The owner of cash-strapped car maker Saab files for bankruptcy protection

Sweden’s Saab filed for bankruptcy protection in a last-ditch attempt to salvage a brand crippled by production stoppages, withheld salary payments and mounting debt.

Spyker Cars, the Swedish Automobile said the move would buy it time to receive funding from Chinese investors, currently awaiting regulatory approval and avoid bankruptcy.

Saab and its subsidiaries Power train and Tools were included in the application for a voluntary and “self-managed” reorganization filed at a local court in southwestern Sweden. Its overseas units were excluded.

If approved by the court and Saab’s creditors, an initial three-month court-administered reorganization phase would halt any debt collection processes as well as potential bankruptcy filings.

Some of Saab’s creditors have threatened to put it into bankruptcy amid its problems in paying suppliers and staff. The Vanersborg District Court in southwestern Sweden also received the application and is expected to make a decision.

The Netherlands-based Spykers Cars changed its name to Swedish Automobile only after deciding to focus on the Saab brand. It also failed to pay suppliers for parts which forced it to suspend production at its plant in Trollhattan, Sweden.

Due to the liquidity crisis salary payments for 3,700 Saab’s workers have been postponed in recent months which will be sought under Sweden’s state’s wage guarantee scheme.

According to the Swedish automobile, the application for creditor protection calls for cutting costs and “creating a viable, competitive and independent organization.”

Image Source : http://bit.ly/npZzX6

The company said, “The eventual purpose of the proposed voluntary reorganization process is to secure short-term stability while simultaneously attracting additional funding.”

Saab has struck agreements and is hoping for cash injections from Chinese investors Zhejiang Youngman Lotus Automobile Co. and Pang Da Automobile Trade Co. The deals includes manufacturing and distribution of Saab cars in China but have been delayed because of pending approvals from Chinese authorities.

CEO of Saab and Swedish Automobile, Muller said that “a voluntary reorganization process will provide us with the necessary time, protection and stabilization of the business allowing salary payments to be made, short-term funding to be obtained and an orderly restart of production to be prepared.”

Muller also warned that the process would lead to “a number of tough issues and decisions” but he added that he believes Saab will exit the process as a stronger and leaner car brand, putting much of his faith on the future expected cash from Pang Da and Youngman.

Union legal adviser for IF Metall who represents around 1,500 Saab workers, Darko Davidovic welcomed the move and said, “It is the fastest way for our members to get their money unless the company pays up itself and all other alternatives would have been worse.”

The director, Bo Lundgren said the Swedish National Debt Office, which guaranteed a €280 million ($395 million) loan from the European Investment Bank to Saab, supports a reconstruction.

He added, “This is likely something that is good for Saab, for it to get some breathing space and get an organized process going instead of this hyperventilating it has been through.”