Money Matters, Simplified.
Joint venture, bridge loan to help Saab restart production
by Jamie Anderson - July 5, 2011 - comments
The challenge that Saab now faces is to convince suppliers that a long term plan is in place, and the company has the requisite resources to ride out the storm.
In what may be considered as a fresh leash of life for the besieged Saab Automobile, Swedish Automobile, its owner, bagged a $35.9 million bridge loan from hedge fund Gemini Investment Fund.
The funds will allow Swedish Automobile to restart the production of Saab cars soon which has been on halt for close to 3 months due to non-payment to suppliers’ bills.
Plans to restart production
Saab has been in such a financial mess that it confessed not having enough money to meet the obligation of employees' wages.
“We have clearly gone through a very rough patch in the past few weeks and hopefully we can now reach agreement with our suppliers so as to ensure a resumption of our production in a controlled way.”-- Victor Muller, chief executive of Saab Automobile and Swedish Automobile
The challenge that Saab now faces is to convince suppliers that a long term plan is in place, and the company has the requisite resources to ride out the storm.
It also needs to convince employees to shorten their summer vacations so that production can start without any further delay. Saab already has outstanding orders of close to 7,500 cars.
“We have clearly gone through a very rough patch in the past few weeks and hopefully we can now reach agreement with our suppliers so as to ensure a resumption of our production in a controlled way,” stated Victor Muller, chief executive of Saab Automobile and Swedish Automobile.
50:50 joint venture
Swedish Automobile is also said to have inked a deal with Youngman subsidiary Zhejiang Youngman Passenger Car Group Co. Ltd.
The deal entails setting up of a 50:50 joint venture. This Sweden based company will develop and manufacture three new Saab models; the Saab 9-1, Saab 9-6 and Saab 9-7, for the fast growing Chinese market.
“This joint venture offers Saab Automobile the opportunity to develop models that were not envisaged nor funded in our original business plan: for instance, we will now be able to develop a small entry-level Saab, a car that has long been on the top of our wish list,” Victor said.
The convertible bridge loan, alliance for manufacturing cars for the Chinese market as well as the recent sale of real estate to a Swedish consortium may, collectively, be just enough to bring Saab out of choppy waters.