Swedish Automobile, the owner of beleaguered carmaker Saab, said on Sept. 7 that the Swedish brand was filing for bankruptcy protection amid towers of unpaid bills and salaries.
"We have concluded that a voluntary reorganization process will provide us with the necessary time, protection and stabilization of the business," a statement said.
This would allow "salary payments to be made, short-term funding to be obtained and an orderly restart of production to be prepared," said chief executive Victor Muller.
The company is waiting for cash from Chinese partners to arrive.
Rumors of a looming bankruptcy have long been circulating, as production has remained halted for months and the company has scrambled to dig up cash to pay off piles of unpaid bills to suppliers. Saab said it would "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."
It said the aim of the reorganization was "to secure short-term stability while simultaneously attracting additional funding" as it waits for a pending cash injection from its already agreed partnerships with Chinese firms Pang Da and Youngman, to get production moving.
"While the voluntary reorganization process will no doubt present us with a number of tough issues and decisions, I believe that Saab Automobile will emerge stronger from this process," Muller said in the statement.
Saab's problems have become increasingly apparent in recent months as Muller has scrambled to pull together funds to pay bills and restart production, and became glaringly obvious late last month when Saab for the third month in a row said it would not be able to pay all of its 3,700 employees their salaries on time. August salaries have yet to be paid, and Saab said that as part of its reorganization application it had requested "the Swedish state's wage guarantee scheme to allow wage payments to all Saab Automobile employees to be made."
The main union at Saab, IF Metall, said it thought filing for reorganization "could be a positive solution for Saab," adding that it hoped the court would process the request soon so its "members can quickly receive word about their salary payments."
The announcement on Sept. 7 came just two and a half years after the carmaker last went through a large-scale restructuring to avoid bankruptcy, when more than 75% of its debts were written down. But observers were quick to point out that the situation today is radically different than last time. While the brand in February 2009 had a number of new models brewing, never halted production and enjoyed some protection from its owner GM, it is now in the precarious situation of having basically halted production since April with a current owner unable to even provide enough cash to pay salaries.
Bankruptcy expert and lawyer Rolf Aabjoernsson, who represented Saab creditors during the last reorganization, said on Wednesday he expected the court to reject Saab's request. "How could Saab succeed when they have no money, no production, nothing?" he asked in comments to Swedish newswire TT. They have nothing besides dreams and they don't stand up in court.
It is not yet known when the court will announce its decision.
Copyright Agence France-Presse, 2011