Court backs Saab as Chinese promise long-term funding

Courts in Sweden have decided to let Saab continue with its restructuring after the embattled brand’s potential Chinese buyers promised substantial and continuing cash investment.

Pang Da and Youngman intend to give Saab a bridging loan of 50 million Euros (£43.1 million) and pour 610 million Euros (£526 million) into the company from 2012.

According to information released by Saab the two Chinese giants, which have offered to buy the manufacturer for 100 million Euros (£86.2 million), expect to see profits by 2014.

Saab’s owner Swedish Automobil announced on Friday that it has signed a memorandum of understanding to sell to the Chinese.

In a presentation to a creditors meeting today (Monday), the partners promise a new strategy and structure to combine the strength of Pang Da, Youngman and Saab Automobile.

Saab’s brand equity and heritage, and its product portfolio, will work with the distribution capabilities of Pang Da in China and the manufacturing expertise of Youngman.

Agreements with creditors to repay outstanding debt and restore Saab Automobile’s supply chain is listed as an early priority. Costs will be slashed by 1 billion Swedish Krona (£95.6 million), partly by cutting 500 staff.

China is seen as a major growth market for the brand, with predicted global sales targets for 2012 of 35-55,000 cars and 2013 of 75-85,000 cars. Long term the volume outlook is between 185-205,000 cars.

Saab has been protected from its creditors since September, but Administrator Guy Lofalk had applied to have this protection removed, arguing that there was not enough money on offer to save the company.

Had his application been accepted by the courts bankruptcy proceedings against Saab would have followed quickly, but he withdrew his application when the new offer was made by Pang Da and Youngman.

The sale has still to be approved by authorities in both Sweden and China.

Words by: Andrew Charman