Telephone conference with US-Suppliers
June 20, 2011 in News
I was allowed to listen in to a telephone conference between the US suppliers and Victor Muller tonight. What I can say is that they have a course of action and to me, it sounds extremely positive.
I also learned that there might be some very important news regarding the short-term funding very soon!
Victor made note of a previously announced fact that has been underreported – that Youngman has been preselected to make a deal with Saab by the NDRC. This makes the process of gaining the necessary approvals considerably easier.
The repayment plan is generous and flexible for suppliers, and while I can’t reveal specifics, it gives them a concrete idea of when to expect full payment for receivables, plus overdue interest.
UPDATE FROM JEFF: after the jump
Göteborgs-Posten reported on information from DI, who obtained a copy of the letter sent to suppliers. This letter was part of what was discussed on the conference call, so since some details of the call are out there now (as you can read in comments already), we’ll report them in the main article.
The plant is stationary and the threat of bankruptcy continues to hover over Saab since its return can not handle their debts to subcontractors.
But information in Dagens Industri claims that Saab initially willing to pay a tenth of the debt.
According to DI, Saab has a total debt to its suppliers of between 500 and 600 million SEK. But in a letter to its suppliers, Saab offered to pay ten percent of the debt at the start of production and the rest with 6 percent interest rate in mid-September. Until then, Saab promises cash payment on delivery, the paper said.
“Unfortunately, our options are conditional on the fact that Saab expects the subcontractors to provide relief. But we have a common interest to start production again and there is a possibility based on all parties to accept,” says Marcus Nyman, CEO of IAC, Sweden, one of Saab’s largest suppliers to the DI.
There was more on the conference call that we’ll keep confidential, but this bit of information is a big piece of it. Basically, Saab gives each supplier up to 10% up front, then follows up with the rest of the money in 3 months with interest. In the meantime, each supplier is guaranteed COD terms for future deliveries– meaning they can’t lose on future deliveries. Either they get the money as soon as 3 months from now (with interest) or they spend a fortune on litigating against Saab, not to mention they’re way back in the list of Saab’s creditors if Saab were to go through bankruptcy. What would you choose, guaranteed income going forward plus a repayment plan with interest, or take your chances in liquidation litigation plus the loss of a proven revenue stream?
Going further, Dow Jones interviewed Svenake Berglie about what he thought of the offer.
“Swedish car maker Saab Automobile’s offer to pay 10% of its debt to suppliers is the best solution you can get, said Svenake Berglie, chief executive of supplier organization FKG, Tuesday.
“You either buy a blank lottery ticket or a ticket with at least a chance to win,” he said, referring to a potential Saab bankruptcy, which would leave the suppliers with nothing.
Berglie said that anyone who has a clear mind would accept the offer from Saab, but that many pieces still have to fall into place for the plan to work. Saab has to strengthen its finances through the sale of its properties, the European Investment bank has to approve another draw down from its loan facility and the deals with Chinese investors Pang Da and Youngman have to get the required approvals from Swedish and Chinese authorities.
“It will take a birdie on every hole,” said Berglie.
I’d go further and suggest that VM and Saab have a few more holes to play if they par or bogey any steps here. But they still need to concentrate and play the best they can on the course as it stands.
Toby K said on June 21, 2011
Dear regulars at SU and its Directing staff.
Please do not feed the Trolls. I think we have one or two in here generating negativity for reasons that confuse the hell out of me.
This is not aimed at the occasional reasoned detractor who may bring an alternate view but those with no valuable information other than the slighting of character or apportioning of blame based on a vague idea or a guess.
Also never argue with an idiot-you will always loose.
hilmar said on June 21, 2011
Fantastic – it worked ? Has anyone had his tea, coffee, beer or wine ? Khrisdk – how did you know that I am a fan of symphonic metal ?
So let´s go on, Toby K has something to say . … Discussion is open again.
Khrisdk said on June 21, 2011
4 year university study of macroeconomics, 4 years university study of Theology, 15 years as a manager and supervisor, an IT- education and 30 years of Heavy metal guitar playing:
I’m psychic…Probably
hilmar said on June 21, 2011
I didn´t manage it to reply directly to Khrisdk – what was wrong ?
Lardy said on June 21, 2011
Trying not to be a troll…..
And I do think that the vast majority of posts are from folks that are passionate about the brand and want to see them survive.
I’ve noted plenty from people with cars on order or leases not far from expiry (so are looking for a new car). I don’t feel that airing concerns when you are about to spend a considerable sum on a new car is out of order when you look at what we’ve been fed (promises of no more prolonged shutdowns followed by a long shutdown and silence).
It’s easy to be enthusiastic when you’ve already got a car and it has little or no warranty left, not so easy when you’re about to splash the cash.
I dearly want the company to pull through and hope it can last through the summer and the Chinese investment gets the required approvals.
I’ve voiced my concerns on previous posts, but then I am putting my money on the line – I’ve bought a shiny new Saab and therefore feel I have the right to be critical of the way the company is presenting itself because they haven’t been doing much of late to instil confidence.
What Saab will need in abundance to solidify and progress in customers and they will need plenty of new ones.
What those customers need is confidence.
So now I just sit on the sidelines and watch as events unfold. Hopefully we’re entering a phase where Saab can start to meet the commitments it makes publicly and restore some of that confidence – it’s much needed.
CurtInFalcon said on June 21, 2011
I’m with you, Lardy. I too have a new Saab and am concerned about the warranty, parts etc. Because Saab has sold so few of the NG 9-5 in the US, parts are already an issue. A rock broke my windshield and there was only one replacement in the entire US. It took two weeks to get it to my dealer. If Saab goes under, who will supply parts to the approximately 600 new 9-5 cars in the US. This is such a paltry number. There won’t be much of a market for them.
Lardy said on June 21, 2011
I’m lucky to be in the UK (large market with small physical geography) so I feel for you CurtInFalcon.
As one or two others have suggested there may be an uptake in 3rd parties producing spares, but who wants 3rd party spares over genuine manufacturer parts? Especially on a new car!
Worse, if there are no genuine parts to compare price to we may even end up paying over the odds for 3rd party parts. And US owners may have to pay another premium for importation.
I’m already creating my shopping list for accessories that I want and I hope the genuine article is available! Fortunately I don’t think VM will have been raiding the bins for tow-bars, roof rails or seat guards to build new cars!
hilmar said on June 21, 2011
Well – two friendly psychics meet each other, driving a Saab … this might be an interesting story. By the way, my dealer just told me he got my new brake discs, so a smaller supplier problem is solved.
hilmar said on June 21, 2011
Ha – now it worked, what a mess !
m!ko said on June 21, 2011
I think we shouldn’t forget about how it all started. Those big financial problems started more than 15 months ago, and those 15 months were, and the time now is stil, a time to get up from knees, Saab were on during last 20 years. It’s not that easy to run a company, that a big corporation [GM] couldn’t manage sensible. Keeping continuity was also leaving some debts by GM, with blessing “we sold you a car company, so you can handle paying all current bills”. Maby first years of Saab under the VM management, will be cleaning the mess after previous owner, and the glory time is going to come in future? I wish them all the best, and thinking forward to time, everything runs properly. Hope is enough for us to stay here, and there are still a lots of Saabs on the streets, so lets hope, there will be more of them, and “The People in Charge” will make only good decisions. And don’t complain, we’re still here
Griffin Up! To all.
Nissi said on June 21, 2011
Just a correction: Above introduction text mentions: “… each supplier is guaranteed COD terms for future deliveries– meaning they can’t lose on future deliveries“, That seems to be a false statement! , because SAAB´s letter to them do not offer COD-terms, they are offered new credit deliveries with payment terms 5-6 days, at least according to following supplier representative:
According to Lars Holmqvist, president of the European organisation for suppliers Clepa, “it is not at all sure that SAAB´s proposal will be accepted by the suppliers, especially since the terms means suppliers have to wait five-six days to get money, based on conditions mentioned in a letter to the these suppliers.
Victor Muller writes cash on delivery, but at the same times makes it to five- six days paying time – that´s not Cash On Delivery. If I buy a pizza, that´s cash on delivery, but it´s not if I tell them, I will be coming back next week to pay. He also adds there is no trust for increased credits to Saab”.
The COD-terms are an international standard used all over the world, so why is Viktor Muller fooling SU by using the text and words “cash on delivery” but in the letter to suppliers avoiding the standard word COD-terms by mentioning 5-6 days payment terms? I can understand that SU are no specialists on international standard tradingterms, but Viktor Muller, being a lawyer, certainly must know about what different standards means.
Red J said on June 21, 2011
Nissi,
will a employee of the parts delivering company go to Saab to take the money every time his company delivers parts?
No.
Are you trying to be overly pedant?
Yes, I think so.
I thought we wanted to leave it as it is and wait till the Saab knows if the suppliers agree to the conditions or not.
michaelb said on June 22, 2011
Sorry Red J,
I think Nissi with respect to this point is 100% right. What Saab in fact asks for: You get 10% of the outstanding debt upfront. Then you give us credit again for the full amount of your delivery, although just for 5-6 days.
It is clear that suppliers would stop immediately if the bills for new deliveries would not be paid immediately. But still, from a credit risk point of view, Saab asks supplier to increase not to decrease credit lines.
Khrisdk said on June 21, 2011
Well, Standards have a way of changing over time:
In practical industry standard use COD means that the bill is delivered with the product.
Which gives some delay of actual payment.
So standards are standards until someone changes them.
Nissi said on June 21, 2011
“In practical industry standard use COD means that the bill is delivered with the product“. But that´s not COD-terms (but maybe a “practical cash on delivery”). COD-terms are used (quite often) when a company can not get more deliveries, because of exceeding its credit limits.
DHL, Schenker and all major logistics companies have established routines for international COD-deliveries, meaning that payments and goods are exchanged at the same time, with the logistics company as a middleman. Of course this comes at a cost and means more administration, but this means no risk for further losses for the suppliers. 5-6 days payment time in stead of COD-terms of course means increased risk for supplier losses, since SAAB has no medium and long term financing back up.
The Clepa representative has interpreted the new SAAB terms as above.
Khrisdk said on June 21, 2011
Yes
What he should have said is that he wants Prepayment not COD
COD by logistics companies are collected on delivery, but may take 1-4 days to arrive at the shipper
Börjesson said on June 21, 2011
Apparently, today (Tuesday) is the deadline for the suppliers to give an answer about Saab’s offer. Maybe everybody already knew that? I haven’t had time to scan the news sites for Saab info today, but only to check out SU every now and then. But if SU has reported on this deadline, then I’ve missed it. Today only has half an hour to go, so I guess Saab will know very shortly if the offer was accepted by all the suppliers or not.
Börjesson said on June 22, 2011
At least one big supplier, Kongsberg Automotive, hasn’t (yet) agreed to the proposal, in spite of last night’s deadline. Negotiations are ongoing.