UPDATE 1-Sweden's Saab keeps court protection for now

Tue Nov 8, 2011 8:49am EST

* Ailing Saab to keep court creditor protection for now

* Deal for Chinese rescue meets resistance from GM

* Saab's production line closed for months, funds dried up

By Johan Sennero

STOCKHOLM, Nov 8 (Reuters) - Car maker Saab will still for now enjoy legal protection from creditors, the court-appointed lawyer overseeing a reconstruction process for the company said on Tuesday after General Motors rejected a Chinese bid for the company.

GM had said on Monday it would stop supplying components and technology to Saab if two Chinese companies succeeded with their acquisition bid -- a hardening in its opposition to the proposed sale of Saab which called into question the survival of the niche brand, which has been under court protection from creditors since September.

"We will now try to get clarity about what the decision from GM means and if there is any way ahead," court-appointed administrator Guy Lofalk told Reuters.

It would be Lofalk's decision to apply to the court to end the bankruptcy protection process. He said that could happen, but declined to say under what circumstances.

The reconstruction involves Lofalk plotting a future for the company in talks with its creditors, mainly suppliers who are owed about 150 million euros. He has to make sure the company has a viable future and the Chinese bid was key to that.

He said talks were taking place between Saab owner Swedish Automobile and Chinese investors, Pang Da Automobile Trade Co and Zhejiang Youngman Lotus Automobile.

"You have to take each day as it comes, no process is served by having too many alternative results ... we are carrying out a reconstruction and a bump comes along on the road, that happens all the time," Lofalk added.

"I hope that I will know more before the end of the week," he added.

Victor Muller, chief executive of Saab's embattled owner, said on Monday GM's rejection meant negotiators would have to go back to the drawing board with the Chinese.

A deal for the Chinese companies to rescue Saab had been awaiting approval from Chinese government officials.

The Swedish government, a Saab creditor, also had yet to approve the deal.

Muller told Reuters he expected to speak to the Chinese companies on Tuesday to consider the remaining possibilities for Saab after GM's announcement.

The proposed rescue deal for Saab had to be approved by GM since the U.S. group still has preference shares in Saab and has supplied the Swedish auto brand with crucial components.

GM, which operates in China in a partnership with state-run SAIC Motor Corp Ltd , said it had concluded that continuing to supply vehicles and technology to Saab's new owners would run counter to the interest of its own shareholders.

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