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Saab declares bankruptcy as GM blocks Chinese deal

By Malin Rising

Associated Press

Published: Monday, Dec. 19 2011 11:21 a.m. MST

Workers at the Swedish car company Saab Automobile leave the factory in Trollhattan, southwestern Sweden, on Dec. 19, 2011, after being informed that the administrator in charge of the company's reconstruction has given up the efforts to save the struggling car company, due to a lack of funds and the refusal of previous owner General Motors to agree to proposed financing deals.

Scanpix Sweden, AP Photo/Bjorn Larsson Rosvall

STOCKHOLM — After six decades of building cars renowned for their teardrop designs and quirky features, cash-strapped Saab Automobile gave up its desperate struggle for a lifeline Monday and filed for bankruptcy.

Saab CEO Victor Muller said "the last nail in the coffin" was previous owner General Motors Co.'s rejection of a Chinese company's attempts to gain control of the ailing Swedish brand. Muller personally handed over the bankruptcy petition to a Swedish court, which approved it late Monday.

Though a theoretical chance remains for a new buyer to step in during the bankruptcy process, analysts said Saab's troubles underline how difficult it is for a small, niched carmaker to survive in today's competitive global market.

"I think it does kind of reflect the situation in the industry that scale is everything," said IHS Automotive analyst Ian Fletcher. "Everyone else have been snapped up ... Saab unfortunately were the last people waiting to dance with someone and they didn't have the right partner."

Volvo Cars, Sweden's other car maker, is presently ramping up production after China's Geely Holding Group bought it from Ford Motor Co. last year.

Muller, a Dutch entrepreneur, used his luxury sports car maker Spyker Cars to buy Saab from GM in 2010 for $74 million in cash plus $326 million worth of preferred shares. He vowed to gradually increase production while restoring Saab's Swedish identity — which critics said was diluted under GM ownership. But the company ran out of money just a year later.

As production stopped and salary payments were delayed, Muller fended off bankruptcy by selling Saab's real estate and lining up financing deals with investors in Russia and China. He bought time by placing the company in a reconstruction process under bankruptcy protection.

But the deals fell through, blocked by regulators or by GM, which was concerned that its technology would end up in the hands of Chinese competitors.

The final Chinese suitor, Zhejiang Youngman Lotus Automobile Co., said it was hoping for a deal "to the last moment" but pulled out after the last proposal for a solution was rejected by GM over the weekend.

GM spokesman Jim Cain told The Associated Press Saturday that each new proposal "results either directly or indirectly in the transfer of control and, or ownership of the company in a manner that would be detrimental to GM and its shareholders."

In another email Monday, Cain said he had nothing to add "except to say it is unfortunate."

The news was grim for Saab's more than 3,000 employees, torn between hope and despair for the past three years.

"This is the most unwelcome Christmas gift I could have imagined," said Fredrik Almqvist, 36, who has worked at Saab's assembly line for nearly 17 years.

While experts say the company is likely to be chopped up and sold in parts, local officials in Saab base Trollhattan — around 75 kilometers (46.6 miles) north of Sweden's second-largest city, Gothenburg — were hoping a new buyer would emerge to salvage the brand.

Saab's small but loyal following of enthusiasts around the world, enamored with the carmaker's pioneering use of turbocharged engines, heated seats and quirky features — such as ignition locks between the front seats — had also not given up hope of the firm's survival.

"Saab drivers don't want to drive run-of-the-mill cars. They want something that is more unique, more individual, but also of a good value," said Mike Philpott, chairman of the Saab Owners Club in Britain. "Very safe, very well-built and also slightly unique and actually a little quirky. And we like those quirky parts of Saab."

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