Swedish carmaker Saab has been forced to apply for protection from bankruptcy after failing to raise new cash, pay staff their wages and keep vehicle production rolling.
The 64-year-old company said it was confident the legal move would buy the time it needed to stabilize its financial position by bringing in money from two potential Chinese shareholders plus cash from other sources.
“The eventual purpose of the proposed voluntary reorganization process is to secure short-term stability while simultaneously attracting additional funding, pending the inflow of equity contributions,” said Saab’s parent group, Swedish Automobile.
Saab is just one of a number of big names in the car industry that have struggled to cope with new, often Asian-based, manufacturers turning out cheaper models at a time when recession has undermined global sales.
The Swedish company faced closure under its troubled former owner, General Motors (GM) of the US last year, but was saved when Dutch-based Spyker Cars stepped in to buy it and renamed the new combined group.
Swedish Automobile hoped to bring in outside investors to help put Saab on a sounder footing, but has struggled to turn promises into hard cash, causing car parts -suppliers to refuse to co-operate.
There have only been small bouts of normal car production since March at the factory in Trollhattan, Sweden. Staff wages were not paid last month for the third month in a row. Last year, Saab built only 30,000 cars, compared with the 120,000 it needs to break even.
Trade unions at the plant were threatening to force the company into bankruptcy unless it paid wages, but Swedish Automobile decided to take the voluntary protection route to buy itself time.
If the court gives its approval as expected, Swedish Automobile said it should pave the way for workers to be paid, but it said a new internal restructuring plan would involve a big reduction in costs.
In June, Saab said two Chinese car companies, Pangda Automobile Trade Co (龐大汽貿集團) and Zhejiang Youngman Lotus Automobile (浙江青年蓮花汽車), had agreed to take a combined majority stake in the firm, but the deals are still awaiting approval from the Chinese authorities.
Industry experts point out that Beijing has previously refused to back similar moves, such as Saab’s failed deal with Hawtai Motor Group (華泰汽車集團) in May and Sichuan Tengzhong Heavy Industrial Machinery’s (四川騰中重工機械) bid for GM’s Hummer, which collapsed last year.