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Saab Wins Chance to Reorganize

Appeals courts accepts plans.

by on Sep.21, 2011

Image By: Len Katz

Saab boss Victor Muller now has 90 days to get the company's finances in order.

A Swedish appeals court has given Saab what amounts to a reprieve, a chance to raise cash and pull its finances into order rather than plunge into a bankruptcy process many believe would result in the closure of the long-troubled automaker.

The decision for the Court of Appeals for Western Sweden reverses an earlier court decision rejecting Saab’s request for a 90-day window in which it would be protected from creditors that include key parts suppliers as well as more than 3,000 Swedish workers.  The reorganization process is somewhat similar to an abbreviated version of the American Chapter 11 bankruptcy filing.

Saab officials have repeatedly said they eventually plan to pay off all of their outstanding debts in full.  But the cash-starved maker is waiting for two proposed Chinese deals to wend their way through that country’s labyrinthine bureaucracy.  In the meantime, Saab has received a $96 million bridge loan it hopes to apply to some of its bills and operational costs until the alliances with China’s largest auto distributor Pangda, and automaker Zhejiang Youngman Lotus Automobile are approved.

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It does not appear likely, however, that the maker will yet be able to re-open the headquarters assembly plant, in Trollhattan, that has been shuttered since suppliers began a boycott in late March.

That action was the result of unpaid bills but the shutdown has only complicated matters for Saab since then, since it is unable to produce – or sell – two of its core models, the 9-5 and 9-3.  Production continues, however, at a General Motors plant in Mexico which supplies Saab’s first crossover-utility vehicle, the 9-4X.

Saab has been in serious financial trouble for years, a situation further complicated by GM’s decision to sell or shutter the brand following the American maker’s 2009 bankruptcy.  With no qualified buyer in sight, GM began winding down operations at the Swedish maker, dismissing its board and halting the Trollhattan assembly line.

At the last minute, a new buyer did emerge, Dutch-based Spyker Cars, which has since renamed itself Swedish Automobile.  But the company was seriously underfunded, a situation made worse by the 7-week delay in restarting the Trollhattan plant in early 2010.

Since the supplier boycott began, last spring, Saab management has desperately sought to find new sources of cash, but a series of deals have either collapsed or been delayed.  The reorganization process could buy it precious time to pull those matters into order.  In the meantime, the Swedish government will pay Saab workers – who had sought to force the maker into bankruptcy.

The reorganization process lasts 90 days but can be extended with court approval.

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