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Saab Offers 10% Deal to Suppliers to Restart Car Production

Troubled Swedish car maker Saab has offered a deal to its suppliers to try and get car production started.

Saab's Trollhättan factory in Sweden

The factory in southern Sweden was closed for most of April and May because it could not pay its suppliers for the parts that it needed. Productions started briefly again in late May but halted when the supply of components ran out.

Saab is offering is to pay 10 per cent of its debts to suppliers when production restarts with the balance – plus 6 per cent interest – being payable in mid-September. Any components that are supplied to its factory between now and then would be paid for in full at the time of delivery.

“Yesterday we handed out a proposal to the suppliers that had to do with production activities,” Saab spokeswoman Gunilla Gustavs said. Saab refused to comment on the details of the proposal.

Saab is owned by Netherlands-based Swedish Automobile – formerly called Spyker – who said yesterday that it was trying to resolve the unpaid debts in order to get production started again as soon as possible. Spyker purchased Saab from GM last year for $74m (€54.5m, £46.4m) in cash and $326m (€240m, £204.5m) worth of preferred shares in Saab.

“There will be no normal production during weeks 25 – 26 (20th June – 3rd July)” said Gustavs. “We are still negotiating with all suppliers and we need to get everyone on board at the same time. The weeks of 27 – 29 (4th July – 24th July) are planned to be normal working weeks”.

Saab has already agreed a rescue package from two Chinese car manufacturers Zhejiang Youngman Lotus Automobile Co and Pang Da that will solve it’s financial crisis in the mid- and long-term.

If the deal is approved by authorities in China and Europe, Zhejiang Youngman will buy 29.9 per cent of the troubled car maker $184.5m (€136m, £116m) and Pang Da will pay $148m (€109m, £93m) for 24 per cent, although they have made an advance payment of $40.7m (€30m, £25.5m) already and are looking for partners to share the stake. Zhejiang Youngman will also set up a distribution and manufacturing framework for Saab models in China.

The Chinese National Development and Reform Commission’s approval is far from certain though as they blocked a previous rescue package in 2010 when it vetoed Sichuan’s Tengzhong bid for GM’s Hummer brand.

An earlier proposal was provisionally agreed between Saab and Chinese car manufacturer Hawtai, but this failed because Hawtai could not get the necessary approval from the Chinese authorities. It has also been suggested that secondary bids for previously refused deals are more likely to be rejected because the Chinese government is keen to prevent domestic companies bidding against each other for foreign assets.

Suppliers have until 22nd June 2011 to respond to the proposal.


About Carlton Boyce

Carlton Boyce
Carlton Boyce is a freelance journalist and photographer covering all aspects of the motoring industry.

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