Earlier today the Court of Appeal for Western Sweden ruled that Saab Automobile AB, Saab Automobile Tools AB and Saab Automobile Powertrain AB would be allowed to enter a voluntary reconstruction. According to the court, this was not an easy decision, and one of the judges did in fact not agree. In the court's ruling, the court does to a large degree support Saab's point of view that the District Court went far beyond what the law requires when assessing Saab's possibility to go through a successful reconstruction. According to the Court of Appeal, the investment planned by Chinese Youngman and Pang Da of SEK 2.2 billion, should be enough to restart production and thus be reason to allow a reconstruction.
Later today Vänersborg District Court appointed Guy Lofalk to be the administrator of the reconstruction. Lofalk was also the administrator when Saab went through a reconstruction in 2009 and was Saab preferred administrator also this time.
Now that Saab enters into reconstruction, all bankruptcy filings and the collection of debt done by the Swedish Debt Enforcement Agency will be stopped. Either Saab sorts out these issues during the reconstruction, or Saab will have to face them again once the company exits reconstruction. The expectation is of course that these issues are sorted out.
The problem for Saab the past months have been to get enough money to make wage payments and also to get enough money to pay suppliers and restart production.
Let's look at the wage payments first. Now during the reconstruction the wages will be paid by the Swedish state. That means that Saab will not have to use its money on wage payments. But Saab must repay the Swedish state at a later point, so it is in fact just a "loan". But nonetheless, it means that Saab can use its current money and resources on focusing on paying suppliers and restarting production.
Saab has announced that the company now will "launched an efficiency improvement initiative as part of a broader review of the company's business plan for 2012 and beyond". And writes that "headcount reductions cannot be ruled out". A reconstruction allows the company to reduce the number of employees, as well as ask for a write down of debt. Saab has said earlier that it aims at fully pay its suppliers, but a reduction of workers is now not ruled out.
And restarting production must be the number one priority. To generate incomes, Saab needs to produce and sell cars. On 31 October Saab will meet its creditors and present the plan for continued life. It is the administrator and the creditors who shall assess if it is probable that Saab can get through this ordeal. If they can not see a future for Saab, then the reconstruction will be ended and Saab will once again face bankruptcy filings. On the other hand, if they decide that there is a future for Saab, then an agreement which let's Saab restart production is needed. Saab has said earlier that it can pay 25 per cent of the debt outstanding to the suppliers now, and the remaining in November when the Chinese investments are expected to be finalized.
A reconstruction can last for several months, and can be extended with three months each time, but can never last more than one year. It is expected that Saab will keep the reconstruction as short as possible. Which probably means that the company will want to exit reconstruction as soon as the investments from Youngman and Pang Da have been finalized and a restart in production is set.
But be aware that the Chinese investments and Saab's survival still depends on China's National Development and Reform Commission (NDRC), China's top economic planning body, approving the investments from Youngman and Pang Da. An approval that is expected in the beginning of November.
A blog fueled by enthusiasm about Saab, the greatest car company between the North and the South Pole. And their cars, which probably is the only cars that would start on a cold and crispy South Pole morning.
