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Saab Files For Bankruptcy Protection; Will China Save The Day?

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2011 Saab 9-5

2011 Saab 9-5

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Saab has had more than its share of troubles the past few years, and the company's failing finances have been headline fodder for weeks. So it should come as no surprise that earlier today, the company filed for "voluntary reorganization" with the District Court in Vänersborg, Sweden.

Critics might argue that Saab has been on life-support for years -- after all, the brand never turned a profit for former parent company General Motors. But when GM began selling off the brand during the recent recession, Saab really hit the skids. Production and development slowed to a crawl as deals fell through, and by the time that Spyker (now known as Swedish Automobile) acquired the company in 2010, Saab was, more or less, an automaker in name only. 

In recent months, troubles have begun to mount. On more than one occasion, the company has been unable to pay workers, and suppliers have stopped shipments because of overdue bills. Saab has been negotiating an investment deal with two Chinese firms, Pangda Automobile Trade Co Ltd and Zhejiang Youngman Lotus Automobil, but those agreements have to be approved by Beijing. So far, nothing has been signed.

(As a reminder, the Chinese government can be very picky about these things: it tanked the sale of HUMMER to Sichuan Tengzhong, and news reports indicate that regulators will not permit Youngman to proceed with its proposed bailout of Saab.)

Today's developments

Few details about Saab's voluntary reorganization plan have been released. In a statement, the company simply says that the plan "includes a number of aspects aimed at lowering its cost-base and creating a viable, competitive and independent organization." The statement goes on to say that:

"Through the roll-out of a fully rejuvenated product portfolio, partnerships with Chinese firms Pang Da and Youngman that will ensure access to the world’s largest and fastest growing market, and a strong and global brand, Saab Automobile is well-positioned to realize its objective of becoming a viable independent premium car manufacturer." 

In other words: someone's betting big on China. Specifics of the reorganization plan should be released to creditors within three weeks, though judges may extend that period.

If the Swedish courts approve Saab's paperwork, the bulk of the reorganization should take place over the next three months. However, the company can seek to push back the date at which it emerges from reorganization by another nine months, if necessary. 

As for workers' wages, Saab says that those should be paid as soon as the courts approve the reorganization paperwork. Suppliers, however, will have to wait until Saab sees an influx of cash from its (potential) new investors.

Victor Muller, the CEO of both Swedish Automobile and Saab, had this to say:

"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."

Which is ballsy talk for a company that approved a pay raise for its chairman while its workers went without.

For a full look at Saab's prepared statement, click here.

[Saab, MotorAuthority]

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