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Saab Resumes Production

Deal with Pang Da moves forward.

by on May.27, 2011

Saab 9-5s rolling off the Trollhattan line.

For the first time since April 4, cars are rolling off the Saab assembly line in Trollhattan, Sweden, marking a turning point in a financial crisis that came close to crushing the struggling maker.

Operations at the maker’s headquarters plant came to a halt when suppliers launched a boycott over unpaid bills.  With sales running short of expectations, the maker was forced to seek additional sources of short-term funding, but several initial proposals – including a deal with Chinese automaker Hawtai — fell through, raising questions about Saab’s viability.

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But, earlier this month, the Swedish maker lined up an alternate deal with the major Chinese dealership chain, Pang Da.  The preliminary agreement is moving ahead and Saab was able to reach an agreement with its vendors to once again begin stocking its Trollhattan plant.

“This is a great day for our company and it is great to see the plant running again. We have gone through a rough patch in recent weeks, but Saab is back in action again,” said Victor Muller, chairman of Saab and the head of the Dutch-based company that acquired the Swedish firm from General Motors in February 2010.

Muller acknowledged to TheDetroitBureau.com, several weeks ago, that he actually triggered the boycott of the Trollhattan plant when he decided to confront a key supplier.

Saab estimates it lost about 6,000 units of production during the shutdown, a mix of 9-3 and 9-5 models.  Production of the new 9-4X crossover continued without interruption because it is being built at a GM plant in Mexico.  With about 6,500 outstanding orders and a diminished supply in its distribution network, Saab is expecting to increase production rates to try to make up its lost production.

A longer-term challenge will be to convince potential buyers that the company is back in business, admitted Muller, who said, “We will work hard in the coming period to regain confidence and show our ability to become a successful car maker. We are fortunate that we are in the middle of the largest-ever product offensive in the company’s history.”

With the 9-4X launch underway, Saab is now preparing to roll out the new 9-5 SportCombi, a wagon version of its flagship line.

Barring a last-minute hitch, the Pang Da deal, announced on May 16, will be worth about $150 million for Saab.  The dealer chain, which staged one of this year’s largest Chinese IPOs, will get a 24% stake in the Swedish carmaker and will begin distributing its products through a network of about 1,100 dealerships.  Saab also hopes to be able to produce some of its vehicles in China, which would eliminate hefty import duties.

Representatives of the Chinese company began a tour of Sweden on Thursday, and have a series of meetings with Saab and Swedish government officials on their calendar.

The proposed alliance still needs approval from both Swedish and Chinese government bureaucrats, though initial indications suggest that is likely to happen.

Meanwhile, discussions are also underway with another potential investor, the billionaire Russian banker Vladimir Antonov, a former partner of Saab Chairman Muller.

“It was a good meeting. The purpose was primarily to establish direct contact and the discussions were conducted in a positive spirit,” says Anna Petre, who is responsible for Saab’s government relations.

Antonov’s involvement could be significant because while the Pang Da deal is expected to resolve Saab’s short-term cash crunch, the maker will still need additional long-term financing, especially if it hopes to expand its line-up.  Muller has said a high-priority is a new downsized luxury model, tentatively dubbed the 9-2, while the maker is also considering options for a larger SUV that it believes would be particularly well-suited for the Chinese market.

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