just-auto.com

SWEDEN: Saab issues gloomy prognosis and potential EUR4.6m cash shortfall

By Simon Warburton | 18 November 2011

Saab has issued a third quarter trading update that outlines the extent to which it is heavily reliant on reaching agreement with General Motors, as well as a potential cash shortfall of EUR4.6m.

The troubled Swedish automaker - that has seen its production lines idle since April this year - reiterated the need for GM consent to continue its existing technology licences and the supply of 9-4X vehicles - a situation the American manufacturer has not approved given the proposed 100% sale of Saab to Youngman and Pang Da in a share purchase agreement (SPA).

The Chinese provisionally signed a Memorandum of Understanding to take over Saab but GM's position now makes this unclear. The MoU also depends on Saab remaining in bankruptcy protection with suppliers owed substantial sums of money and employees wages due next week.

"The validity of the MoU is also contingent on Saab Automobile remaining in reorganisation," said a Saab statement today (18 November).

"Without the GM consent having first been obtained, it is uncertain whether the parties are in the position to sign an SPA."

There is a further twist to the tale however. If Swan (Swedish Automobile) sells the Saab Auto Group and the Spyker business as currently envisaged, the total (net cash) proceeds will amount to EUR132m (US$179m). The exact use of these proceeds depends on the negotiations with the different stakeholders of Swan such as creditors and lenders.

But based on the current situation, the proceeds of the sales will not allow Swan to meet all its liabilities in full. A best estimate of the total liabilities of Swan for 31 December 2011, amounts to around EUR136.5m plus contingencies.

The future of Swan will depend on the outcome of the negotiations with the purchasers of the Saab Auto Group - Pang Da and Youngman - and the Spyker business (North Street).

"If Swan is not able to complete a sale of the Saab Auto Group or secure further financing for the Saab Auto Group, management will likely not be able to safeguard the continuity of the Saab Auto Group, which will have negative financial implications for Swan and its stakeholders and may result in the bankruptcy of the Saab Auto Group," noted the statement.

"If Swan is not able to complete a sale of the Spyker business, Swan may continue the Spyker business, provided the necessary funding for that business can be obtained. If Swan were to sell the Saab Auto Group but continues the activities of the Spyker business, as it did before it acquired the Saab Auto Group at the beginning of 2010, it will focus exclusively on the Spyker business. If both businesses are sold, Swan will consider all of its options including a voluntary liquidation of Swan."