IMPORTANT NEWS: National Electric Vehicle Sweden has agreed to buy the assets of Saab Automobile and the sale is expected to be finalized during the summer.

Tuesday, June 21, 2011

Saab's debt to the suppliers is over SEK 500 million

Dagens Industri reports today that Saab's current debt to the suppliers is between SEK 500 million and SEK 600 million, that would make approx EUR 54 million to EUR 65 million. In a letter to the suppliers Saab is said to have offered to pay 10 percent of the debts at production restart, and the rest in September with an interest rate of 6 percent. Up to September, Saab promises cash payment at delivery. Saab wants an answer from its suppliers by today Tuesday.

"We need a positive response from everyone in order to coordinate a restart in week 27", Gunilla Gustavs from Saab's information department told TT.
When asked what happens if not everyone respond, Ms Gustavs said that they will deal with that if it happens.

According to Gustavs, the discussions over the payment plan has been going over some time.

Marcus Nyman, the CEO of the supplier IAC Sweden, is quoted by Svenska Dagbladet (SvD) saying: "Unfortunately, our options are few when Saab expects that the suppliers  once again  are to provide relief. But we have a common interest to restart production again and there is a possibility based on all parties accepting".

According to Dow Jones, Sven-Åke Berglie, CEO of Swedish suppliers organization FKG, says that Saab Automobile's offer to pay 10% of its debt to suppliers is the best solution you can get.

"You either buy a blank lottery ticket or a ticket with at least a chance to win," Berglie said.

In other words, it looks like Saab is relying on the China deal being finalized by September and the EUR 245 million Chinese investment received. Untill then Saab will survive on the short-term funding they have received so far and are working on securing. One part is the sale of the property to a consortium where Swedish real estate company Hemfose is one party. In addition, Saab is according to SvD also trying to get an advance payment from the new Chinese partners Pang Da and Youngman. 

For the Swedish suppliers which rely on Saab it seems like the options are few. It's either accepting the terms or shut down their own production.

As far as I see it, the big question is the foreign suppliers. For them Saab may be only a small customer. On one side their business with Saab may be so small that their potential loss may be minuscule in the big picture, and thus there is little reason to say no. On the other side if their business with Saab is very small then maybe they can live fine without more uncertain deliveries to Saab.