TTELA on Saab: now out of reconstruction

TTELA have a good summary article today, covering Saab’s situation now that they’ve emerged from a court-protected reconstruction process.

CTM has once again been kind enough to translate it for consumption here at SU. My thanks to him once again.

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Saab Automobile can buy on credit again. It strengthens Saab’s cash situation. But delays in payment can be the last nail in the coffin for subcontractors.

Many will pick a fight against that, says Christer Palm, president of the subcontracting organization FKG.

The previous credit on 30-60 days will be used again, instead of payment after a few days.

It may take 75 days, and not everyone can cope with that. Sure, the suppliers would like to help Saab but not by ruining themselves, says Christer Palm.

He believes that the subcontractors will be tough in their negotiations. Especially as volumes have fallen sharply. The production for this year seems to stay at 25,000 cars compared the previous 100,000.

Saab shows some understanding of the subcontractors concern.

The rule is that the old agreements are still in force, but in some cases we may need to have a discussion, says Gunilla Gustav at Saabs information department.

Long payment periods are not unusual in the auto industry. Quite the opposite. The unusual in Saab’s case is that the entire company’s existence is threatened. If the deal between General Motors and Koenigsegg Group fails there is a increased risk of closure. So far there is no indication that there is enough money to go through with the purchase.

In the new business plan Saab is considered to need around 11 billion SEK by 2012 when the company will become profitable on its own merits. Koenigsegg Group has so far only put in 720 million, equivalent to 6-7 percent. GM contributes around 2.8 billion in exchange for a share of any profits in the future.

But there is no new money. One part is the loan of about 1.1 billion that Saab got for the operation during the reorganization and that GM intends to write off. Much of that money is already spent. The rest of GM’s effort is paying for the production equipment for the new 9-5. But that agreement is not even finished according to the documents that Saab has submitted to Vänersborgs District Court.

The entire affair is based on Saab getting a loan of 5 billion from the European Investment Bank with the Swedish state guaranteeing it al. Would it become a reality they are still missing 3 billion.

Facts:

Saab is seeking loans for environmental and safety projects valued at 985 million EUR, equivalent to 10 billion SEK. Normally, The European Investment Bank (EIB) grants loans for half that sum, which is around 5 billion SEK. The company must contribute equally.

EIB’s board has its next meeting on September 22. Saab has already calculated that a decision may be delayed until the next meeting on October 21.

After a decision by the EIB, the National Debt Office, which values Saab securities, will make a recommendation to the Swedish government about state guarantees.

According to Saab’s balance sheet from March of this year, there are assets of 8.9 billion SEK, but only 3.2 billion SEK in case of a bankruptcy.

The EU Commission must also approve the guarantees so that they do not conflict with state aid rules.

The EIB has a limit of 400 million EUR per company and year.

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