Saab Goes Into Administration But Comes Out SwedishFebruary 20, 2009
Saab has become a casualty of the effect of the current economic conditions on the car making industry and has gone into administration, but the outcome should be a Saab company that is no longer part of GM, and is fully Swedish owned again.
GM, which took a 50% stake in Saab in 1989 and gained full ownership ten years later, said that it wants to sell Saab. There had been concerns about the loss-making carmaker after the Swedish government rejected GM’s call for aid. However despite turning down GM’s request for support, a senior Swedish government official has said the government has not ruled out providing loan guarantees to Saab following its restructuring. Perhaps the Swedish government sees that Saab may be more committed and capable of producing green cars than GM.
In a restructuring plan submitted to the US Treasury, GM had said it planned to make Saab an independent business by the start of 2010. The Saab Board announced that it will file for reorganisation as a result of GM’s strategic review of the global Saab business, under a self-managed Swedish court process to create a fully independent business entity that would be sustainable and suitable for investment.Sales at Saab in 2008 were down 25% on the previous year. The Swedish carmaker has not made a profit since 2001. In 2007 it made an operating loss of 2.19bn Swedish crowns ($248m; £175m). It estimates its losses in 2008 at around 3bn Swedish crowns and expects a similar loss this year.
Over recent years the Saab brand has lost individuality and character under GM, with the 93 model being based on a Vauxhall Vectra.The reorganisation is a self-managed, Swedish legal process headed by an independent administrator appointed by the court who will work closely with the Saab management team. As part of the process, Saab will formulate its proposal for reorganisation, which will include the concentration of design, engineering and manufacturing in Sweden. This proposal will be presented to creditors within three weeks of the filing, and any restructuring would need the approval of the creditors, who meet on 6 April.
Following the Swedish court’s approval of Saab’s request, the reorganisation will be executed over a three-month period and will require independent funding to succeed. The reorganisation process is the Swedish equivalent of going into Chapter 11 bankruptcy protection in the US, providing protection from creditors.
“We explored and will continue to explore all available options for funding and/or selling Saab and it was determined a formal reorganisation would be the best way to create a truly independent entity that is ready for investment,” said Jan Ake Jonsson, Managing Director for Saab Automobile. “With an all new 9-5, 9-3X and 9-4X all ready for launch over the next year and a half, Saab has an excellent foundation for strong growth, assuming we can get the funding to complete engineering, tooling and manage launch costs. Reorganisation will give us the time and means that help get these products to market while minimizing the liquidity impact of Saab on GM.”
Funding for the restructured company will need to be secured during the reorganisation process and will be sought from both public and private sources.
Saab will continue to operate as usual and in accordance with the formal reorganisation process, with the Government providing some support during this period. The reorganisation should have no impact on other GM operations. Details of the progress will be provided as milestones are achieved.
“Today is the beginning of a new chapter in Saab’s history”, says Jan Ĺke Jonsson. “We are now recreating Saab Automobile as an independent unit. The road ahead will not be easy. Many have already suffered considerably as a result of the crisis in the automobile industry and sacrifices will be a part of our future, but after a period of tough decisions we will have laid the foundations for a new beginning.
“Saab has a trademark which is well established both in Sweden and internationally. We have a documented efficient production and we have a strong range of models in development. That is why we have chosen this road. The future will be tough, but the commitment which exists to support the Swedish automobile industry and Saab will help us in the arduous tasks which lie ahead of us.”
The work of piloting the new Saab Automobile into the future will be led by a group of three people: the lawyer Guy Lofalk, whom the District Court has appointed as Administrator, the Managing Director Jan Ĺke Jonsson, and the international reorganisation expert, Stephen Taylor.
The purpose of the company reorganisation is to create a short-term stability that will make it possible to develop a long-term solution for Saab. The Swedish Company Reorganization Act says that an application shall not be approved unless there is reasonable cause to assume that the purpose of the reorganisation will be achieved.
“I can already say that I am impressed by the competence within Saab”, says Guy Lofalk, “and with three strong automobile models just around the corner it would be a waste not to try to find a long-term way forward.”
Meanwhile, car production in the UK has continued to fall sharply, down 58.7% in January. Commercial vehicle production also posted a substantial fall, down.
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