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General Motors Forces Saab AB into a Swedish Bankruptcy

GM’s Ownership of 20 years will be abandoned. Saab is now left to find capital for itself or perish.

by on Feb.20, 2009

GM hits the wall with its European Saab brand and is trying to force a Swedish solution.

GM hits the wall with its European Saab brand and is trying to force a Swedish solution.

General Motors took another drastic cost cutting step earlier today when its Saab unit filed for reorganization in Sweden. On Friday, the Vänersborg District Court in Sweden approved a request for reorganization and restructuring, which Saab’s representative submitted earlier in the morning. GM is trying to force the Swedish government to finance or guarantee the future of loss-making Saab in order to stop its own financial hemorrhaging as required under its U.S. Treasury loans.

Saab says the reorganization will create short-term stability that will make it possible to develop a long-term solution. Funding for the restructured company will need to be secured during the reorganization process and will be sought from both public and private sources.

GM said earlier this week that as part of its ongoing reorganization it would no longer support Saab. Rick Wagoner, GM’s CEO last Tuesday evening cited GM’s demonstrated ability to drastically cut costs as proof of its viability. True to his word, Saab’s viability is now threatened.

The announcement comes on the eve of the Geneva Auto Show, where Saab will unveil the 2010 9-3X model, one of three new models (9-5, 9-3X and 9-4X) due to appear during the next 18 months. Whether they will make it into production is now an open question.

“We explored and will continue to explore all available options for funding and/or selling Saab and it was determined a formal reorganization would be the best way to create a truly independent entity that is ready for investment,” says Jan Ake Jonsson, Managing Director for Saab Automobile.