Latest News 2012 January Chinese Fail to Rescue Swedish in Saab Bankruptcy

Chinese Fail to Rescue Swedish in Saab Bankruptcy

As reported by USA Today, and several other media outlets abroad and in the U.S., Saab Automobile has reluctantly filed for bankruptcy in a Swedish court after their former owner, General Motors (GM), blocked attempts by Chinese investors to take the company over.

Victor Muller, the Saab CEO turned in the bankruptcy application himself to a court in southwestern Sweden.  He had spent the last two years working to revitalize the 60 year-old faltering business.

The paperwork is now in the hands of the Vanersborg District Court and expects to be approved within a week.

A Saab assembly line worker for almost two decades, F.A., 36, said, "This is the most unwelcome Christmas gift I could have imagined."

More than 3,000 Saab workers and officials in the town of Trollhattan are hoping that the company will not be divided up and sold off into smaller parts.  The town's mayor, P.A., said, "Our absolute hope is that the bankruptcy administrator will aim for a solution where the company is sold in its entirety."

Muller purchased Saab for his Dutch company, Spyker Cars, in 2010.  His hope was to use Spyker, a luxury sports car company, to restore Saab to profitability.  A year later, however, Saab ran out of funds.

Muller avoided bankruptcy by stopping Saab's production, delaying salary payments, selling off the company's real estate, reorganizing and, finally, by attempting to make financial deals with both Russian and Chinese investors.  

Regulators, and GM, blocked the financing deals and they fell through. 

GM still owns some of Saab's technology licenses - and had allegedly grown concerned that their Chinese competition would gain access to that technology. 

Rachel Pang, the executive director of the Chinese company, Zhejian Youngman Lotus Automobile Co., said of pulling their proposal, "We were supporting them to the last moment, even up to 1 a.m. this morning we were discussing possible solutions by telephone, but due to GM's position, in the end Sweden's Saab filed for bankruptcy this morning."

Peter Smedman, a Swedish lawyer and reconstruction expert, said, "The licenses that GM has are crucial for the value of the company.  If GM doesn't want to let anyone in because they are scared of competition in China, then there is probably not much (value) left."

The Saab company started out as an aircraft maker and then began making cars after World War II.  By the 1970's Saab became a household name in Sweden.  In 1989 GM purchased a 50 percent stake of the company - that included command of management - and took total control and ownership in 2000.

The Saab aircraft company has remained independent of the bankruptcy.

Saab sold its most cars in 2006: 133,000.  But by 2008 sales dropped to 93,000 cars, and, by 2009, they sold only 27,000. 

By the start of 2011 Saab failed to pay its suppliers, production halted in March, gained speed again and restarted, and then stopped completely.

Facing a bankruptcy due to a faltering economy or other factors beyond your control?  Contact a bankruptcy attorney to give you the help you need now.

Categories: Bankruptcy Basics