Saab

Saab may be going the way of the Studebaker

September 8, 2011: 10:58 AM ET

The quirky Swedish auto manufacturer may yet avoid extinction like its one-time siblings Pontiac and Saturn — but that looks more unlikely than ever.

By Doron Levin, contributor

SaabFORTUNE -- The bankruptcy filing of Saab Automobile AB, the subsidiary of Netherlands-based Swedish Automobile NV, could very well spell the end of Saab, the quirky car made by workers in Trollhattan, Sweden.

Workers at the Saab factory there have been idle since April. The company promised to submit a reorganization plan to creditors within three weeks; among those owed money are European suppliers, in the amount of about €150 million.

Victor Muller, chief executive of Swedish Automobile, bravely predicted in a prepared statement Wednesday that the filing in Sweden will allow the company to arrange financing, pay salaries and restart production. But much remains contingent on the ability of two Chinese companies to invest in the company, and under what conditions.

"The two Chinese companies are private and operate at the pleasure of the Chinese central government," said Jim Hall, an analyst with 2953 Analytics in Birmingham, Michigan. In June, Swedish Automobile agreed to sell a 29.9% stake to Zheijiang Youngman Lotus Automobile Co. for €136 million; and Pangda Automobile said it was willing to pay €109 million for a 24% stake. Hall said that the attempt of General Motors (GM) to sell Hummer to a Chinese company failed because the government wasn't willing to approve the transaction.

With Chinese government approval, the two automotive companies could eventually move production to their home country. Thus, Chinese motorists might have access to a car once was renowned in the West for its distinctive design, characterized by details like the ignition in the floor between the front seats.

On Thursday, a Swedish court denied Saab's petition for protection from creditors while it organizes new financing, according to Automotive News. Saab will appeal the denial, the trade newspaper reported.

Without approval, Saab could disappear like many other automotive brands, from Hudson and Packard to Studebaker and Saturn. Muller's company bought Saab from GM, following GM's 2009 bankruptcy. GM has continued to supply components and engines to Saab, as well as fully-completed 9-4X models, a compact sport utility vehicle cloned from the Cadillac SRX and built at a GM plant in Ramos Arizpe, Mexico. "Saab hasn't built anything since June," said Jim Cain, a GM spokesman. "They've struggled to get financing. It's too bad."

Hall noted that Saab's "quirkiness" was largely eliminated from the car's character by GM, which hoped to turn it into an alternative to BMW and Audi for those partial to European luxury cars. In the first quarter of the year GM created a financial reserve to cover monies owed it by Saab, Cain said, without specifying the amount.

Worldwide sales hit a peak at about 133,000 vehicles in 2006 and fell short of 32,000 vehicles last year. GM, which bought half of Saab in 1990 and the rest a decade later, said in August that its approval is required for sale of equity to the Chinese companies. A reborn Saab manufacturing enterprise in China could raise intellectual property concerns for GM, which regards that country as a key market for its own brands.

Saab began in 1937 as an outgrowth of the Swedish airplane industry. GM once used "Born from Jets" as a marketing slogan. Now it seems more enthusiasts and automotive analysts are contemplating not the brand's storied origin, but its likely demise.

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