UPDATE 2-Saab still talking to Chinese after rejecting bid

Mon Oct 24, 2011 8:59am EDT

* Talks between the companies ongoing

* Chinese working on a "sweetened offer" -Swedish daily

* Swedish Automobile shares down 3.7% after earlier 16% tumble (Adds talks being held, share price)

By Veronica Ek and Aaron Gray-Block

STOCKHOLM/AMSTERDAM, Oct 24 (Reuters) - The owner of troubled Swedish carmaker Saab is still talking to would-be Chinese buyers, hours after scrapping their planned cash lifeline and days after spurning their total buyout bid.

Saab owner Swedish Automobile said late on Sunday it was cancelling a planned 245 million euro ($340 million) investment deal signed in June, under which Zhejiang Youngman Lotus Automobile Co and Pang Da Automobile Trade Co would have taken a majority stake in Saab, as they had failed to confirm their commitments.

The Chinese companies came up with an alternative offer last week for a 100 percent buyout of the carmaker, which was granted protection from creditors in September and hasn't made a vehicle since closing its production line in April.

Swedish Automobile rejected that offer, but Saab spokeswoman Gunilla Gustavs said on Monday that contact had not been broken off.

"Representatives of Pang Da, Youngman and Saab are meeting in Stockholm about how to go forward," she said.

The Chinese investment deal had been seen as Saab's only chance of survival after the 60-year-old company. Shares in Swedish Automobile sank 16 percent in opening trade, but by 1257 GMT were down 3.7 percent.

Swedish daily Svenska Dagbladet quoted unnamed sources as saying the alternative offer the Chinese companies had made was worth 200 million crowns ($30.5 million) and that a "sweetened offer" could soon come.

The provisional deal signed in June involved Youngman and Pangda each taking a stake in the company for a combined 245 million euros, while Youngman had also promised 70 million euros in bridge financing, only some of which arrived.

Svenska Dagbladet also reported that the company's CEO, Victor Muller, was still negotiating with U.S. investment firm North Street Capital, which last week promised to invest $70 million in the carmaker.

Doubts about the Chinese plans prompted Saab's court-appointed administrator to say last week that there was not enough cash to keep the company alive and that the protection from creditors should end. The court is expected to make a decision by the end of the week. Should it agree with the administrator, Saab is likely to face bankruptcy claims.

Saab owes hundreds of millions of crowns to suppliers. It is also due to pay salaries to its own workers this week.

Swedish Automobile, then called Spyker, rescued Saab from closure in early 2010 by former owner General Motors, which wanted to ditch the brand after its own bankruptcy. ($1 = 0.720 euros) ($1 = 6.550 Swedish Crowns) (Reporting by Aaron Gray-Block and Mia Shanley,; Editing by Matt Driskill and Will Waterman)

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