, suppliers and other stakeholders have stood by us through this tough period. I look forward to continuing these relationships and collectively start building a brighter future for Saab Automobile."
Now, supposing that the Swedish government approves Saab’s plans for reorganization, the automaker will have a short time where they will not have to worry about creditors claiming what assets they do have at this time. However, among those reorganization plans pending approval will be their rundown of how they will pay back all of those people and companies owed money – so while they are protected from claims in the immediate future, they are no means out of their debt troubles.
Should the government approve Saab’s reorganization plans, we can expect things to get underway in a hurry since the company only technically has a year and if the government rejects the plans for reorganization (and protection), this could very well be the beginning of the end for Saab.
Other Saab News:
Swedish debt authority prepares to seize Saab assets
Saab will not display at the 2011 Frankfurt Motor Show
Saab pays the workers, avoids bankruptcy for now
European Investment Bank refuses access of Saab to Russian Antonov
Saab cannot pay salaried workers this month
Saab secures another $35 million loan, production could begin soon
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