My personal take on the reconstruction

September 7, 2011 in Archive

Youngman and PangDa have always been very confident that they will receive an approval by the NDRC very quickly, this is again enforced by statements made by Saab that the suppliers should be paid in full sometime in September. This means that things should happen fairly quickly from now? How can that be?

Anyone who has ever been involved in an approval process with government officials (yes I have also done that) knows that there is a certain game to play. They will expect to see a certain amount of details presented in a specified way. If you’ve been there before you know what they want. And yes, Youngman has been there before so they would know exactly what the NDRC is expecting to see. Thus a quick decision can be made by the NDRC since all of the pieces of the puzzle is there from the start. First time runners often submit one draft and then need to amend it about 100 times before they get it right, that’s why it takes them such a long time…

Would Saab’s reconstruction be approved? Considering whats written just above I believe so. Saab has a great potential still and a bankruptcy would just cause a lot of damage to the country compared to giving Saab a fair chance. This was a good course of action for Saab in order to safeguard the salaries of its employees and also to get more time to do things right!

42 responses to My personal take on the reconstruction

  1. It’s the cheapest way to buy Saab for the Chinese. That’s why they get don’t hand out the negotiation in the past time to NDRC – my opinion.

  2. Since the reconstruction is a voluntary action by Saab, once commenced, can Saab apply to stop the reconstruction at any stage, like when the Chinese money hits the bank? Or is the process unstoppable once commenced?

    • Since the end result of the reorg (which I think is not the same as a reconstruction) must be that the company is cash-flow positive. I think a massive cash infusion from the Chinese should be more than enough to achieve this objective.

    • I think, and I can remember it was the case in 2009, they have to achieve certain goals before the process can come to an end. For instance in 2009 the process took a little bit longer as some of the creditors wasn’t happy with getting 75% less money.

      • You are exactly right Red! The good thing this time is that Saab is promising 100 % to the creditors.

        • Are you sure about that?
          If I was in the game, and owing roughly 1 mia SEK, to suppliers, and needing another 1.5 mia SEK to get things startet again, I would definately try to reduce that amount, to be able to have as much as possible , for the actual production/future development! This is a chance, that I don’t think Saab (VM) will pass by…


          • Henrik: From the press release: “With regards to outstanding debts to creditors, Saab Automobile will seek the support of its creditors for the reorganization process and is confident it will obtain this support, particularly because Saab Automobile aims at full redemption of outstanding debts.”

          • “aims at full redemption of outstanding debts”
            Meaning – if possible. That is also what I would state, not to pi** off to many suppliers. 😉


          • Henrik, they sort of have to pay 100% to everybody to keep their credibility. I think the reconstruction is just a means of protecting any bankrupcy demands from single suppliers. And it takes a load off the unions shoulders as they don’t have to be the ones who bring Saab down.

            I’d say they entered reorganization because they know how to get out of the situation. They just need time to make it happen.

          • @till72 – What I read as the other side of your comment (I am referring specifically to the “just a means of protecting any bankrupcy demands from single suppliers” part) is that SAAB already had the rope around their necks (i.e. suppliers were going to ask for the bankruptcy) and that no money has been secured at this point in time, so they entered into this to buy more time. Is that what you meant in your comment? :/

          • @Pedro: I am pretty sure that they have the solution in place, it just takes a bit until for example the money is there. That’s what I meant by saying that they already know how to get out of a reconstruction.

            The unions and suppliers are pretty quiet right now but even a single supplier could ask for bankrupcy and complicate things a lot. So Saab can live on until the money arrived without having to worry about deadlines by enforcement agency. It just gives some security to work that way. And as we saw even some suppliers state this is a positive development.

            I really think we will see a good outcome.

  3. The big issue (or the big ‘if’) is that the “be given a fair chance” card has been played 2 times in 2 years already: first with GM and now with this reconstruction… I understand the stalling and buying time aspects, but looking at this from the outside the company, it all hinges on trust (or lack thereof). Do suppliers trust management and its business plan or do they want to end this quickly and move on? Do workers trust management and its business plan? Can the business plan be trusted in terms of units sold and average price per car sold?

    Many balls in the air to juggle; let’s be patient and see what this results in.

  4. Tim, my personal take on this is that this is the end of SAAB as we know it. In the best case Chinese will pick up the rests and continue developing SAAB as it happened with Volvo. In the worst case SAAB people will start producing windmills or even vanish.

    I repeat what I said in a comment: I read in SVD this morning that Youngman/Pang Da support the plan. Why they haven’t sent the application to NDRC is a good question that deserves a good answer and not just “Youngman/Pand Da is behind the plan”. I think that we don’t understand much about Chinese business. I remember well when there had been rumors that Geely would buy Volvo, they were almost swearing on their mother’s graves that they would not do that. I think that Chinese businessmen consider that it is totally OK to not tell the truth when it is good for their business.

    I really have a big respect for VM and I really believe that he works 24/7 in order to save SAAB. But I also think that his days in SAAB are numbered for many reasons. Probably he was not responsible for the most of them reasons. But to be honest I can not care less for him now that SAAB’s future is in danger.

    • “Probably he was not responsible for the most of them reasons. But to be honest I can not care less for him now that SAAB’s future is in danger.”

      Well, we didn’t see you, Iggy, leading a rescue bid when GM had the company on the block? As somebody once said, “decisions are made by those who turn up”. You didn’t. VM did. Nobody else did. Without him, Saab was dead in 2009.

      • OK, once and for all: I, Iggy have huuuuuuge respect for VM, for what he did back in 2009. He is million times better businessman then I am, and most probably than most of the population on this planet Earth. My son, born one and half years ago has name Viktor.
        But also this gave has become much bigger then one man can bear. So, if I can choose between secure SAAB’s future without VM, of shaky road ahead of SAAB with VM, I chhose the first without any hesitation.

        • That seems a better sentiment. Basic human decency suggests that we should not ‘not care less for him’ regardless of the outcome. He did something good in 2009; he should not just be cast aside without a care if times turn out rather awkwardly!

          • I couldn’t care less for him as a SAAB’s chairman and CEO of course, not as a person. And I don’t think he will be starving in case he is not at SAAB. He will probably have much better life then most of us, which he certainly deserved.

  5. Just heard Lars Holmqvist (CEO@CLEPA) say in a P4 VĂ€st interview that he feels much more positive today than yesterday. That sounded quite reassuring, given that he’s been very critical earlier.

    • Indeed, he sees it as the best solution at the moment, if the court allows it. They, Saab, get some more time to solve the problems, and the suppliers have a greater possibility of getting all debts paid. They are willing to work with Saab (but we already knew that a lot of suppliers wanted that).

      And FKG in Sweden is also positive.

      • > And FKG in Sweden is also positive
        Exactly… I was just writing another comment:

        Fredrik Sidahl (new managing director of FKG, Sven-Åke Berglie has retired) said, among other things:
        – “this is a chance to come further in the process…”
        – “important for the industry and suppliers that there are two strong automotive companies”
        – “1 is of course better than 0″ (reconstruction vs. bankruptcy)

  6. I hope this works I really, really do. Everyone knows it is vitaly important to get a hold of the Chinese market and SAAB seem to have set out to do just that. This is a good thing.
    I just hope we don’t get a repeat of the Rover Group in the UK.

    • I don’t think it could be a repeat of the unfortunate Rover incident. The Chinese can’t just sit back and wait for Saab to die as they did with Rover, because GM would make sure they don’t have access to any GM IP. Really the Chinese have to make Saab viable so that they can enter into agreements and them build Saabs in China for the Chinese market.

      Speaking of Rover, the MG Magnette that has evolved from the old Rover Group doesn’t look like a bad car. I think it will get better too.

  7. Everybody paid in full in September? Were did you read that? Maybe you read another press release than I did.

    Pang Da only want to invest when they get the OK from the Chinese government and when Saab has lowered its debt.

    Also Saab stated before that the Chinese approval won’t arrive before autumn.
    So in the short term there is still no money to pay suppliers.

    At the moment we can only wait.

    • I agree that the only reasonable thing to do is wait, but (my silly habit of asking questions): How does a company that went through a reconstruction a year and a half ago and that is not producing cars (i.e., has no materially relevant income stream) lower its debt? How do Swedish courts traditionally weigh/judge such situations of a 2nd reconstruction in such a short period of time – straight to liquidation or wait for a new business plan?

      • Very easy: Pay your suppliers only 25% (or maybe a bit more). They can choose:

        – Get 25% now and deliver parts in the future (and earn money)
        – Don’t accept and let Saab go bankrupt. In that case they only get 10% (or less) and have no sight on future income from Saab.

        That is how Saab will lower their debt. And after that new money can be invested. And that money can be used “for the future” instead of being used to “pay the past”.

        • OK, pretty much what I imagined you’d reply; standard fare there. But if a supplier doesn’t believe now (in 2011) that SAAB has a credible business plan and that the company will eventually be profitable, then what’s the outcome? And my 2nd question: what about the court? How do courts in Sweden usually act in cases like these?

          • Interesting news:

            “Saab reviderar sin affĂ€rsplan och lovar att effektivisera och genomföra kostnadsminskningar. Tillsammans med förbĂ€ttrade intĂ€kter och marginaler förvĂ€ntas det fĂ„ Saab lönsamt vid 100 000 sĂ„lda bilar per Ă„r mot 140 000–160 000 bilar. Det mĂ„let rĂ€knar bolaget att uppnĂ„ under 2013.”
            This is the exact same talk (review business plan; cut costs; lower break-even point to 100K units/year through improved pricing/margins) as during the 2009 GM talks and deal, so I really really hope it is TTELA that does not have a clue about what they are reporting…

        • Get real. Nobody has any trust in the future, if they don’t pay the last dime of supplier debt before. If that is the approach, Saab is gone.

        • BoeBoe
          This is not about writing down debt. If suppliers were to be offered anything less than 100% then they would walk.
          This is about buying time, and protection from bankruptcy, so that they can secure financing.

    • BoeBoe: I heard if during the dealer telephone conference I took part in, in July. It was widely spread in the media that Saab wanted to pay 10% back then and then the rest in september plus 5%…

  8. Still fighting!

    Saab up! 😀

  9. If the court says no then the SAAB brand is gone forever! The cars might still be made but in China and another name! To me SAAB habe been to sloppy with managing the cash flow up until march! That was the problem and also caused by them not having a proper cfo.

    • KarlR,
      We know what your opinion is. “If…, then…”; you have mentioned it a couple of times. Is it some mantra? So that you later on can say “see, I said this, I told you so”.

      We can all have opinions on why; perhaps it went wrong very early, at the start, with not so good conditions, after the sale. It was a very difficult position, after the winding down process; if for example the debts were supposed to be paid within a shorter period of time than earlier it’s difficult grow, expand. Still they sold more every month than the previous, on almost all markets, up until the stop this spring.

      • I’ve deleted KarlR response and all the reactions to that.

        We can discus about anything but we won’t get personal.

  10. What i hear up to now on: is an honest and positive speaking Victor Muller.
    Let’s hope for the best.

  11. My wife told me CBS news (in the US) reported that Saab filed for bankruptcy protection. How is this different from voluntary reconstruction?

  12. Even with this protection and the cash infusion, VM has done ultimate damage to the SAAB brand by shuttering production. Who is going to trust SAAB enough to buy their product in the future?

    People have many choices now.

    It is hard to believe that VM, who made his money in finance, didn’t know this was coming. In fact, he has stated that he played “chicken” with the suppliers, they responded by not shipping parts and then this whole 6 months unfolded.

    As others have stated, probably the Chinese buys the intellectual property and moves everything or most of the operations to China.

    Don’t know if others bought it from GM, we would have the same outcome.

    I organized a “SAVE SAAB” campaign here at the time of the GM sale and there was much sympathy from the public. Unfortunately, you can’t do it more than once. VM squandered the good will.

    Maybe he did the best he could, but his plans and decisions turned out poorly.

    I still will proudly drive my 1994 900S around SF.

    I guess it will have to survive another 20 years.

  13. Indeed, if this works out, it has been quite some work! I feel quite hopeful – I don’t expect any of the parties to have done something without understanding how it would be seen by the others.

  14. From what Muller said in the press conference (btw, one can only admire that man), it seems that for Saab to be granted the bridge loan, it had to gain protection from creditors. It is for this reason that I think Saab entered reorganization.

    • If i was a bazillionaire- I wouldnt lend SAAB the bridge loan without a guarentee from the suppliers that thye were going to pay nice with me- so that my investment had mitigated risk. So if i were a supplier- it goes back to the fact, I am already holding the bag, how do I move forward to lessen the risk I am holding/experiencing. 100% payment but over 4 quaters?