Saab Undergoes Reorganization, Files For Government Protection

One thing is for sure: Saab has been drug through the mud more than any other manufacturer out there. Really. It just can't catch a break. For the past three years it has endured one bad thing after another. Just when you think the brand's future might be looking up, something else happens. Saab recently signed deals with Chinese distributor Pang Da and manufacturer Youngman Automotive.

Those moves were supposed to open up big opportunities (and most importantly, cash) for Saab in China. However, Saab has run into trouble with its suppliers. It is unable to pay its workers, and production at the Trollhattan, Sweden plant that produces the 9-5 and 9-3 has been stopped for months. Despite this, 9-4X production continues at the General Motors plant in Ramos Arizpe, Mexico.

What we want to know is how any Saab dealers are left after this? How are they surviving? Anyhow, Saab has officially filed for government protection in Sweden. It appears the process is different from bankruptcy though as there isn't a liquidation. Saab head Victor Muller (boy we feel for this guy) did his best to put a brave face on the situation, saying:

"Since securing the long-term funding through conditional agreements with Pang Da and Youngman, who both support this voluntary reorganization, we have focused on securing funding to bridge the period until we receive their funds. We have concluded that a voluntary reorganization process will provide us with the necessary time, protection and stabilization of the business, allowing salary payments to be made, short-term funding to be obtained and an orderly restart of production to be prepared."

They make it sound like everything will be fine. But indeed, that is their job - and they've made it sound like everything would be dandy up until now, and it hasn't been. The company aims for full payment of its outstanding debts, with the team working to secure short-term funding during reorganization. Following reorganization, Saab intends to receive an infusion of funds from Pang Da and Youngman. A reorganization plan is due to be presented in three weeks.

In the meantime, Saab is applying for Sweden's wage guarantee scheme that will allow workers to be paid while the reorganization is complete. This will enable a restart of production. The question will be is after all this, is there any value in Saab's brand name left? Guess we'll see - its been a painful experience for everyone involved. For more information you can check out the full press release below the image.

SAAB AUTOMOBILE AB FILES FOR VOLUNTARY REORGANIZATION, SAAB AUTOMOBILE PARTS AB AND OVERSEAS SUBSIDIARIES ARE EXCLUDED

Zeewolde, The Netherlands, 7 September 2011 - Swedish Automobile N.V. (Swan) announces that Saab Automobile AB and its subsidiaries Saab Automobile Powertrain AB and Saab Automobile Tools AB (collectively Saab Automobile) will file for voluntary reorganization today at 09:00 CET with the District Court in Vänersborg, Sweden. Swan and Saab Automobile are of the opinion that, considering Saab Automobile's current limited financial resources, a voluntary reorganization will entail the best preconditions for using existing resources in the most efficient way. The eventual purpose of the proposed voluntary reorganization process is to secure short-term stability while simultaneously attracting additional funding, pending the inflow of the equity contributions of Pang Da and Youngman.

The proposed voluntary reorganization will be a self-managed, legal process under Swedish law headed by an independent administrator appointed by the court who will work closely with the Saab Automobile management team. As part of the process, Saab Automobile has formulated a reorganization plan, which includes a number of aspects aimed at lowering its cost-base and creating a viable, competitive and independent organization. This reorganization plan will be presented to creditors in more detail within three weeks of the filing, although this period could be extended by the court.

Following court approval, the voluntary reorganization will be executed over an initial period of three months. If required, the reorganization period can be extended by another three months, up to a maximum of twelve months. Swan and Saab Automobile are confident that they will secure additional short-term funding for the reorganization period and are currently in negotiations with several parties about obtaining such funding. Funding for Saab Automobile to exit reorganization has been secured through binding agreements with Pang Da and Youngman as announced on July 4, which agreements are, however, subject to obtaining certain approvals.

As part of the reorganization filing, the court-appointed administrator will apply for the Swedish state's wage guarantee scheme to allow wage payments to all Saab Automobile employees to be made. August salaries are expected to be paid within a short time frame following the court approval. With regards to outstanding debts to creditors, Saab Automobile will seek the support of its creditors for the reorganization process and is confident it will obtain this support, particularly because Saab Automobile aims at full redemption of outstanding debts.

Saab Automobile has proposed that the District Court appoints Swedish lawyer Guy Lofalk as administrator, who also was the administrator in the successful 2009 Saab Automobile reorganization. Victor Muller, CEO of Swan and CEO and Chairman of Saab Automobile, and the Saab Automobile management team will cooperate closely with the administrator to execute the reorganization plan. The voluntary reorganization process will cover Saab Automobile AB, Saab Automobile Powertrain AB and Saab Tools AB. All other entities, including Saab Parts AB and all overseas entities such as Saab Great Britain and Saab Cars North America, are excluded from the reorganization.

The reorganization plan contains a blueprint of how Saab Automobile's Management expects to improve Saab Automobile's business model with an emphasis on an independent, lean and competitive organization. Many key elements of Saab Automobile's original business plan remain, as Management believes the objectives of the overall strategy remain intact. Through the roll-out of a fully rejuvenated product portfolio, partnerships with Chinese firms Pang Da and Youngman that will ensure access to the world's largest and fastest growing market, and a strong and global brand, Saab Automobile is well-positioned to realize its objective of becoming a viable independent premium car manufacturer.

Victor Muller, CEO of Swan and CEO and Chairman of Saab Automobile, said:

"Since securing the long-term funding through conditional agreements with Pang Da and Youngman, who both support this voluntary reorganization, we have focused on securing funding to bridge the period until we receive their funds. We have concluded that a voluntary reorganization process will provide us with the necessary time, protection and stabilization of the business, allowing salary payments to be made, short-term funding to be obtained and an orderly restart of production to be prepared."

"While the voluntary reorganization process will no doubt present us with a number of tough issues and decisions, I believe that Saab Automobile will emerge stronger from this process. The potential for Saab Automobile as a viable, independent premium car manufacturer is there, as shown by the rejuvenation of our product portfolio, approximately 11,000 orders and the conditional long-term funding already in place through the binding agreements with Pang Da and Youngman that will give us access to the Chinese market."

"I would also like to express my deep gratitude to our employees, dealers, suppliers and all other stakeholders who have been so patient and understanding in the past trying months. I realize that we have severely tested their patience, but it has been heartening to see that in general, our employees, dealers, suppliers and other stakeholders have stood by us through this tough period. I look forward to continuing these relationships and collectively start building a brighter future for Saab Automobile."