Saab crisis deepens, says cannot pay wages

Markets Reuters

By Helena Soderpalm and Simon Johnson

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STOCKHOLM (Reuters) - Saab said on Thursday it had no money to pay staff, compounding a crisis at the Swedish carmaker, which has halted production for two months as unpaid suppliers stopped delivering parts.

Parent company Swedish Automobile <SWAN.AS> has been struggling to solve a cash crunch since April, vindicating critics who said it was too small to turn around Saab when it bought the firm in 2010 after 20 loss-making years under previous owner GM <GM.N>.

Shares in Swedish Automobile, until recently called Spyker, slumped 62 percent to close at 0.9480 euros. It said it was in talks with various parties including current financiers over various options, including a sale and leaseback of Saab's factory.

"There can, however, be no assurance these discussions will be successful or that the necessary funding will be obtained," it said in a statement.

"But you can take my word for it, we will never give up," Swedish Automobile Chief Executive Victor Muller said later.

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Analysts said Saab's future looked bleak.

"If you can't pay the people who are closest to you, then the end is nigh, basically," IHS automotive analyst Ian Fletcher said.

"We saw similar things happening at MG Rover when it was going bust. The world is seeing another name go because there just isn't the demand for its vehicles."

British carmaker MG Rover Group collapsed in 2005.

PRODUCTION STOP

Production at Saab was halted for most of April and May and will be hit again for at least the next week because there is no money to pay suppliers for parts.

Swedish Automobile this month agreed a rescue package for Saab from two Chinese car companies, Zhejiang Youngman Lotus Automobile Co and Pangda <601258.SS>.

Saab also got a cash injection from the sale of cars to Pangda but it has yet to get production rolling again.

The IF Metall and Unionen groups at Saab said they would formally demand payment on Monday if workers had not received wages by then.

"Then the company has seven days to react," IF Metall representative Veli-Pekka Saikkala told Reuters.

"After that there are two alternatives. Either we see that the situation can be solved, or we demand that Saab is put into bankruptcy."

Saab has 3,350 employees, and a further 5,000 people working in related industries would risk losing their jobs if the company were closed, banking group Nordea estimated in April.

Sweden's GDP would drop by around 0.2 percentage points.

Swedish Industry Minister Maud Olofsson ruled out help from the state, which is already guaranteeing a 400 million euro EIB loan to Saab.

DOWNWARD SPIRAL

Trouble is nothing new for Saab. The company filed for bankruptcy protection in early 2009 after GM <GM.N> said it would cut ties with the brand.

Swedish Automobile, then named Spyker, bought Saab for $400 million in January 2010. Spyker itself had never made a profit since it was founded in 2000.

Saab fell well short of its first-year sales targets under its new owner, leading to the escalating cash crisis.

Saab spokeswoman Gunilla Gustavs said it was not possible to say when salaries would be paid.

"That depends on when and if we can secure short-term funding, for example through the real estate deal," she said.

"There are no guarantees, but we are not giving up."

"The company is in a downward spiral. The longer it takes, the tougher it gets. The longer it takes, the more potential buyers will leave," said analyst Martin Crum at Dutch brokerage AEK.

Earlier this week Saab made a payment offer to suppliers in an effort to get production going again.

The chairman of Sweden's association of car industry suppliers Christer Palm said many suppliers seemed willing to accept a payment of 10 percent of outstanding debt at the restart of production as a first step toward full repayment.

(additional reporting by Christopher Jungstedt, Anna Ringstrom and Amsterdam newsroom; Editing by David Hulmes and Will Waterman)

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