According to a recent Fox business report, "Struggling Swedish car maker Saab said on Tuesday it cannot pay almost half of its workforce this month because it has not received the funds it had expected, reviving fears about its precarious finances."
Saab spokesman Eric Geers said the decision affects about 1,600 people out of 3,640 employees. That is 45 percent of Saab staff that will not receive wages. Geers declined to say when they would be paid or how much money Saab still needed so that it could pay wages. What is clear is that Saab’s financial stability is in serious doubt.
"The money has been committed; the only thing is it has been delayed. This is very, very unfortunate for those people who have been affected," Geers said.
Saab—who, until recently, was owned by General Motors--has been struggling with its finances for decades. Much like its previous owner, Saab has crept from one crisis to another and has been forced to seek funds in hopes of restarting production.
Fox business reports, “Car assembly was halted in April because suppliers refused to deliver parts until they were paid, and Saab only narrowly fended off a demand for one of its units to be declared bankrupt last week.”
The company said it is doing all it can to collect the funds it owes (an estimated $47 million) and is seeking assistance from various groups to raise additional short-term funding. Geers stated that Saab is ready to sell factories and office buildings rather than file for bankruptcy.
Saab’s chances are “slim,” said Martin Crum, an analyst at Amsterdams Effectenkantoor BV. “The company is still not able to produce cars; that’s the main concern. If you don’t sell cars, you don’t get cash in.”
Since being bought by GM in 2000, Saab has failed to turn a profit. As a result, GM implemented a major turnaround plan in 2002 that included firing almost a fifth of its domestic workforce.
But with GM itself hit badly by the financial crisis and begging for government loans, it gave up and announced in 2009 its intention to shut down Saab. However, the destruction of Saab was avoided when GM struck a deal with the Dutch sports car manufacturer Spyker and sold the company to them in February 2010.
But since then, Saab has continued to fall short of sales targets. Last year, they missed the 50,000 target aimed for, selling only 30,000 cars, and will most likely miss their target of selling 80,000 cars this year.
In the first quarter of 2011, only 10,000 cars were assembled at the Trolhättan factory, and hardly any in the second quarter, with production more or less at a standstill since April.
Saab will need to think of creative ways to raise enough capital to stay in business. They can only get so much assistance from their Dutch-owned parent company and they can forget about government intervention.
The Swedish government has said it will not take the initiative in saving Saab, and that the company itself must be responsible for finding solutions to its financial woes.
A company told to handle its own financial problems? What a novel idea!