Saab runs out of cash to pay wages

[June 23, 2011]  STOCKHOLM (AP) -- Saab's owner said Thursday it doesn't have the money to pay employees' wages, deepening the financial crisis that is pushing the struggling Swedish brand ever closer to ruin.

Dutch owner Swedish Automobile, previously known as Spyker Cars, has courted Chinese and Russian investors and put the Saab factory up for sale in its attempts to revive the brand it took over from General Motors Co. last year.

But after months of production stoppages and problems with paying suppliers, Saab said the situation is so dire that it won't be able to pay its 3,700 employees, adding to doubts over how long the brand can survive.

"I do not see a future for the car maker in the current position," said Ferdinand Dudenhoeffer, an auto analyst at the University of Duisburg-Essen.

Analysts have sounded the death knell for Saab several times since Spyker, a small luxury sports car maker, bought it from GM last year for $74 million in cash plus $326 million worth of preferred shares. Skeptics questioned how Spyker and its smooth-talking CEO Victor Muller could turn around a car maker that posted loss after loss during GM's ownership.

But every time the company appeared to be on the edge of bankruptcy, Muller came up with a new lifeline. His latest move was lining up two Chinese investors -- Zhejiang Youngman Lotus Automobile Co. and Pang Da Automobile Trade Co. -- in a deal to make and distribute Saab in China. The deal has not yet been approved by Chinese authorities.

Saab spokesman Eric Geers insisted Thursday that the car maker is not headed for bankruptcy.

"We're saying that we don't have funding to pay out salaries, but we're working day and night to find a solution," he said. "We're assuming we'll find a solution."

Swedish Automobile, formerly Spyker, said it is currently in talks with various parties to solve the financial difficulties, but warned that there can be "no assurance that these discussions will be successful, or that the necessary funding will be obtained."

The car factory in Trollhattan, in southwestern Sweden, has been plagued by production stoppages since March as Saab has struggled to pay suppliers for parts. Saab spokeswoman Gunilla Gustavs said production would be down at least until July 4.

Muller has sought to raise money with a plan to sell Saab's property -- including the factory -- and leasing it back. Russian investor Vladimir Antonov was lined up as a potential buyer, but hasn't received the necessary approval from the European Investment Bank, which last year gave Saab a euro400 million loan, that has since been reduced to euro280 million.

The Swedish Debt Office, which also must approve such a plan, hasn't receive any applications from other potential buyers, spokeswoman Linda Sjoblom said.

Hakan Skott, a local union boss in Trollhattan, said the situation "is creating a lot of worries and there are thousands of questions about what will happen now."

[Associated Press; By LOUISE NORDSTROM]

Malin Rising in Stockholm contributed to this report.

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