Monday, December 19, 2011
SAAB WATCH 2011 : Saab files for bankruptcy
As inevitable as it always was, Saab Automobile finally filed for bankruptcy this morning in Swedish courts. The car manufacturer was under debt protection for several months while it attempted to re-align it's stars and scrambled to find funding to stay alive. They failed, due to a combination of things, and were forced to file bankruptcy as a result.
For those keeping score at home, Saab has been in trouble since they closed their manufacturing plant in April of this year. They were out of money to pay parts providers and wages to their 3,000 plus employees. They had plans in place to pay off these wages and developed a restructuring process that included finding foreign investors interested in purchasing the company, but missed deadlines, vetoed proposals and general disjointed communications has lead Saab to finally throw in the towel.
As it was reported in the Chicago Tribune this morning, Saab's CEO Victor Mueller announced that he handed in the submission of bankruptcy himself. Since Saab's deal to be bought by Chinese automotive company, Zhejiang Youngman was thwarted several times by General Motors, Saab lost the potential option for a buy-out as Youngman has to pull out of the deal. The reason GM, who still have priority votes in regards to any business deal Saab would want to make, denied the sale has to do with their concern that the technology they provide Saab with currently would be used against them by their Chinese competitors in the Asian market. Since GM didn't see a way that the sale of Saab would benefit them, and rightly so, they couldn't allow the deal to go through. It's not clear if Saab every truly understood this, because they proposed several deals in the past month, but none of them really addressed GM's concerns. With the veto in place, the investors had to give up.
Mueller is reportedly placing blame on Saab's recently resigned reconstruction administrator, Guy Lofalk, for misrepresenting to the Chinese investors how much of the company could be sold to them. He claims Lofalk implied the Chinese could do a complete buy-out, which was never going to be approved by GM. It's hard to say if this is true or not, seeing as Lofalk asked last week to be removed as the administrator on their restructuring because he didn't see a way out for Saab. On the outside, at least, it looks as if Lofalk recognized the severe disconnect between what Saab thought they should get and what their realistic value was. He also petitioned the courts to end the creditor protection for Saab, siding that they had no legit plan to restructure properly.
Though we may never be able to verify the truth, it seems that Mueller and his board may be the real people responsible for Saab's constant misfortune and eventual destruction. He was the one who turned down Chinese investors several times because he was afraid of losing Saab's identity to outside companies. It was only after they had missed the deadline to present a course of restructuring to courts that Saab caved in and announced they would sell off their shares to the Chinese. Then, when GM stepped in and stated their position, Saab did nothing until they ran past the deadline to pay owed wages, in which they resubmitted a deal that would only give up 60% of the company to the Chinese. GM rejected that as well and here we are.
It is sad to think that the 3,000 employees of Saab, who have been on the edge, waiting for some good news, had to wait until the week of Christmas to learn they're company would probably be chopped up and sold in pieces. When a company is so mismanaged the way Saab was, it's hard not to realize where this was heading. Mueller's company, Spyker Manufacturing, purchased Saab from GM almost two years ago with the promise to turn the company around in five years. A year and a half later, they ran out of money. Even from the start, many analysts saw a flaw in Mueller's optimistic plan. The fact that sticks out the most is how Saab sold a company record 133,000 vehicles in 2006. Three years later in 2009, they reported sold only 27,000 vehicles. As plain as day, we can see how such a steep and brutal drop in sales would kill any resemblance of a profit margin.
Today, Saab files for bankruptcy, but the story doesn't end there. The courts need to figure out how best to sell off their assets in order to pay debts. If they can find a buyer who will take the entire company as a whole, this may salvage the jobs of many employees. For now, however, nothing is certain except that Mueller and company will be out and someone else could be in.
Tyler Baker; One Stop Motors Writer
( Source : Chicago Tribune )