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.

Thursday, September 8, 2011

Suppliers say reconstruction is a good move by Saab

Yesterday Saab Automobile filed for reconstruction at the Vännersborg district court. The decision of the court is expected today at 14:00 CET. According to Victor Muller, Chairman and CEO of Saab, the company also has a plan if the court decide that Saab will not be allowed reconstruction. But Saab warns in the application that if it is denied reconstruction, the alternative may be bankruptcy.

At a press conference at Saab yesterday, Muller said that the company has EUR 150 million (approx. SEK 1.4 billion)  in due debt. That is debt than needs to be paid in order to exit a reconstruction. Saab intend to fully pay all due debt and will not ask for debt to be written down, despite that a reconstruction opens for write down of debt. In total Saab's short-term debt was SEK 6.9 billion at the end of June.

The reconstruction application has gotten support from several stakeholders. The head of Sweden National Debt Office, Bo Lundgren, has said that they support the filing.

"Our assessment is that it's good for Saab to enter into a reconstruction now. From their perspective, it will be good to get a little breathing room and an orderly process. We will not object to the reconstruction and will provide the support we can to whomever the district court appoints administrator, " Lundgren said to Swedish news agency TT.

A previous harsh critic of how Saab has handled the production stop and the dialogue with its suppliers, Lars Holmqvist who is the head of the European Association of Automotive Suppliers (CLEPA), has also expressed optimisme and positivity.

"A bankruptcy is bad for all. The fact that Victor Muller dares to take this step strengthens my confidence in him. The fact that he is willing to allow the company to be scrutinized. If Victor Muller shows the district court what he told me, then a reconstruction should be allowed," Holmqvist told TT.

Holmqvist also expressed support of restart of production at Saab: "If Saab pays its debts, or at least some of them, we will help get production up and running again," Holmqvist said to Dow Jones Newswires.

Also the head of the Swedish Association of Automotive Suppliers (FKG), Fredrik Sidahl, was positive:

"This is a positive thing for our members and I hope the court approves the reconstruction," Fredrik Sidahl told Dow Jones Newswires.

"They must have some kind of plan for how to get Saab out of this crisis and start production again. For the suppliers this is better than bankruptcy, where we end up last in line and get nothing," Sidahl told GP.

The previous head of FKG, Svenåke Berglie, who stepped down from the postion last week after 13 years on the job, even thinks that the suppliers will accept a write down of debt:

"If the alternative is bankruptcy, then I believe they will go along with a write down. To get 20 percent paid is better than getting nothing, which is likely in a bankruptcy, " Svenåke Berglie told Dagens Industri.

But as mentioned, Saab intend to fully pay suppliers.

Of course even the labor unions at Saab are positive to the reconstruction filing. This means that they will get paid and that their employee has a chance of survival.

Now the big question is if the court will allow the reconstruction. The court has not asked for any supplement to the 14 pages reconstruction application handed in yesterday. If the court's decide to approve, then the next big question is if there are any creditors who will object to the reconstruction at the meeting with the creditors which will be held approx. three weeks into the reconstruction. And of course the biggest question of all, can Saab raise enough money during the reconstruction period to survive and convince the creditors that they all have a bright future once the Chinese investments are approved by the Chinese government and finalized.