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Saab's Chinese Suitors Bail, Court Asked To Pull The Plug

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Yesterday, Saab hit the snooze button and dreamed of survival a bit longer, thanks to a series of loans from North Street Capital totaling $70 million. That isn't nearly enough to keep the brand afloat, though, and the company has been banking on investments from China for its long-term stability.

Unfortunately, those investments seem far less likely today than they had been just a few weeks ago. As a result, the man in charge of Saab's reorganization has effectively asked the Swedish courts to kill the brand.

It's a dramatic twist in one of the auto industry's most complicated plot lines. The CliffsNotes version is that Pang Da and Youngman -- two Chinese firms that had expressed interest in purchasing a portion of Saab -- aren't likely to be the company's saviors after all. Neither has reached an agreement with Saab, and even if they had, it seems unlikely that Chinese authorities would approve such a move.

To its credit, Saab recently filed for bankruptcy protection, which would buy the company a bit more time and potentially help Saab survive even without the help of foreign suitors. However, Guy Lofalk, the man in charge of Saab's reorganization, has publicly stated that no bankruptcy plan can possibly provide enough cash to keep Saab alive. And so, Lofalk has asked the Swedish courts to end Saab's reorganization.

If the courts agree to Lofalk's request, Saab's future prospects are grim. Without bankruptcy protections, and without the rumored $335,000,000 investment from Pang Da and Youngman, Swedish Enforcement Authority official Hans Ryberg has said that the government will resume efforts to seize control of Saab's assets and recover debts owed to suppliers.

Is this the end?

Victor Muller insists that Saab is not dead. Muller bought the company from General Motors, then created a holding company -- Swedish automobile -- to house both Saab and Spyker Cars. He has told the press, "No way it’s over", and he has vowed to fight Lofalk's request in court.

Muller believes that Lofalk has some ulterior motive in asking the Swedish courts to end Saab's reorganization, though he won't go on record about what that motive might be. He simply says that Lofalk "is completely focused on an ownership change.... He wants to force Swedish Automobile to sell Saab."

And in truth, Lofalk said as much. He has stated that one of the few possible solutions to Saab's dilemma is to allow Pang Da and Youngman to buy Saab in its entirety. That would be a very interesting development, since another major Swedish marque -- Volvo -- landed in the arms of Chinese investors just last year.

But as much as a full sale to Pang Da and Youngman might pain Saab fans -- not to mention Muller -- it seems the only feasible solution at this point. And in truth, it's only half-feasbile, since (a) the three companies would have to reach an agreement at the bargaining table, which they been unable to do so far, and (b) the Chinese government would have to approve the deal at a time when China is worried about a glut of competing car companies. (Remember HUMMER?)

Unless another investor steps forward -- which seem highly unlikely -- it seems Saab may finally have to wake up and face a very dreary day.

 
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