Our Daily Saab: Saab Lives Another Day, Waits For Chinese Money

Today, Saab creditors met in a packed-beyond capacity courtroom on Vänersborg. After a short deliberation, the district court approved the reorganization plan, Göteborg’s Posten reports. It will cost 500 jobs in Trollhättan. On Friday, China’s Youngman and Pangda had agreed to take over Saab 100 percent – in a Memorandum of Understanding, which isn’t worth much, and which is littered with caveats.

The reorganization plan, ( full text here), was feted in a lengthy press release. It starts like this:

“Pending the approval from all relevant parties, short- and long-term funding for Saab Automobile is assured: Youngman and Pang Da have expressed their commitment to provide EUR 50 million, to fund Saab Automobile while in reorganization. In addition, the Chinese investors will provide a minimum of EUR 600 million in funding to restart production, to settle the company’s clear and due debts and to fund operations for the 2012-2013 medium-term timeframe. To provide funding for the revised business plan and provide long-term financial stability the new Chinese owners have also budgeted funding for the planned expansion of Saab Automobile’s portfolio and additional operations to be set up in China.“

And then it continues:

“Saab Automobile has not received the funds from Pang Da and Youngman that have been committed for today.”

Sound familiar?

Sweden’s Aftonbladet figures that the suppliers alone are owed some $230 million. There is a $300 million EIB loan. $328 million in preferreds are due to GM in 2016. The cost of developing a new platform is in the neighborhood of a billion dollars.

Neither Pangda nor Youngman have anywhere near that money sitting around in their bank accounts. They are dependent on investors, banks, governments. China has tightened the purse strings on its banks, creating what is called a “shadow banking system”, a giant below the table loansharking operation, which many, including the Wall Street Journal, expect to explode any minute. China’s car market is growing in the low single digits, while expensive capacity expansion projects are underway. As far as car producers go, Youngman is at the bottom of the long Chinese food chain.

The reorganization plan expects continuing losses through the 2013. It sees Saab return to profitability in 2014 on sales of around 200,000 units annually. Hope springs eternal.