Ssaab's Chinese rescue in peril
Saab's Chinese white knights may have arrived too late, with the struggling Swedish carmaker announcing yesterday it is unable to pay its employees' wages.
Despite unveiling a planned Euro245 million (HK$2.75 billion) partnership with two mainland car firms less than two weeks ago, Saab's liquidity position appears to have deteriorated progressively.
'Saab Automobile will be unable to pay the wages to employees as it has not yet obtained the necessary short-term funding,' the carmaker's Dutch owner, Swedish Automobile (formerly Spyker Cars), said yesterday in a statement.
Swedish Auto said it remains in talks to secure a cash infusion via a potential sale-and-leaseback of real estate owned by Saab, or from its existing financial backers.
'These discussions are ongoing,' Swedish Auto said. 'There can, however, be no assurance that these discussions will be successful or that the necessary funding will be obtained.'
The cash crunch is the latest in a series of setbacks in Swedish Auto's long struggle to engineer a turnaround at Saab since it bought the company from a then-bankrupt General Motors in January last year. Recent months have seen Saab scrambling to secure short-term funds and longer-term Chinese investment to help it pay off component suppliers in an attempt to end the production stoppages that have been plaguing its plant in Trollhattan, Sweden, since late March.
In early May, Saab appeared to have secured a Chinese lifeline in the form of a Euro150 million investment by tiny Beijing-based carmaker Hawtai Motor. But that deal fell through nine days later after failing to secure the necessary approvals.
Saab followed up that failure days later, announcing on May 16 a new Euro110 million deal with Hebei-based car dealer Pang Da Automobile Trade. That involved Euro45 million worth of down payments on cars that Pang Da would import to the mainland and sell, as well as a Euro65 million equity investment for a 24 per cent stake in Swedish Auto.
On May 27, with Pang Da's orders and upfront payments in hand, Saab resumed production - but not for long. Its plant ground to a halt again on June 9, the carmaker citing continuing problems securing supplies of parts and components.
Then, on June 13, Saab's owner announced yet another Chinese investment deal. This one folded Pang Da into a new three-way co-operation with Zhejiang Youngman Lotus Automobile, a lesser-known manufacturer of cars, heavy trucks and spare auto parts.
This latest deal, worth Euro245 million, would see Youngman pay Euro136 million for a 29.9 per cent stake in Swedish Auto, while Pang Da raised its equity investment to Euro109 million for a 24 per cent stake. The non-binding memorandum of understanding also calls for the three parties to set up manufacturing and distribution joint-ventures in China.
Still, Saab's planned tie-up with Pang Da and Youngman has yet to be finalised and depends on receiving all the necessary government approvals - which, as the Hawtai experience showed, are far from certain.
'Whilst we leave no stone unturned in making sure we're prepared for the approval process, we have every confidence that the deal will get through regulatory approval both in Sweden and in China,' Saab's official blogger Stephen Wade wrote yesterday on the carmaker's website.
But the apparent recent deepening of Saab's cash crunch likely complicates matters further. Only hours before the company announced it will be unable to pay its more than 3,000 employees, Wade wrote: 'Our Achilles' heel at the moment is not the long-term outlook, though we do not take that for granted. Our immediate challenge is cash flow; securing sufficient funds to get suppliers on board and the factory up and running again on a consistent basis.'