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Cash-Strapped Saab Files For Bankruptcy

Wed, 09/07/2011 - 5:23am
Louise Nordstrom, Associated Press

STOCKHOLM (AP) — The owner of cash-strapped car maker Saab filed for bankruptcy protection on Wednesday in a last-ditch attempt to salvage a brand crippled by production stoppages, withheld salary payments and mounting debt.

Swedish Automobile, formerly known as Spyker Cars, said the move would buy it time to receive funding from Chinese investors, currently awaiting regulatory approval, and avoid bankruptcy.

Saab and its subsidiaries Powertrain and Tools are included in the plan for a voluntary and "self-managed" reorganization, while overseas units have been excluded, Swedish Automobile said.

If approved by the court and Saab's creditors, an initial three-month court-administered reorganization phase would halt any debt collection processes as well as potential bankruptcy filings. Some of Saab's creditors have threatened to put it into bankruptcy amid its problems in paying suppliers and staff.

The Vanersborg District Court in southwestern Sweden received the application and expected to make a decision by Thursday, court spokeswoman Elisabeth Lindstrom.

The Netherlands-based Spykers Cars changed its name to Swedish Automobile after deciding to focus only on the Saab brand. Led by Dutch businessman Victor Muller, the company has failed to revive the loss-making brand since taking it over in 2010 from General Motors Co., which was in the process of dismantling it.

Failure to pay suppliers for parts forced it to suspend production at its plant in Trollhattan, Sweden. Salary payments for many of Saab's 3,700 workers have been postponed in recent months as the liquidity crisis worsened. These salaries will be sought for under Sweden's state's wage guarantee scheme.

The application for creditor protection calls for cutting costs and "creating a viable, competitive and independent organization," Swedish Automobile said.

"The eventual purpose of the proposed voluntary reorganization process is to secure short-term stability while simultaneously attracting additional funding," the company said.

Saab has struck agreements for cash injections from Chinese investors Zhejiang Youngman Lotus Automobile Co. and Pang Da Automobile Trade Co. The deals include the manufacturing and distribution of Saab cars in China, but have been delayed because of pending approvals from Chinese authorities.

Muller, who is CEO of Saab and Swedish Automobile, said 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."

He warned that the process would lead to "a number of tough issues and decisions" but added that he believes Saab will exit the process as a stronger and leaner car brand, putting much faith on the future cash expected from Pang Da and Youngman.

Darko Davidovic, union legal adviser for IF Metall which represents around 1,500 Saab workers, welcomed the move. "It is the fastest way for our members to get their money unless the company pays up itself," he told The Associated Press. "All other alternatives would have been worse," referring to a potential bankruptcy which would have drawn out payments.

The Swedish National Debt Office, which guaranteed a euro280 million ($395 million) loan from the European Investment Bank to Saab, supports a reconstruction, director Bo Lundgren told reporters in Stockholm.

"This is likely something that is good for Saab, for it to get some breathing space and get an organized process going instead of this hyperventilating it has been through," Lundgren said.

 

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