Friday February 20, 03:17 PM
Saab to restructure as independent unit to avoid bankruptcy
By Pia Ohlin
STOCKHOLM (AFP) - Beleaguered Swedish carmaker Saab Automobile will undergo restructuring as an independent unit to stave off bankruptcy after it was abandoned by its owner General Motors (NYSE: GM - news) , Saab (Stockholm: SAABB.ST - news) and GM said Friday.
"On Friday, the Vaenersborg district court approved the request for a reorganisation and restructuring which Saab's representative submitted earlier in the morning," GM said in a statement.
"We are now recreating Saab Automobile as an independent unit. The road ahead will not be easy," Saab managing director Jan Aake Jonsson said.
The move came after GM warned that Saab would have to file for bankruptcy protection "as early as this month" unless it received help from the Swedish government, which in turn flatly refused to step in and rescue the auto maker.
Restructuring allows parts of Saab to survive and could enable suppliers, who would lose all the money owed them by the company if it filed for bankruptcy, to get some money back by agreeing to accept partial repayment.
GM said the move was aimed at creating "a fully independent business entity that would be sustainable and suitable for investment."
The reorganisation is a Swedish legal process headed by an independent administrator appointed by the court who will work with Saab management.
"As part of the process, Saab will formulate its proposal for reorganisation, which will include the concentration of design, engineering and manufacturing in Sweden," GM said.
The restructuring will be executed over a three-month period and will "require independent funding to succeed," it said.
Funding will be sought from both private and public sources, it added.
The government will provide "some support" during the reorganisation period, according to GM.
Saab's Jonsson remained optimistic that the Swedish brand could survive, pointing out it has three new models ready for launch over the next 18 months.
"Saab has an excellent foundation for strong growth, assuming we can get the funding to complete engineering, tooling and manage launch costs. Reorganisation will give us the time and means that help get these products to market while minimising the liquidity impact of Saab on GM," he said.
The court-appointed administrator, Guy Lofalk, said he was "impressed by the competence within Saab."
"With three strong automobile models just around the corner it would be a waste not to try to find a long-term way forward," he said.
Swedish Industry Minister Maud Olofsson, who has sharply criticised GM's decision to let Saab go, said she planned to visit Saab's hub in the southwestern town of Trollhaettan soon.
"Our role is to contact town and regional officials and see what we can do in these hard times. Our focus is to help the people there," she told news agency TT.
She has suggested Saab's technological know-how could to be put to use in more in-demand sectors such as wind power.
Saab employs about 4,100 people in Sweden, 3,700 of whom work in Trollhaettan.
Including suppliers, some 15,000 jobs in Sweden are believed to be at risk if the unit disappears.
A crisis for the car supplier industry would also have negative effects on Sweden's other carmaker, Volvo (Stockholm: VOLVB.ST - news) , owned by Ford.
In response to concerns from Saab's supplier base, General Motors Europe said it would "promptly establish a viable mechanism" for payment of suppliers' claims towards Saab.
GM bought 50 percent of Saab in 1990 and acquired the rest 10 years later. But the Swedish company has registered chronic losses over the past 20 years.
The brand, once renowned for its cutting-edge technology and futuristic designs, has in recent years suffered from an aging product line and plunging sales. In the fourth quarter last year, Saab's sales nosedived 38 percent to just 17,900 cars.
For all of 2008, the Swedish automaker sold only 93,300 vehicles down from 120,000 just three years earlier.
The Scandinavian country's two carmakers are a source of pride for Swedes, and the disappearance of Saab would be a hard blow.
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