Saab files for bankruptcy: the end of the Swedish saga

 

Saab has reached the end of the road - for the second time in two years, just before Christmas. Parent company Swedish Automobile today announced that Saab had filed for bankruptcy.

Owner and acting CEO Victor Muller had been trying to sell Saab as a going concern and had come close to signing a deal with Chinese car makers Pang Da and Youngman, but the deal was blocked by former owner General Motors which feared its technology - powering the new 9-5, plenty of the 9-3 range and the 9-4X - would fall into opposition hands in China.

GM spokesman Jim Cain told Automotive News that Saab had not been able to reassure GM that its technology would be safe in the sale to the Chinese. 'Each proposal results either directly or indirectly in the transfer of control and/or ownership of the company in a manner that would be detrimental to GM and its shareholders,' he said. 'As such, GM cannot support any of these proposed alternatives.'

Saab files for bankruptcy: the statement in full

'Zeewolde, The Netherlands, 19 December 2011 – Swedish Automobile N.V. (Swan) announces that Saab Automobile AB (Saab Automobile), Saab Automobile Tools AB and Saab Powertrain AB filed for bankruptcy with the District Court in Vänersborg, Sweden this morning.

'After having received the recent position of GM on the contemplated transaction with Saab Automobile, Youngman informed Saab Automobile that the funding to continue and complete the reorganization of Saab Automobile could not be concluded. The Board of Saab Automobile subsequently decided that the company without further funding will be insolvent and that filing bankruptcy is in the best interests of its creditors. It is expected that the Court will approve of the filing and appoint receivers for Saab Automobile very shortly. 

'Swan does not expect to realize any value from its shares in Saab Automobile and will write off its interest in Saab Automobile completely.'

Why Saab failed

General Motors sold Saab during its own reorganisation after it collapsed into Chapter 11 bankruptcy protection in June 2009. GM sold or closed many of its brands, and it had long been recognised that it had failed to make a success of Saab. At the end of its ownership, most Saabs had been diluted down to Vauxhall/Opel clones with very little of the idiosyncratic vibe that had made them famous in the first place.

After courting numerous prospective owners, including some far-flung suitors such as Koenigsegg, GM finally settled on Spyker. Victor Muller's Dutch sports car maker bought Saab on 27 January 2010 for $74 million but, crucially, GM retained preferential shares.

Muller and his team went about reinvigorating Saab with an independent spirit and showed promising ideas for future models, with plans for a modern 9-1 infused with classic Saab thinking. But Swedish Automobile, the company set up to run Saab, always struggled with the financials of being a volume car maker in a competitive industry already riddled with overcapacity.

It never sold enough cars and cash flow became a major problem. In April 2011, suppliers finally stopped supplying and Trollhattan fell quiet. Just 11,000 new Saabs were built in 2011 - and the factory has a capacity of 190,000 vehicles per annum.

What next for Saab?

The receivers will be appointed shortly and they will try and raise as much capital as possible from the remaining assets. The factory and land will be sold off, and it is likely that some of the production equipment will be sold - and could end up bought by an Asian car maker. Could the Saab nameplate transfer east too? It is possible we may see an MG Rover scenario, but those intellectual property rights exercised by GM are likely to block any potential sale to a Chinese or Korean suitor.

Some parts of Saab remain highly profitable. The parts supply business creating components for the estimated 1 million Saabs still on the road is a viable concern and is likely to remain trading.

Reaction to the closure

'There's no doubt this is the blackest day in my career'
Victor Muller, CEO Swedish Automobile, parent company of Saab

'Saab files for bankruptcy because GM blocks their rescue. Well done GM. Hope you're proud of yourselves.'
Greg Fountain, managing editor CAR magazine

'The only way a c.100-150k producer will survive is to make massive gross margins – thanks to massive price points – on each car that can cover the bare minimum R&D and cap ex needs of a car company. Making cars suitable for global sale and homologation is going to get ever more expensive. Porsche arguably decided that even with its price points, 100k/year wasn't going to work. What hope for Saab with Saab pricing points? Even with the intelligent use of sub-contractors and outside R&D providers, it is hard to see how they can generate the cash to tool up and build competitive product.'
Max Warburton, senior analyst Bernstein Research

'This is a sad day for anyone who loved the independent spirit of Saab and all that they stood for. The Saabs that made the company famous might have been watered down, but it seemed as if Victor Muller's project was about to make Saabs interesting again. His pockets were just not deep enough. We feel for all the Saab workers hearing this news just before Christmas.'
Tim Pollard, associate editor CAR magazine

'Each proposal results either directly or indirectly in the transfer of control and/or ownership of the company in a manner that would be detrimental to GM and its shareholders. As such, GM cannot support any of these proposed alternatives.'
Jim Cain, spokesman for General Motors

'Maybe people don’t want quirky cars from a Swedish aeroplane maker any more. They want sporty BMWs instead. Better to stop the rot, than perpetuate it. Economics change too. Those tiny Saab volumes – and it’s never been a big selling brand – are no longer viable, without prostituting measures such as part and platform sharing. Cars that sell on their individuality nowadays don’t make much economic sense unless they carry correspondingly big price tags.'
Gavin Green, executive editor CAR magazine (www.carmagazine.co.uk)