Faced with ballooning debt and struggling to pay suppliers, Saab Automobile and parent company Swedish Automobile N.V. have filed for voluntary reorganization. Saab’s overseas subsidiaries, including Saab Cars North America, are unaffected by the reorganization.
The decision to file in Swedish court came because Saab has been unable to pay employees or suppliers, and vehicle production has been halted for weeks. The reorganization process protects Saab from its creditors for the time being, and allows the company to restructure its debts and business expenses.
The court process gives Saab three months in which to cut costs and prepare a “viable, competitive, and independent organization.” If necessary, the timeframe can be extended to twelve months. Within three weeks of filing today, Saab must present a reorganization plan to its creditors.
Saab also hopes to score more capital from Chinese companies Youngman and Pang Da. Saab entered into agreements with the Chinese companies earlier this summer in hopes of securing enough capital to resume production and pay suppliers. The deals are still pending final regulatory approval.
Victor Muller, CEO of Swedish Automobile and Saab AB, said the reorganization is key to “allowing salary payments to be made, short-term funding to be obtained and an orderly restart of production to be prepared.”
Muller claims the company has 11,000 orders for vehicles and expects to receive long-standing funding from the aforementioned Chinese groups. Through the first half of 2011, Saab built just 12,877 vehicles.
“I believe that Saab Automobile will emerge stronger from this process,” Muller said in a statement. “The potential for Saab Automobile as a viable, independent premium car manufacturer is there.”