VOL. 126 | NO. 247 | Tuesday, December 20, 2011
Saab Declares Bankruptcy as GM Blocks Chinese Deal
KARL RITTER & MALIN RISING | Associated Press
STOCKHOLM (AP) – After six decades of building cars renowned for their teardrop designs and quirky features, cash-strapped Saab Automobile gave up its desperate struggle for a lifeline Monday and filed for bankruptcy.
Saab CEO Victor Muller said "the last nail in the coffin" was previous owner General Motors Co.'s rejection of a Chinese company's attempts to gain control of the ailing Swedish brand. Muller personally handed over the bankruptcy petition to a Swedish court, which approved it late Monday.
Though a theoretical chance remains for a new buyer to step in during the bankruptcy process, analysts said Saab's troubles underline how difficult it is for a small, niched carmaker to survive in today's competitive global market.
"I think it does kind of reflect the situation in the industry that scale is everything," said IHS Automotive analyst Ian Fletcher. "Everyone else have been snapped up ... Saab unfortunately were the last people waiting to dance with someone and they didn't have the right partner."
Volvo Cars, Sweden's other car maker, is presently ramping up production after China's Geely Holding Group bought it from Ford Motor Co. last year.
Muller, a Dutch entrepreneur, used his luxury sports car maker Spyker Cars to buy Saab from GM in 2010 for $74 million in cash plus $326 million worth of preferred shares. He vowed to gradually increase production while restoring Saab's Swedish identity – which critics said was diluted under GM ownership. But the company ran out of money just a year later.
As production stopped and salary payments were delayed, Muller fended off bankruptcy by selling Saab's real estate and lining up financing deals with investors in Russia and China. He bought time by placing the company in a reconstruction process under bankruptcy protection.
But the deals fell through, blocked by regulators or by GM, which was concerned that its technology would end up in the hands of Chinese competitors.
The final Chinese suitor, Zhejiang Youngman Lotus Automobile Co., said it was hoping for a deal "to the last moment" but pulled out after the last proposal for a solution was rejected by GM over the weekend.
GM spokesman Jim Cain told The Associated Press Saturday that each new proposal "results either directly or indirectly in the transfer of control and, or ownership of the company in a manner that would be detrimental to GM and its shareholders."
In another email Monday, Cain said he had nothing to add "except to say it is unfortunate."
The news was grim for Saab's more than 3,000 employees, torn between hope and despair for the past three years.
"This is the most unwelcome Christmas gift I could have imagined," said Fredrik Almqvist, 36, who has worked at Saab's assembly line for nearly 17 years.
While experts say the company is likely to be chopped up and sold in parts, local officials in Saab base Trollhattan – around 75 kilometers (46.6 miles) north of Sweden's second-largest city, Gothenburg – were hoping a new buyer would emerge to salvage the brand.
Saab's small but loyal following of enthusiasts around the world, enamored with the carmaker's pioneering use of turbocharged engines, heated seats and quirky features – such as ignition locks between the front seats – had also not given up hope of the firm's survival.
"Saab drivers don't want to drive run-of-the-mill cars. They want something that is more unique, more individual, but also of a good value," said Mike Philpott, chairman of the Saab Owners Club in Britain. "Very safe, very well-built and also slightly unique and actually a little quirky. And we like those quirky parts of Saab."
Originally an aircraft maker, Saab entered into the auto market after World War II with the first production of the two-stroke-engine Saab 92. It soon became a household name in Sweden, and in the 1970's released its first turbocharged model – the landmark Saab 99.
GM bought a 50 percent stake and management control of Saab in 1989, and gained full ownership in 2000. The aircraft and defense company with the same name remained an independent entity, building fighter jets and weapons systems.
Saab Automobile's sales peaked at 133,000 cars in 2006. After that, sales dwindled to 93,000 in 2008 and just 27,000 in 2009, as GM – itself in bankruptcy protection following the financial crisis – prepared to wind down the Swedish brand.
Muller stepped in after a takeover attempt by a consortium led by Swedish sports car maker Koenigsegg failed. Analysts expressed doubt over Saab's chances of survival under Spyker, which later changed its name to Swedish Automobile.
Spyker manufactured only a few dozen high-priced cars a year and had never made a profit. Without support from other investors, Muller's plans didn't seem credible, critics said.
As the liquidity crisis deepened, he turned to Youngman and Pang Da Automobile Trade Co., another Chinese automaker, for financing. Muller blamed the former administrator of Saab's reconstruction, Guy Lofalk, for the collapse of those deals, saying Lofalk had led the Chinese investors to believe they could become sole owners of the company. Muller said he knew that was impossible given GM's concerns about licenses.
"Until this problem arose the relationship with GM was excellent," Muller said.
Calls to Lofalk's office were not answered Monday.
AP Business Writer Elaine Kurtenbach in Shanghai and Tom Krisher in Detroit contributed to this report.
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