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Summer 2011: stormy times for car maker SAAB

SAAB may be in trouble despite fielding their best ever line up of products but it isn't over yet

SeriousSAAB made an undertaking some time ago not to publish news or information that might depress owners, dealers or enthusiasts. Accordingly, site updates here have been sparse over the last 3 months but now may be the time to review SAAB's turbulent summer.

Reliable information concerning SAAB can be tricky to acquire and at a time when it is becoming more widely known that SAAB have not produced cars since April, rumours abound and speculation about the marque's future is rife. Now may not be a bad time to step back and review the causes and extent of SAAB's cash crisis and look at possible remedies together with steps taken by the company to date to resolve the problem, while looking at the current state of affairs and likely outcomes.

First rumblings of discontent
Earlier this year, we reported that car production at Trollhättan was likely to be interrupted due to suppliers not being paid up to date. Back in April, not too many people were unduly alarmed by this news for everyone seemed to appreciate that resuming production, rebuilding the dealer network, training staff, launching a major advertising campaign and launching two new models would place a great strain on the operational budget.

The crisis deepens
SAAB chairman Victor MullerBy May, it was clear that the scale of the cash flow crisis was greater than feared and that resuming production quickly would not be possible. Later, rumours began to emerge that the company's liquidity problems might extend to being unable to pay salaries to the 3,000+ workforce.

Ever optimistic Chairman Victor Muller has worked tirelessly to resolve the situation and at times, his exact whereabouts has been a closely guarded secret.

Efforts to boost funds started with looking at ways of selling and leasing back SAAB real estate, then the quest to attract new investment turned overseas, notably toward China where several suitors expressed an interest.

Options mired in 'red tape'
Whilst SAAB management have sought new investment throughout the current crisis, progress has been hampered severely by the terms of the original sale from General Motors and by the terms of the loan from the European Investment Bank (EIB) underwritten by the Swedish government. This restricts options and quadripartite consultation is required at every step.  It had been hoped that would be Russian investor Vladimir Antonov might be allowed to inject funding and indeed best known SAAB blog Saabs United ran their own campaign to advance that cause. This included a convincing photograph of the SAAB factory that had been manipulated digitally, so that the words ‘Approve Antonov’ appeared in giant letters on the plant roof. Later, it transpired that EIB had outlined its resolve never to approve Antonov over 2 years ago.

With all hope of approving Vladimir Antonov as an investor gone while SAAB remains dependent on the EIB loan, the possibility of having that loan taken over by other financial institutions has been explored. In the last few weeks, it transpired that SAAB have engaged New York based global investment bankers Endeavor Advisory Group LLC to assist with securing short-term funding required to restart production. 

SAAB explore new territory
Mindful of the fact that a non-productive car plant still incurs considerable costs, SAAB management have been courting new investors, mainly in China. In our last update, we reported on the abortive deal with Hawtai Motor (China) and the collaboration with Pang Da Automotive and Youngman-Lotus but these deals -which involve selling shares- are not foregone conclusions and still await regulatory approval.

Latest update
During the course of Thursday September 8th, 2011, news broke that SAAB had failed in a bid to fend off creditors by seeking bankruptcy protection, as it had done before the sale of the company by General Motors to Spyker in 2010. A Vanersborg district court judge yesterday was unimpressed by SAAB chairman Victor Muller's plans to reorganise the company so it could repay the €150m (£132m) outstanding to creditors.

What is likely to happen now
Although Chinese regulatory approval for the purchase of a substantial number of SAAB shares has not been confirmed, it has not been rejected either. While SAAB will undoubtedly press ahead with their right to appeal the decision not to grant bankruptcy protection, it must be conceded that bankruptcy remains a distinct possibility. The major players at the moment are the powerful unions representing the interest of the 3000+ workers at Trollhättan and of course the company's creditors. Forcing SAAB into bankruptcy, however, might well represent a Pyrrhic victory for either party:is securing wages for staff more important than writing off their jobs with SAAB and if creditors foreclose and seize assets, will the end of supply contracts in turn deal the suppliers a fatal blow in the long run?

It would be naive to expect that Chinese interest in SAAB would end in the event of the company being declared bankrupt: in fact, the exact opposite is more likely, with investors seizing the opportunity to pick up SAAB assets at a bargain price and no doubt, switching production to China. It would be sound business but bringing down the curtain on Trollhättan built SAABs is surely something that will not benefit the Swedish government, the unions or SAAB's creditors in the long run.

SAAB need to keep on keeping (or hanging on)The route back for SAAB is still open. Way back in 2010, when Spyker saved the company, even the most optimistic enthusiast knew that it rebuilding the brand be a long and arduous job: the company has the products - all it needs is the money to finance their construction.

Right now, it seems that far too many people have 'jumped the gun' by penning their obituaries. The situation is grave but SAAB is not dead yet and it is vital for SAAB fans everywhere not to lose faith - the company needs all the help it can get just to to hang on, or as the author is fond of saying, 'to keep on keeping on'.

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