Saab Seesaws Again Toward Insolvency

Saab Seesaws Again Toward Insolvency

Just days after Saab Automobile AB acting CEO Victor Muller said he was confident a hastily arranged deal with privately-held Chinese automaker Hawtai Motor Group would allow Saab to restart production at its assembly plant in Sweden, reports from China today confirm the deal has dissolved. At a press event in Washington, DC, on Tuesday to launch Saab's upcoming 9-4X crossover (above), Muller suddenly bolted to catch a China-bound flight, but it appears his presence was unable to influence Chinese government authorities, which had to approve the $213 million Hawtai intended to invest in Spyker Cars NV, the parent company of Saab.

For now, Spyker said it continues to work on securing the investment it needs, saying in a release today, “Spyker and Saab Automobile continue to work on securing short and medium term funding. To that end, Spyker and Saab Automobile are negotiating equity and debt financing and/or technology licensing with various (strategic) Chinese partners.” The company also said it is working with the European Investment Bank – the entity that extended a $565-million loan to fund Saab’s post-bankruptcy restructuring and development of new models – on structuring an arrangement to handle immediate cashflow requirements. “As soon as the EIB drawdown or other equivalent funding is confirmed, Saab Automobile plans to restart production depending on the outcome of discussions with its suppliers on terms to resume supplies of materials and services to Saab Automobile,” today’s statement from Spyker asserted.

Production at Saab’s assembly plant in Trollhaettan, Sweden, has been suspended for nearly a month after nearly 100 suppliers demanded immediate payment for parts and components previously delivered – an amount totaling some $90 million that Spyker did not have on hand, Muller said. The acting CEO told journalists this week at the Washington, DC, event that Hawtai was not the only entity interesting in providing the automaker with the liquidity it needs, however, claiming, “We had a dozen players to choose from.”

Money Needed - Fast
Saab now will need to turn quickly to those options – or others – if the company is to survive. Every day of suspended production increases the cashflow deficit that appears to be one of Saab’s chief operational problems after being cut loose early last year by former owner General Motors Co. and restructuring through bankruptcy. The company’s manufacturing was shut down for seven weeks at the start of last year and it has found difficulty in reaching firm footing ever since.

Sales of the new 9-5 flagship, a GM-developed model, have seriously lagged expectations and Saab’s projection for global sales of 80,000 units this year clearly is impossible: Saab sold 31,696 vehicles worldwide last year and in the U.S., targeted as the company’s largest market, the company sold a paltry 2,730 units in the first four months of this year. Worse still, the decade-old 9-3 continues to heavily outsell the all-new 9-5; of the 2,765 vehicles Saab has sold in the U.S. through April, 2,315 were the 9-3.

The situation also leaves question as to launch of the 9-4X crossover, slated to land in U.S. dealerships in June. The 9-4X, which starts at $33,380 but can run to $48,000 for the top-line Aero, is built under contract with GM at its assembly plant in Ramos Arizpe, Mexico. Saab obviously needs the revenue that can be expected from the additional of another vehicle to the lineup, but it is unclear at the moment if the company’s liquidity problems will affect its contract with GM to build the 9-4X.

Bill Visnic:  is an AutoObserver Senior Editor. Follow @AutoObserver on Twitter