Last week, a small Swedish parts supplier by the name of SwePart did not want to wait any longer and asked a Swedish court to declare a key Saab subsidiary, Saab Automobile Tools, bankrupt. Bankruptcy of the subsidiary would have meant the end for Saab as well. Hectic activity ensued. On Friday afternoon, there was an announcement that the matter had been settled and the bankruptcy petition was withdrawn. Expect a run on the bankruptcy court in the coming days and weeks.
Victor Muller had thought the creditors would hold out because in a bankruptcy, they would only see pennies on the dollar (or rather öre on the kronor) and that they would not dare to make such a move, because they want to remain in Saab’s good graces.
Muller was wrong. Obviously, many suppliers have lost all hope for future business with a manufacturer that had been closed since April and that had reneged on its promises many times. Muller’s offers of payment plans have gone nowhere. Suppliers don’t wat more Saab business. They want to get paid and move on. Seeing that the threat of bankruptcy can shake loose some money, more will go the same route as SwePart.
This sentiment is echoed by Lars Holmqvist, a Swede who is president of the European parts supplier’s association CLEPA. He gave a damning interview to the Swedish Expressen.
“Saab’s days are numbered,” said Holmqvist, who gives Saab only a month or two.
“Suppliers won’t supply any longer. They have grown tired. They believed the promises made by Muller, but now nobody believes anymore.”
The suppliers lost faith in the viability of Saab. Loss of future business is no threat for them if they think there is no future business. Says Holmqvist:
“With 30 years of experience in the business, I ca say that you cannot make money building production cars if your volume is not at least 100,000 to 200,000 cars a year. They compete with manufacturers that sell 300,000 to 400,000 cars a year – I am amazed that they survived so long.”
Expressen readers also mostly abandoned all hope. In an on-line poll with the question “Do you think that Saab will survive?” 77 percent answered no, 19 percent answered yes and 4 percent don’t know.
And I am not surprised that the suppliers have abandoned all hope. In this business, orders for a few thousand parts are considered a nuisance, and you are referred to the next parts wholesaler. Capacities in the business are tight, and paying jobs are easy to come by.
Saabs remaining money is being wasted by paying workers to stay at home, doing nothing. This also has only one purpose: To avoid bankruptcy. When Saab could not meet payroll in June, the unions started collecting the paperwork for bankruptcy proceedings. Muller scrounged up more money, and salaries were paid. This month’s salaries also will be paid, but start of production has been delayed again.
If threatening bankruptcy works for the unions, if it works for a small supplier, expect several other suppliers to try the same. Except that now it won’t be small sums. Holmqvist figures payable to suppliers to be “between 800 million and 1.2 billion.” No Chinese car dealer or busmaker will come up with that kind of money.
Mr. Schmitt,
Holmqvist is quoted in Swedish newspaper “Expressen” to have spoken about 800 million to 1,2 billion that SAAB owes to its suppliers. In the article, all other figures are in SKR. The EIB did not lend € 3 billion to SAAB, as far as I know, but rather € 300 million. So the sum SAAB owes to its suppliers is more likely € 80 to 120 million – which, as I see it, makes something of a difference.
Very good catch! Bad journalism at play once again…
Journalism is only “bad” when it dies not coincide with your own beliefs.
Saab’s days are numbered, might as well give up the hope of them producing more vehicles that the market does not demand. Driving old 96/99/900s won’t help any.
TTAC only reports on what is occurring in the industry, no spin from my perspective.
Holmqvist did not mention a currency in the 800 million to 1.2 billion quote. I took the € out, it’s self-serve now. Whether it’s €120 million or €1.2 billion doesn’t make a difference anyway, Saab does not have the money.
Mr. Schmitt,
I see your point (always do!), but I still think funding is NOT the main issue here, and even more so as we’re NOT talking about € 1 billion.
I see the main problem in the difficulty to get the whole immensely complex process of car production restarted for the second time within fifteen months – this time exacerbated by a tightness of liquidity plus a lack of trust of the suppliers.
Even if SAAB get the line rolling again by September, they’re going to miss their sales targets for 2011 by nearly 50%.
The development of the new platform plus the vital new SAAB 9-3 has been thrown back
for months.
I can imagine it is difficult to see a promising perspective for SAAB.
On the other hand, SAAB was pronounced dead for so many times over the last years that I don’t trust any pictures of SAAB funeral cars any more.
I hope you’ll understand – if not share – my point!
Yours,
saabista63
Saabisata63,
It’s not about the funding? We’re looking at a company that has lost hundreds of millions of dollars every year for the past however many years and is sold by one of the world’s largest car makers to one of the smallest. How exactly is that change of ownership going to stop the losses and result in positive cash flow especially while their main source of revenue (the factory) has been closed most of the summer?
The new platform doesn’t matter because they don’t have and probably won’t get the cash to even begin thinking about bringing that out. Last month Saab sold 385 cars in the U.S. If you check the websites of Saab dealrs many have over 100 new cars in inventory. Why would they need to order more cars from the factory when many have so many unsold cars? Unless dealers order more cars Saab doesn’t bring in revenue. They couldn’t make money selling 100,000 cars when they were owned by GM; how on earth will they make money selling under 50,000 cars?
It is always sad when a beloved car maker goes under but if there had been more buyers than fans maybe we’d still be able to buy Studebakers, Auburns and Panhards today.
Can someone with REAL knowledge explain why bankruptsy means the end of SAAB? I mean, I know many “journalists” that claim to be experts in the auto industry want to see SAAB die, but what does bankruptsy have do with it? What’s different about Swedish bankruptsy vs. U.S. bankruptsy? Obviously here in the U.S. bankruptsy is almost a good thing for the auto industry.
If suppliers decide they don’t want to work with SAAB anymore, is it “the end” because other suppliers don’t exist? It’s just car parts, are their laws that state that a non-Euro supplier can’t make parts? Obviously they source transmissions from Japan so that can’t be it.
I guess I’m just thinking out loud here, but I guess I don’t see why the sky is always falling. Like gas prices and politics, the only real problem SAAB has is that they don’t have enough money to pay off the press to stop the “speculation.”
Hopefully they pull through. I like Mercedes-Benz and Audi for sure, but they are soooooooooo common here in DC…it’s nice to see something else that represents Euro style and culture.
If they don’t have the money, THEY DON’T HAVE THE MONEY. They didn’t get a bailout from the EU like GM and Chrysler/Fiat got in the US, thus, no money. No money, no cars. Hard to build cars with no cash flow, especially with the afore mentioned inventories SAAB has at least in the US, why would remaining dlrs make any orders?
explain why bankruptcy means the end of SAAB?
I don’t know Swedish law. I do know a fair bit about US bankruptcy law. I will assume that the basics of both are similar.
There are two basic types of bankruptcy: reorganization and liquidation. (In the US, the first kind is called Chapter 11, the second called Chapter 7.)
If a company can reorganize, then it gets to renegotiate or cramdown its debts and start over. But to do that requires both a plan and enough money to get things started.
If a company can’t reorganize, then it goes to liquidation. Everything is sold off and the creditors get what little they can.
If SAAB is going to reorganize, then it needs a lot of money. There is no obvious place where that money is going to come from. (If you know, then tell their management, as they would probably like to speak to whoever has it.)
If the creditors are demanding a bankruptcy, then it’s a likely sign that the company is going into liquidation. At this point, the creditors are fed up and just want to get what little they can. Not a good sign that there is light at the end of this tunnel.
GM and Chrysler were able to reorganize because Uncle Sam provided gobs of money. There seems to be no such rescue plan for SAAB. If there are no investors or lenders who are ready to pony up cash, they’re finished.
Put it another way — if I was an outsider who was interested in saving SAAB, then I would wait for it to go into liquidation before stepping in, as it would make the deal far cheaper for me. I’d pick it up for pennies on the dollar once it is clear that the entity is toast, and then deal with some of the suppliers separately, without much concern for what they were previously owed since it wasn’t my debt to pay off.
At this juncture, there is very little reason for any rational player who is outside of the existing company to pony up E100 million for a company with no cash flow and an ongoing burn rate. So unless there is a secret money rabbit to be pulled out of a secret cash hat, things are not looking good.
Except things are different in Sweden.
There is bankruptcy and there is reorganization. However, as the text above explains:
“In a bankruptcy, the company does not normally emerge as a going concern, while in a company reorganisation the intention is that it does. However, the Company Reorganisation Act is relatively seldom used. There are approximately 100 reorganisations each year. The majority of these reorganisations are converted into bankruptcy proceedings within a couple of months after the initiation of reorganisation procedure.”
Once the Swedish enforcement agency gets ahold of Saab, the assets will be sold off, and Saab will be done.
“Put it another way — if I was an outsider who was interested in saving SAAB, then I would wait for it to go into liquidation before stepping in, as it would make the deal far cheaper for me. I’d pick it up for pennies on the dollar once it is clear that the entity is toast, and then deal with some of the suppliers separately, without much concern for what they were previously owed since it wasn’t my debt to pay off.”
This is kind of what I was thinking/hoping. Who cares if they go bankrupt. They still have some equipment, technology, industry know-how, and to some, an image/brand. I think someone will buy them. For some reason SAAB waited too long to get in bed with the Chinese unlike Volvo. I guess that’s Ford’s good stewardship compared to GM’s.
I hope they make it, if only because I have a 2010 9-3 (yes, really a 8 yr old platform) that I would like spare parts for for a few years.
I start to wonder – does the U.S. govt have a law on the books that says something like “if we let you sell your cars here you MUST provide support/spares for X years.”? Hope so!
They really are just GM parts, so clearly nothing expensive or difficult, but if a supplier won’t make them, hopefully the “rights” to them can be sold to the aftermarket.
@spyked “I hope they make it”
Me too.
However, the Company Reorganisation Act is relatively seldom used. There are approximately 100 reorganisations each year.
I don’t know what “seldom used” means, but in the US, most businesses end up in 7, not 11. There generally isn’t enough money with which to fund a plan, and since creditors are entitled to be repaid at least as much in a reorg as they are in liquidation, reorganizations are not exactly common for smaller businesses.
Larger businesses have a better shot of reorganizing because they may have enough of a business to support DIP financing. SAAB probably doesn’t have enough sales to justify that.
Who cares if they go bankrupt. They still have some equipment, technology, industry know-how, and to some, an image/brand. I think someone will buy them.
Yes, conceivably, someone could wait for liquidation, then swoop in and pick up the pieces. But with the brand’s proven inability to sell cars, one has to wonder why anyone would bother.
Except they already tried to sell the company and the politburo in Beijing said no.
Another isuue at hand is that Saab basically owns no intellectual property, patents, etc. GM kept those and licensed them to Saab, even in liquidation, the things that would be most valuable to investors don’t exist (example, Apple and a handfull of other companies paid $4.2 billion for Nortel’s patents, they didn’t want the business, factories, customers, etc. they wanted the intellectual property)
I’m sick of this! Bury the zombie now!!!
For thousands of dollars less than a four cylinder turbo front-drive Saab 9-5, one can get a Buick Lacrosse with the 3.6 liter DOHC V6 and all wheel drive built on the same platform architecture.
Just sayin’.
And both are equally embarrassing to be seen in.
Out of curiosity, what car do you consider not embarrassing to be seen that is priced under $40k USD new?
Like Eldard, I have rigorous automotive standards.
The car needs to run at 80 mph without a punishing ride or more than a couple of rattles, climb the Eastern U.S. idea of mountains without overheating, pass motorhomes and VW buses without fuss, have decent brake and tires, working A/C and heat, windows that open and close, body panels all painted the same color, upholstery without springs sticking me in the ass, working FM radio, and vacuumed out in the past month.
The second time it leaves me stranded for something other than a flat tire or lights left on, it’s history.
Last, but not least, allow a corn-fed American at the edge of needing the big and tall store to fit behind the wheel comfortably. Ironically, small cars sometimes do this better than big ones.
3er, C-class?
3-series and C-class? Well, those are a couple of the more unreliable cars you can find priced under 40k – and I drive a 3-series.
If you think a modern Buick is too embarrassing to be seen in, then you have some self esteem issues. I’m 29, BTW and have gotten over the whole “Buick is an old guy’s car” stigma.
We’re talking about being embarrassed, not reliability or features of a car. I still won’t accept a Buick or Saab (unless they’re given to me for free.) Life is short. I want to spend it on something with more panache. ;)
@SamP Not all of us can AFFORD a $40k car at the moment. Di##.
Patrick, nearly any 5-year-old compact will do that these days. Your standards are, luckily, easily met. Others need their “panache”, and if the bank account permits, by all means. If you’re the type to be literally embarrassed by driving a lesser car though, there are larger problems as others have pointed out.
Christ, yet another Saab story.
Like a rabid dog, we shouldn’t sit around and wait for Saab to ultimately die. It’s time to hold the shotgun to its head and pull the trigger.
Hehe, is that a Mazda6? Unless Mazda can convince more rental outlets to buy them, the 6 might not be long for this world either. Have some compassion! ;)
spyked, I’m not saying the chances for Mazda are any better in the long run, though at this point it does have a slightly better chance of surviving the year. Check back in 2012, care to guess which company will still be around?
Too much time and money are spent trying to “save” worthless things. I have compassion, but not blindly so.
Just messin’ with you Rob. I know Mazda (MAZDA!!!!) sells more Mazda6 in a month than SAAB sells all year. I just was appealing to your obvious good taste (you could have bought a CamCord but chose not to). The less carmakers like Mazda and SAAB succeed, the more your future will likely hold something common or boring.
Saab has two potential sources of money. The first is the deals with Pang Da and Youngman which need approval from the Chinese government. Saab is expecting these approvals in September (although I wouldn’t count on it). The second source of money is from Vladimir Antonov who wants to invest in Saab. The European Independent Bank is holding up this investment due to Antonov’s suspected mob ties. However, if Saab is able to transfer the loan from the EIB to a commercial bank, then Antonov can invest and get Saab going again. So, there is still hope (only a little) that Saab can survive.