SAAB running out of road?

Things just get worse at struggling Swedish carmaker Saab - now it says it can't pay its workers...

by Andrew Saunders
Last Updated: 23 Jun 2011
Saab – discretely famous amongst the motoring cognoscenti for historic models like the Sixten Sason designed 92 and 99 – has been struggling to secure interim finance and has already had to cease production due to problems paying suppliers. Now it says that, whilst negotiations are ongoing, there can be no guarantee of a successful outcome. And that without fresh funding, it no longer has the cash to pay its 3,000 or so workers.  

That’s a pretty desperate corner to be in, although it’s possible that the firm will yet be able to extricate itself – it has had several sniffs of interest from Chinese firms, and earlier this month announced a 245m Euro deal with two of them – Youngman Automotive and Pang Da. Pang Da already distributes brands including Audi, VW and Mercedes in China, while Youngman makes cars, buses and spare parts under license in the country. But there are major issues surrounding regulatory approval from the Chinese authorities, and many industry watchers fear that things simply won’t move fast enough to save Saab.

It’s just the latest instalment is a saga of doom which has been ongoing since even before Saab was abruptly offloaded by then-parent GM last year. The Swedish firm was already in difficulties and about to enter Chapter 11 in the US when the sale was announced by GM, which of course had troubles of its own to deal with.

A white knight was found in the nick of time, in the unlikely form of Dutch supercar business Spyker, more used to producing handbuilt near-racers for ultra rich customers than mass production. The Swedish government guaranteed finance from the EIB to the tune of almost $400m, then nearly got cold feet over the rest of the funding, which came from Russian billionaire and Saab enthusiast Vladimir Antonov.

But the rescue efforts have struggled, sales plummeting from an already very low 89,000 under GM in 2008 to only 31,000 in 2010 – way short of the firm’s forecast for the year of 45,000 and an unsustainably low number for a mainstream carmaker.   In April the warning bells started to ring more vigorously when production at the Trollhatten factory was halted due to a lack of parts, Saab having been unable to pay its suppliers. Production has been on/off ever since – hardly a healthy state of affairs.

So all in all a pretty gloomy position for a firm which was has been lauded for some of the more innovative and free-thinking pieces of automotive design to have emerged since the end of WWII. That putative deal to get into the lucrative Asian market could keep the brand alive, but Saab’s future looks now to be effectively in the hands of the Chinese authorities. Let’s hope for the firm’s sake that somewhere in Beijing is a mandarin who likes to drive a Saab…

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