Saab Files for Bankruptcy

by Emily on December 30, 2011

After months of trying to stay afloat, Saab the Swedish carmaker has filed for bankruptcy. The company’s owners have given the company’s assets over to a Swedish court- appointed receiver.  Sabb was founded as an airplane maker in 1937 and entered the car business in 1946. General Motors is a former owner of Saab. General Motors rejected a recently proposed deal, which was to sell the company to Chinese investors, which included automaker Zhejang Youngman Lotus Automobile.

General Motor’s cooperation was needed for the deal to go through because GM still supplies parts, and does design and engineering work for Saab products. China is currently one of GM’s largest markets and reports say that the U.S. carmaker was concerned that its technology could end up in competing vehicles.  GM was worried that their technology would end up in the hands of the Chinese. General Motors still maintains an ownership stake in Saab.

Saab’s Board has subsequently decided that without further funding the company will be insolvent, and that filing bankruptcy was in the best interest of the company’s creditors.  According to Eric Geers, Saab spokesman, there is still a chance that Saab could be purchased in whole or in parts out of the receivership process.  If there were a potential buyer, that buyer would have to negotiate with Saab Group, a separate company that does defense and aerospace work. This company still owns the rights to the Saab name and trademark.  Saab Group is a separate defense company and still remains in business. The potential buyer would also have to negotiate with General Motors.

With the bankruptcy process, an administrator or receiver needs to be appointed in order to start making decisions in the best interest of the company. GM has yet to make any public comment on Saab’s decision to file for bankruptcy.  In early 2010, as part of GM’s bankruptcy organization, GM sold Saab to Swedish Automotive. Swedish Automotive is a Dutch company, formerly known as Spkyer. This company makes a high-end brand of hand- made sports cars. Despite the new ownership, Saab continued to struggle. Swedish Automotive reports that it does not expect to realize any value from its ownership of Saab.

Back in June, Saab had announced a tentative deal with two Chinese companies. Within weeks of this announcement, Saab reported that they had run out of cash and needed to pay workers.  Even though Saab was able to secure financing in order to resume paying workers salaries, problems still remained. Saab was having trouble making payments to suppliers, which in effect stopped Saab from resuming production. In early December, Saab was forced to file for bankruptcy protection.

There are still U.S. dealers in operation of Saab products. Sales have suffered as the company struggled to stay afloat. As of the end of November, sales dropped to 5,305. In 2000, the company had sold 39,479 cars to U.S. buyers. During the third quarter of this fiscal year the company manufactured only 130 cars and sold 1,235 cars. According to the bankruptcy filing, Saab’s assets are valued at $431 million.  U.S. dealers are not exactly sure what Saab’s bankruptcy means for their dealerships or their employees. Over the past 2 years with the turmoil surrounding the company, dealerships have decreased their inventory of Saabs, and making the brand a smaller part of their business.

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