Struggling Saab wins reprieve, eyes job cuts
AMSTERDAM/TROLLHATTAN, Sweden |
AMSTERDAM/TROLLHATTAN, Sweden (Reuters) - Struggling car maker Saab SWAN.AS launched a cost-cutting plan to secure its survival on Wednesday after a court gave it temporary protection from creditors while the company waits for long-term Chinese investment to come through.
The 60-year-old company ran out of cash in April just over a year after Dutch group Spyker, now called Swedish Automobile SWAN.AS, rescued it from closure by former owner GM (GM.N).
Saab has only produced a handful of cars over the last six months and bankruptcy looked close last week when unpaid workers and suppliers -- owed more than 150 million euros ($206 million) -- asked a court to declare Saab insolvent.
Shares in Swedish Automobile, however, soared 30 percent on Wednesday after a court gave Saab protection from creditors while it restructures, prompting the company to announce a cost-cutting plan.
"All improvements should be implemented before year-end in order for Saab Automobile to have a new, competitive cost structure for the 2012 financial year," the company said in a statement.
"As a result of this initiative headcount reductions cannot be ruled out."
A spokesman for the firm said it was not yet clear how many jobs would go nor how much Saab aimed to save in the process, which will focus on streamlining activities, shortening lead times and simplifying the organizational structure.
Hakan Skott, IF Metall union chapter head at Saab, said he did not know anything about the plan.
"We haven't heard anything about it," he said. "Furthermore, it is something for the administrator to evaluate the organization and make it as efficient as possible."
Saab hopes protection from creditors will allow it to survive until China's authorities approve a 245 million euro ($336 million) investment by car firms Zhejiang Youngman Lotus Automobile and Pangda (601258.SS). It hopes this will come in November.
Saab sought protection this month, but was turned down by a lower court. [ID:nLDE78604I] The new decision overruled that.
"This is a battle won, but not the war," Swedish Automobile Chief Executive Victor Muller told Reuters.
Muller said the court decision meant employees could get paid by the weekend, adding that the company would meet creditors as part of the reconstruction process on October 31.
Wages will be paid by a state wage-guarantee scheme.
Creditor protection lasts three months but can be extended. The court appoints an administrator and meetings are also held with creditors.
Saab had creditor protection while it was owned by GM and that led to a writeoff of debts. Muller said this would not happen this time.
"We think the suppliers will be very cooperative. They are getting paid in full," he said.
Guy Lofalk, the administrator appointed when Saab was under creditor protection last time, will once again lead the reconstruction process, Muller said.
Production at Saab has been more or less at a standstill since April when unpaid suppliers pulled the plug on deliveries.
Saab has raised some cash since then, including a recent agreement for 70 million euros of financing with the help of a guarantee from Youngman, but it has not been enough to meet all its debts and get production started again.
Sweden's debt collection agency had already begun seizing assets at the behest of unpaid suppliers, but the court decision stops that too.
"For months and months it's been a question of hoping, now this buys them time," said Tom Muller, analyst at Dutch private bank Theodoor Gilissen.
"I hope the Chinese partners will pay the money and buy the company eventually. I don't know whether the Chinese will buy the company's technology and just produce it in China, and not buy the Saab operations in Sweden," he added.
($1 = 0.729 Euros)
(Editing by Jane Merriman and Helen Massy-Beresford)
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