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SAAB CASH CRISIS
Holding back wages 'last resort': experts

Holding back wages 'last resort': experts

Published: 23 Jun 2011 15:02 GMT+02:00
Updated: 23 Jun 2011 15:02 GMT+02:00

The future of disaster-riddled carmaker Saab doesn’t look bright, according to several analysts, who say that holding back salaries is a company’s very last way out.

“Generally you could say that what is important for a company on the brink of disaster is to pay its taxes and its employees,“ said Per Åhlström, professor at Stockholm School of Economics (Handelshögskolan), to news agency TT.

He makes the assessment that the cash-strapped carmaker is in “a very tight spot”.

“It doesn’t look like they are getting the backing they need. What is important for Saab at the moment is to find backing to give the company a respite in order to get sales going,” he said.

According to Ferdinand Dudenhöffer, auto analyst at the Duisburg-Essen University, Saab has little chance of ever becoming a financially stable carmaker again.

“The situation has deteriorated for Saab over the last two, three or even ten years. I see no solution to the problems," he said in an interview with Swedish business paper Dagens Industri.

Dudenhöffer also said that he doesn’t think that Saab would be able to compete on a market that today is dominated by brands like Volvo and BMW.

Luxury carmakers Ferrari and Rolls Royce don’t leave much room for Saab to try to battle for the exclusive market either, according to Dudenhöffer.

“There really is no place for the Saab business model on the market, “ he said.

Dudenhöffer also doubts that the Chinese co-operation will be the answer to Saab’s dilemma.

“I don’t know if they have the ability to give Saab a cash injection. But even if they can, sums like €50 million won’t suffice to turn Saab around,” he said.

And the latest developments in the Saab saga imply that things have reached rock bottom, according to experts.

“The very last thing that a company in crisis stop paying are taxes and salaries,” said Peter Törngren, who acted as a liquidator to Saab last year.

But as he no longer has any special insight in the automaker’s finances, Törngren can’t say how close to the brink the company really is.

On Thursday Saab's main union IF Metall called on the government to intervene, saying Thursday's announcement was "the worst case scenario for our members in

Trollhättan".

But minister for enterprise Maud Olofsson reiterated that the government would not step in to finance help for the beleaguered automaker.

"It is Saab which has the responsibility and must find the financial solution," she said.

Prime Minister Fredrik Reinfeldt meanwhile said he sympathised with Saab

employees, who received the news at the eve of Midsummer weekend, one of Sweden's most celebrated holidays.

Saab's owner and leadership must "answer how to make Saab profitable so

that it can survive," he said, stressing the Swedish government had been supportive when it came to development opportunities and making loan structures possible.

TT/The Local/rm (news@thelocal.se)

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Your comments about this article

16:40 June 23, 2011 by millionmileman
Dear Swedish Government,

Saab is not asking for endless welfare just enough to kick-start the factory to so the cars that people have been ordered can be produced. Then the workers can spend their wages, keeping the Swedish economy going.

The alternative is skilled workers on welfare until they start running out of other peoples' Kronas. Other businesses will suffer and there you have the downward spiral that has gripped the US economy for the past 2 years. Americans are just not spending and that includes Swedish products.

What makes Sweden great is its innovative industries. This is why Israel's (with a similar population) economy has not been affected by the Great Recession. The Government got out of the business of regulating and holding back, allowing them to flourish with a stellar GNP.

LQQK at Greece. All I can think of are Kalamata Olives. I certainly do not want to be left with only knäckebröd from IKEA.

Wake up!
17:15 June 23, 2011 by Twiceshy
Dear millionmileman

Stop trying to prop up an unprofitable business. Ever heard of throwing money into a black hole?

What makes this particular instance of Saab needing money different from the other times it happened?

Those workers you mention are currently wasting their time working on a company which will go bankrupt anyway, when they could be out there training for jobs which generate actual profits, or starting up their own productive businesses.
18:13 June 23, 2011 by RobinHood
@Millionmileman

"Saab is not asking for endless welfare ...." Yes it is! It took billions off GM, and hundreds of millions off various banks which it will never repay. It is about to "borrow" millions more from its own employees; another loan which it will never repay. When it defaults, it will take millions more off the Swedish taxpayers for loans foolishly guaranteed by the Swedish government, and incredibly, it wants the taxpayers to stump up billions more to keep it afloat. Saab has been on welfare for 20 years, and no one wants to buy its products.

If you think it's such a great company, make the receiver in bankruptcy an offer. You should be able to pick up the entire company for about 500 SEK in a couple of weeks. Good luck with it.
20:07 June 23, 2011 by Great Scott
I would rather see money going to some form of parachute pay for the workers than the billions that are going in the form of tax breaks for the well off.

This is not just about 2 or 3000 people at Saab, but also its supply chain which is most probably triple that amount. I don't think it's a case of if, but when Saab goes, beware of the tidal wave.

Also remember it's easy to say train for another job, but you must consider some of these people are too old to train. On top of that Sweden already has an extremely high unemployment rate.

The best any one can hope is that the Chinese take over Saab and keep some production in Sweden.
20:08 June 23, 2011 by spy
Robin Hood

Actually you are wrong on many levels:

1) Saab didn't take millions from GM - GM were actually managing Saab as a brand and if there was a loss it was down to GM themselves

2) Yes Saab does owe millions to banks - but frankly what big company doesn't have loans - Saab's are secured so the banks have limited risk

3) Yes I agree Saab has behaved irresponsibly with regard to its suppliers and more recently its employees - clearly this is extremely bad management

4) The Swedish taxpayer is unlikely to suffer directly - if it all goes wrong the National Debt Office already have security against Saab assets - although they will have to burden the cost of around 15,000 lost jobs

5) You may be surprised to learn that there are in excess of 10,000 new car orders - so it is clear some people want to buy their cars

6) You are wrong to think that the entire company could be bought up after going bust - If the company does go into liquidation many of the cars' IP rights will revert to GM and the Saab name will revert to Saab AB..... So we may yet see a scramble to save the brand before it dies....

A note to the Swedish government and EIB: If you had approved Antonov Saab would not be in this mess....
09:16 June 24, 2011 by Arcticeric
Saab has been on life support for quite some time ... please, be kind, pull the plug.
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