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Tags: Saab | Auto | Chinese | Bankruptcy

Saab Auto to Be Sold to Chinese to Stave Off Bankruptcy

Friday, 28 October 2011 02:28 PM EDT

Saab Automobile will likely change owners for the second time in as many years as the Swedish automaker seeks to restart production and stave off bankruptcy.

Zhejiang Youngman Lotus Automobile Co. and Pang Da Automobile Trade Co. reached a tentative deal today to purchase Saab for 100 million euros ($142 million), parent Swedish Automobile NV said in a statement. The memorandum of understanding is valid until Nov. 15.

Saab, which has produced few cars since first halting production in March because of a lack of money, avoided bankruptcy last month after a Swedish court granted the carmaker protection from creditors. General Motors Co. sold Saab in February 2010 for $400 million in cash and preferred shares.

“They have to rebuild the image of the brand,” said Martin Crum, an analyst at Amsterdams Effectenkantoor BV. “It’s been quite damaged by all that’s happened.”

Swedish Automobile fell as much as 32 percent and traded down 13 percent at 68 euro cents at 3:37 p.m. in Amsterdam trading. The stock has fallen 80 percent in 2011, valuing the Zeewolde, Netherlands-based company at 19.5 million euros.

Youngman will buy 60 percent of Saab and Pang Da will purchase 40 percent, Saab Chief Executive Officer and Chairman Victor Muller told reporters on a conference call today. The two had originally agreed to take a majority stake in Swedish Automobile before that agreement fell apart this month.

Downward Trajectory

Saab, whose global sales peaked in 2006 at 133,000 cars, has been on a downward trajectory in recent years. The automaker sold just 31,700 vehicles in 2010, with deliveries suffering after it took months to restore the production flow because GM had emptied the factory as part of a planned closure.

The brand has hovered near bankruptcy several times, including in 1989, the year before GM bought half of it. In December 2009, crisis-hit GM announced it would kill Saab as it did with Saturn, Hummer and Pontiac, before Muller persuaded GM to change its mind.

The Swedish automaker began making cars in 1947 and gained a reputation for being offbeat, practical and safe. Innovations that defined the brand included headlight wipers, self-repairing bumpers and side-impact door beams.

Protection From Creditors

Saab filed for protection from creditors in September, three months after Pang Da and Youngman agreed to buy a combined 53.9 percent stake in Swedish Automobile for 245 million euros.

Attorney Guy Lofalk, Saab’s court-appointed administrator, had applied to the Vaenersborg District Court in Sweden to terminate the restructuring of the carmaker. Lofalk has now withdrawn that request pending a final sale of the automaker, the court said today.

“This is fantastic news,” Saab spokesman Eric Geers said. “Now we’re hoping for a stable period where we can start thinking about making cars again.”

Saab will discuss payment and delivery terms with suppliers with the aim of restarting production “as soon as possible,” Geers said.

The agreement still faces hurdles and must be approved by Chinese regulators, the Swedish government, the European Investment Bank and GM. Bayerische Motoren Werke AG, which last year agreed to supply engines to future Saab models, must also sign off on the new owners for that engine agreement to stay valid, Muller said.

Toughest Hurdle

GM may be the toughest hurdle, Muller said. “This is a transaction that requires a lot of consensus from General Motors. It’s not just the preference shares and technology rights. There are many, many relationships with General Motors, all of which need to be taken into consideration, so it will be a lot of work. What I can tell them is that Saab will be a fantastic client for them.”

Saab owes GM $326 million in preferred shares, debt that Pang Da and Youngman would assume if the deal is approved, Muller said.

GM is “waiting for more information,” said James Cain, a company spokesman in Detroit. “We simply don’t know what’s in the agreement on principle. Events are moving very quickly for Saab and we’re watching with interest.”

Pang Da and Youngman have a “tremendous desire” to start Saab production in China, while they have agreed to keep the factory in Sweden, Muller said. The Chinese companies will invest “way more” than 245 million euros, the amount they had originally pledged, he said.

Saab, which employs 3,700 people, will probably need to cut jobs, Muller said.

© Copyright 2023 Bloomberg News. All rights reserved.

Saab Automobile will likely change owners for the second time in as many years as the Swedish automaker seeks to restart production and stave off bankruptcy. Zhejiang Youngman Lotus Automobile Co. and Pang Da Automobile Trade Co. reached a tentative deal today to purchase...
Friday, 28 October 2011 02:28 PM
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