Saab says its salvage process is in jeopardy

AP News
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Posted: Dec 07, 2011 9:24 AM
Saab says its salvage process is in jeopardy

The administrator in charge of Saab Automobile's reconstruction has given up his efforts to save the struggling car company, due to a lack of funds and the refusal of previous owner General Motors to agree to proposed financing deals.

In an application to end the struggling car company's salvage process, court-appointed administrator Guy Lofalk said Wednesday that Saab's owner, Swedish Automobile N.V., has failed to deliver sufficient bridge-financing to cover costs during the reorganization.

He also said there wasn't enough time to find a financing solution that GM will accept.

Lofalk said this is partly because of "General Motor's categorical no to contributing to any proposal that has been presented to them so far, despite the fact the parties have stayed within the framework of demands in existing contracts."

Swedish Automobile has a week to respond to the administrator's application or Saab could be declared bankrupt. The Vanersborg District Court will deliver a verdict on Dec. 16.

Saab said it will continue to fight for survival, like it did earlier this year when a court gave it a few days to present an answer to a similar application by the administrator.

"We still have five to six days to do it," Saab spokeswoman Gunilla Gustavs told The Associated Press. "We're continuing to talk with the Chinese to reach a solution."

Earlier this year, Chinese companies Zhejiang Youngman Lotus Automobile Co. and Pang Da Automobile Trade Co. said they would buy the brand for euro100 million ($135 million), but that deal was blocked by GM amid concerns over its technology licenses.

On Monday, Swedish Automobile said it was in new talks with Youngman and an unnamed Chinese bank about getting them to buy stakes to help Saab, but GM said its position on a sale had not changed.

The U.S. company's spokesman Jim Cain would not say what it would take for GM to change its mind and allow a sale of shares in Swedish Automobile to Chinese investors.

Saab's Gustavs said the company was studying alternative plans.

"Victor Muller says there is always a plan B," Gustavs said, referring to Swedish Automobile's CEO, but declined to give details.

Saab has been fighting for survival since 2010, when GM sold the loss-making brand to Dutch company Spyker Cars, which has since changed names to Swedish Automobile.

Production has been suspended at Saab's main plant in Trollhattan, southwestern Sweden, for most of the year while the company struggled to pay suppliers and its 3,700 employees. It entered bankruptcy protection in September after a court gave it three months to reorganize and solve a severe liquidity crisis.

Saab's employees have still not received their November salaries and two labor unions last week filed official requests for the money, which means Saab has seven days to pay or face bankruptcy proceedings.

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Associated Press Writer Louise Nordstrom in Stockholm contributed to this report.