Court in Sweden rejects Saab plea for bankruptcy protection

Posted by


Saab

Car maker Saab has received a rare "no" in answer to its request for bankruptcy protection. Image: Flickr / mjhagen / CC-BY-SA

In 2009 and 2010, General Motors ran Saab through bankruptcy and re-organization, then sold it to the Dutch auto group Spyker. Now, a judge has denied Saab’s request for bankruptcy protection, which means there is a possibility the car maker will fold.

Saab files for bankruptcy protection

As reported yesterday, Saab owes approximately $210 million to suppliers. Workers’ unions have said that if a deal is not worked out by Monday, the unions will take bankruptcy action against the company. However, the bankruptcy judge has denied Saab’s claim, effectively denying it protection. The company has been looking for financing from China, and suppliers have put the company on a Cash-on-Delivery basis since April. Two Chinese companies, Pang Da Automobile Trade Co. and Zhejiang Youngman Lotus Automobile had both agreed to purchase a part of the company, but the agreement is still waiting on Chinese government approval.

Saab plans to appeal

Saab has a few weeks to appeal the bankruptcy court decision. If the employee unions take bankruptcy action against Saab before the company successfully files for its own bankruptcy, government salary protections for the workers may kick in, paying employees the August salaries that they still have not received. Successful bankruptcy protection would allow the company to reorganize. Unsuccessful bankruptcy filing means that Saab may soon be added to the list of failed car companies.

Saab must prove profitability

In order to get bankruptcy protection, Saab must prove that there is a workable plan toward profitability. Swedish bankruptcy law does not allow for a new round of credit or new investors to come into a company during bankruptcy re-organization, meaning that any investors or companies that may step in to save the company must do so before the court grants any protection from creditors. Basically,  Saab has the weekend to find investors and receive millions of dollars into its accounts.

Sources

Sydney Morning Herald
Wall Street Journal
MSN Autos
Cleveland Leader


Comments are closed.