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Saab Set To Re-emerge As Electric Car Maker « Back
Selina Harrison, July 2012
 
In June it was announced that Saab Automobile was to be bought out of bankruptcy and reborn as an electric car manufacturer focused on China, under rescue plans drawn up National Electric Vehicle Sweden (Nevs). The deal will hopefully breathe new life into the Swedish carmaker which, despite its iconic status, has struggled for years to buoy its operations and improve its fortunes.

Saab Auto’s roots date back to the 1937 establishment of aircraft manufacturer Svenska Aeroplan AB, which began making cars in 1947. In the 1970s Saab became a household name in Sweden and released its first turbocharged model – the landmark Saab 99. Saab cars also became popular for their quirks – it was the first car manufacturer to provide heated seating. However, despite its distinctive brand and loyal fan base, Saab has struggled against bigger competitors and failed to capitalise on emerging market demand for premium cars in recent years.

After sales peaked at 133,000 deliveries in 2006, Saab sold just 31,700 vehicles in 2010. No sales figures have been released for 2011 but it is estimated that Saab sold between 10,000 and 15,000 vehicles last year. Furthermore, Saab has struggled to make profits for a number of years. Until February 2010, Saab was owned by General Motors (GM), which controlled the automaker for 20 years despite never turning a profit on its vehicles. Restructuring in its own bankruptcy, GM sold Saab to Netherlands-based automaker Swedish Automobile (SWAN), which completed the deal with the backing of a €400m loan from the European Investment Bank (EIB). But it was not long before problems surfaced.

On 8 April 2011, Saab halted production at its plant in Trollhattan amid disputes with suppliers over payments and contracts. Under mounting financial strain, Saab went on a search for funding. Luckily, a few days later, the EIB agreed to alter its financing package and the NDO also released its security covering Saab’s property holdings, allowing SWAN to sell and lease back the assets. However, despite announcing a €150m strategic partnership with China’s Hawtai Motors on 3 May, nearly a fortnight later SWAN revealed the agreement had been terminated because Hawtai was unable to secure shareholder approval.

Even so, on 16 May China’s Pang Da Automobile agreed a distribution deal with Saab, via a joint venture company that would manage distribution of Saab cars in China. Pang Da paid €65m for a 24 percent stake in the business. On 13 June 2011, Saab also managed to secure a second deal placing 53.9 percent of its ownership in Chinese hands. Saab said Zhejiang Youngman Lotus would pay €136m for a 29.9 percent share of SWAN and a joint venture to make and distribute Saab cars in China. Meanwhile, Pang Da said it would raise its investment in the business to €109m to keep its 24 percent stake. However, as the investment was subject to regulatory approval, it did not halt Saab’s short term funding crisis.

Unions pushed for a bankruptcy due to the unpaid wages of some 3500 employees at Saab’s plant in Trollhattan. On 7 August 2011 Saab Automobile and two subsidiaries, Saab Automobile Powertrain and Saab Automobile Tools, filed for voluntary reorganisation with the District Court in Vanersborg, Sweden. However, the court was reluctant to approve Saab’s request and only did so on 21 September 2011, after the company appealed to the court.

In the meantime, Saab’s parent company was eagerly awaiting bridge financing from Saab’s new Chinese investors. On 13 October it was reported by Swedish newspaper Dagens Industri that Saab had received about 100 million crowns ($15m) from Youngman. However, approval from Chinese regulators to the deal was still pending. The two firms were reluctant to pledge more money into Saab without this regulatory reassurance, so SWAN decided to seek funding from other avenues.

At the end of October it was announced that US private equity firm North Street Capital had agreed to invest $70m in SWAN, just a few weeks after buying the firm’s luxury sports car business Spyker for €32m ($43.9m). SWAN said it decided to accept the investment because it no longer believed it would receive the investment from its Chinese partners.

But despite the North Street cash injection, and in the belief that Saab’s restructuring would fail, Guy Lofalk, the administrator appointed to oversee its three-month restructuring, informed the company he would ask that the court to terminate the process. “Saab Automobile shall contest this application and request for continuation of the voluntary reorganisation process,” SWAN said, adding that it also planned to “apply at the court for replacement of Mr. Lofalk as administrator”.

With relations between Mr Lofalk and SWAN fraught, the carmaker tried to appease the administrator to improve relations. Although it rejected a full takeover offer from Youngman and Pang Da a week earlier, on 28 October 2011 it was announced that Saab had signed a memorandum of understanding with the two companies to be taken over in a deal valued at €100m. As a result of the deal, Mr Lofalk withdrew his application to the Swedish court to halt the firm’s reorganisation process. But the calm was short-lived.

GM blocked the deal, objecting to the transfer of its intellectual property. Further, on 7 November 2011, GM announced it had decided to sever its ties with Saab and its commitment to supply it with vehicle components and the 9-4X model because the deal would hurt GM’s competitive position in China and other key markets. Saab GB, the British division of the carmaker, entered administration a few weeks later, while in Sweden things were also looking desperate.

Workers were still waiting to be paid. Production remained on ice. Youngman and Pang Da were unable to take over Saab. On 7 December, Mr Lofalk again asked the bankruptcy court to remove Saab’s protection from creditors and possible bankruptcy claims. In response, the court gave SWAN a week to come up with a credible rescue plan or enter bankruptcy.

Then, on 12 December, as shares in Swedish Automobile plunged 19 percent, the Netherlands’ Financial Market Authority halted trading of the company’s shares until further notice.
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