Saab's money troubles have worsened to the point that the struggling car maker is unable to pay its employees' wages on the eve of the Swedish mid-summer vacation period.
In a brief official statement last night, Saab's parent company Swedish Automobile N.V (formerly Spyker Cars) announced that it was 'will be unable to pay the wages to employees as it has not yet obtained the necessary short-term funding.' While Swedish Automobile and Saab continue to pursue options for securing short-term financing to solve the cashflow crisis, the company admitted 'there can however be no assurance that these discussions will be successful or that the necessary funding will be obtained.'
Saab share prices tumble, Swedish government will not intervene
Reaction to the worsening financial crisis from stakeholders has been predictably bleak. Swedish Automobile's shares dropped 61% in value yesterday, and are currently trading at 0.948 euro.
The Swedish government, already guaranteeing a €400m loan to Saab by the European Investment Bank, shows no inclination to bail-out Saab, which employs 3800 staff. Swedish minister for enterprise and energy, Maud Oloffson, has said that Saab must find its own solution to the financing issue.
Trade union considers bankruptcy action
Saab's two employee unions, IF Metall, and Unionen, are watching the situation with growing concern. Both unions are considering legal options that could see Saab forced into bankruptcy.
IF Metall represents 1500 production line workers who have already received payslips for wages to be paid on 23 June 2011. IF Metall will collect workers payslips and plans to issue a legal payment reminder notice if wages aren't paid by 27 June. Saab would have one week respond. 'If that happens, that we file a payment reminder, and the company still does not fix this, we have to consider bankruptcy,' Veli-Pekka Säikkälä, negotiations secretary of IF Metall, told Stockholm News.
IF Metall's lawyer Berko Davidovic told The Wall Street Journal that IF Metall then would have three weeks before it could force Saab Automobile into bankruptcy. A bankruptcy proceeding would allow employees to then receive government assistance.
What happened to Saab's Chinese deals?
Saab appeared to have recovered after signing a collaboration deal with Pang Da Automobile Trading, and then linking with Zhejiang Youngman Lotus Automobile Co. as a mutual partner for joint-venture production of Saabs in China. The Pang Da deal bought an immediate €45m boost through advance purchase of vehicles by Pang Da, and included planned equity sales in Saab to the two Chinese partners worth €245m.
However, those investments, along with a proposed lease-back sale of Saab's property and a further draw-down on Saab's €400m EIB loan, require time-consuming negotiations and statutory approvals which have not been completed. In the meantime, Saab lacks short-term funds for day-to-day business.
Is this the end of Saab?
It's difficult to see a solution to the immediate cashflow crisis and mounting debts facing the beleagured car maker. This latest crisis comes on top of the estimated €33m still owed to parts suppliers which led to the shutdown of Saab production in April 2011.
Without the ability to pay suppliers for parts or staff to build cars, it appears that an immediate, substantial injection of funds will be required to rescue Saab from financial collapse. It's shades of MG Rover all over again.
>> We've been here before several times since 2009, but is this the last act in Saab's ongoing financial crisis? Share your thoughts in the comments section below
1 March 2011 - Saab Phoenix concept (2011) at Geneva motor show
5 April 2011 - Latest Saab production halt raises concern
11 April 2011 - Saab's latest factory shutdowns 'just a blip'
16 May 2011 - Saab announces new China Joint-venture
16 June 2011 - Saab 9-5 Sportwagon (2011) prices and revised 9-5 range
24 June 2011 - Saab unable to pay wages as financing crisis deepens
27 June 2011 - Saab secures more funds as it seeks to avert collapse
28 October 2011 - Saab is sold again: two Chinese makers buy Saab
1 November - Saab 9-3: is this the new 2013 hatch