The Swedish Press – reading between the lines….

We’ve had a healthy debate in comments to a previous post about the accuracy and fairness of the Swedish press when it comes to reporting about matters concerned with Saab.
My contention is that much of the Swedish press are reporting situations in a manner that suits their editorial desire for match a populist opinion. Facts are nice, but overlooking them is……kind of OK.
I’d like to take apart a story that appeared in e24 today. It seems pretty typical of the kind of article that I find to be sensationalist, and needlessly critical of Saab.
What are the odds that if the Koenigsegg deal comes through OK, and Saab are still around in three years time, that press outlets like this would print a retraction or apology?
Here’s the article, with my thoughts scattered throughout. My thanks to Blogo for translating it and sending it through.
This will probably be a long one, so sit back, relax and read….
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“Saab will go bankrupt within a few weeks”
2009-08-24 | Posted 09:51 | Updated 10:52

Remember that headline. It’s not conditional. It doesn’t leave room for interpretation. It’s unequivocal. e24’s only ‘out’ from this is the fact they’ve put it in quotation marks. But don’t let that fool you – it’s a deliberate editorial decision.

Saab’s management will be forced to file for bankruptcy within a few weeks. This is the opinion of initiated analysts that E24 has spoken to. The basic problem is that there is neither sales volume nor financing that works.

“If we’re wrong, it’s not our fault”

Although Saab emerged from reorganization last week, there are many questions surrounding the company’s financial situation. Sales have folded and in July only 79 cars were sold to private individuals.

Total sales were down around 70% in July, the same as they’ve been for most of this year. They’ve highlighted the 79 cars sold privately as that was highlighted in the news this month. The monthly trend has not changed, however, since the start of the year. “Sales have folded” should have been reported in March, not as if it’s news right now.

The company also has a millstone around its neck because it must be able to pay around 3 billion to its current parent company GM and the Swedish government by 17 June next year under the negotiated arrangement.

True, they’ve got debts, but the vast majority of those debts – around 90% – are to GM. This has been reported as fact throughout the reorganisation but is conveniently left out here. Do you think GM are going to be the ones to put Saab into liquidation next year?
Not likely.

But buyer Koenigsegg has made clear that it lacks some 3 billion to finance the purchase and it is yet not clear that the State will guarantee the vital loan of 4.3 billion kronor, which Saab hopes to have from the European Investment Bank.

Again, as mentioned in comments, the 3 Billion is not for the purchase, it’s for the ongoing business plan.
It is true that it’s not clear that the State will provide guarantees, but it’s not clear that they won’t, either. The only thing that’s clear seems to be that the State won’t provide that magic 3Billion that KG need for the business plan, but I’m quite confident that KG have other sources to tap for that.

The question now is how Saab will survive during the coming weeks, before the new funding is made available. As of last week expenditures for daily activities are ticking on as usual and the suppliers who are not paid have the option to put the company into bankruptcy at any time.
During the reorganization period, Saab has been living in a loan from GM of approximately 1.1 billion kronor. This loan GM intends to forgive. How much is left of this money from GM the administrator Guy Lofalk would not disclose. He recently told the newsagent TT, that in the short term there is money left in Saab to build cars.

So e24 quote the money that GM provided for Saab, they quote that Saab have enough money to build cars “in the short term” and they still write the headline that Saab will declare bankruptcy within the next few weeks?
“In the short term” does not mean in the next few weeks, I’m quite sure. GM provided funds that were to last until December 31 and at 100 cars a day, I’m sure Saab would get to that date.

One who is skeptical of Saab’s ability to avoid bankruptcy is Thomas Ehrner, lawyer at Setterwalls, who has represented several subcontractors in negotiations with Saab.

Does he have a vested interest in his point of view?

– If the deal with Koenigsegg falls through and they don’t quickly start selling more cars, how will they then be able to pay taxes, wages and suppliers? Then Saab would quickly move into insolvency and at such a point there is only one option and that is bankruptcy, says Thomas Ehrner to E24.

that’s a mighty big “IF” to be basing a headline on. Remember, Koenigsegg signed their binding agreement just last week. Would they sign that purely on the hope that they’d get money from a reluctant government? Really?

Another informed analysts says:
– All of this restructuring has been done the wrong way. The purpose of a reconstruction is that a company should come out of it making a profit. But now it has been restructured without having the financing in place, says an analyst who wishes to remain anonymous, and continues:
– I think Saab’s management will be forced to file for bankruptcy within a few weeks.

This is the one that really interests me. The anonymous analyst. Most company insiders want to remain anonymous for obvious reasons. I cannot recall an analyst remaining anonymous before this, however. Most analysts want their wisdom attributed to them, so that they can sound informed and be useful sources of knowledge for other potential clients.
If you’re an analyst with genuine wisdom to share, why remain anonymous?

Thomas Ehrner is on the same track.
– Yes, it’ll probably be the case of management itself putting the company into bankruptcy. If you run a company which is insolvent, there may be personal liability claims and similar things one would probably choose to avoid, “he says.

That probably the fairest point in this whole article. But again, if Saab have had sufficent liquidity provided by GM to get through to December, this is more panic-mongering than pure truth.

According to Thomas Ehrner all subcontractors are now terrified of selling parts to Saab as the company moved back to their traditional payment times of 60 days.
– It is obvious that suppliers are very concerned that they might not get paid for what they deliver, “he says.

Again, fair enough. Suppliers are the most unfortunate ones in this situation because they seem to have the smallest voice.

The anonymous analyst states that the entire reconstruction has only been a way to get bankruptcy protection and wage guarantees from the state during the time they have negotiated with potential buyers. In principle, this is in conflict with the basic idea of the reconstruction process.

The anonymous analyst appears to be too idealistic to work in business. Or maybe too cynical to work in the press?
Is he claiming that Saab didn’t need to reorganise the way they have? Seriously?

Leaving the reconstruction at a time of sharply declining sales, and without having the financing in place does not bode well for the creditors who have given up much of their debts.

I am quite sure that they wouldn’t have left reorganisation without having a fair assurance that it was safe to do so i.e. that the Koenigsegg deal was imminent, and that it would work.
To do anything else would be foolhardy in the extreme, and the guy at the head of Saab is many things, but foolhardy isn’t one of them.

– It has been financial blackmail. Suppliers have had to agree to the arrangement because it is their only chance to get back any money at all. But now there is a major risk that they will not receive a single cent.

Again, if what we’ve been told throughout the reorganisation process – and in this very article itself – is true, then Saab have the money to get through this year. Suppliers should have known that or should have been told that by the people representing them.
Koenigsegg were chosen as preferential bidders some time ago now, and there have been votes for composition since that time. Those votes came out in favour of continuing Saab’s reorganisation and giving them a chance at survival.
I think it was the right thing to do. I think K-Segg will pull this together and Saab will be around for some time to come.
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Let me say here, on the record, that I think Koenigsegg’s decision to play media games with the government over the finance ‘hole’ in the business plan is a foolish decision.
It’s makes a certain amount of sense, on one level, to try and minimise personal exposure in a deal that involves risk.
But to come out and take an unpopular stand against both the government and popular opinion has been a foolish decision IMHO. Koenigsegg had tremendous support when their status as preferred bidder was announced but they failed to capitalise on this by communicating a vision or inspiring confidence in their bid.
They paid a price for that with constant questioning and now they’ve rubbed salt into their own wounds – and damaged Saab in the minds of the Swedish public – with this media game about the 3billion.
I’m confident they’ve got access to the money they need. I just hope they organise it soon and start the PR bandwagon that Saab are going to need as they launch their new products in the near future.

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