Saab Starts A New Chapter, But How Long Will It Be?

October 31, 2011

On Friday of last week, struggling Swedish automaker Saab signed a memorandum of understanding with Chinese partners Pang Da and Youngman. The MOU essentially sells Saab to its Chinese partners for the bargain-basement price of $142 million.

That investment, however, is only the first step on what will be a long journey back to health for Saab. The first test of the memo came earlier today, when Saab's creditors accepted the reorganization plan presented by Saab and its bankruptcy administrator, Guy Lofalk.

Per Inside Saab and Motor Authority, 75 percent of the creditors needed to accept the plan before reorganization could proceed.

Now that this milestone has been reached, it's up to Pang Da and Youngman to provide Saab with the $70 million committed for the reorganization process, followed by a longer-term investment of $840 million to satisfy existing debts and restart production.

Pang Da and Youngman would also like to expand Saab’s product line, and have plans to set up manufacturing in China, pending the long-awaited approval of the Chinese government.

It appears that Pang Da will focus its efforts on the distribution of Saab products in the Chinese market, while Youngman will concentrate on establishing a manufacturing base in China.

The road forward is likely to be a painful one, and the reorganization plan calls for a reduction in force of some 500 workers out of Saab's total workforce of 3,400. If all goes as planned, Saab expects 2012 and 2013 to be “financial transition” years, with the automaker returning to profitability by 2014.

For the latest information on Saab, follow our comprehensive coverage of the struggling automaker here.

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