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Saab faces tough battle to survive: experts

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Saab faces tough battle to survive: experts
09:14 CEST+02:00
Sweden may have helped ease cash-strapped Saab's finance problems but the carmaker's woes are far from over as it faces a liquidity crisis just a year after its last-minute rescue from bankruptcy.

"The government has given Saab the green light to borrow money for its

daily operations," Swedish Enterprise and Energy Minister Maud Olofsson told

reporters late Friday.

Industry observers were skeptical the move would be enough to save the

iconic carmaker, which was saved from oblivion in January 2010 when Dutch firm

Spyker bought it from General Motors at the eleventh hour.

"This is not a solution. This is just a very short-term thing. It's like

putting someone on life-support for one more day," said Lars Holmqvist, the

head of the Brussels-based European Association of Automotive Suppliers.

"It won't help in the long term. There are far too great problems beneath

the surface... They needed a lot more money at a much earlier stage."

Sweden has a final say in Saab's business because it guaranteed a

€400 million ($580 million) European Investment Bank loan for the company

through its National Debt Office (Riksgälden).

Under Friday's agreement, the Debt Office will release its security covering Saab's

property holdings, allowing the company to raise fresh cash by selling the

assets, including the main Saab plant in the southwestern Swedish town of

Trollhättan which will be leased back.

At the same time, however, the EIB financing package for Saab will be

reduced to €280 million - as it has already drawn down €217 million from the EIB, that leaves just 63 million euros.

Saab's pressing liquidity crisis became painfully clear last month as

suppliers stopped deliveries to the carmaker over unpaid bills.

Its assembly line was halted several time before the company finally

announced on April 6th it was stopping production "until further notice."

"We have decided that we don't want to have these stop-and-go's any more.

It's not good for the whole production process," Saab spokesman Eric Geers

told AFP at the time, adding production would re-start once got a financing

accord.

That was the first time since Spyker's takeover that Saab halted production

without providing a subsequent start-up date.

The chairman of the IF Metall union at Saab's plant in Trollhättan told

AFP before the government decision Friday that the halt had been difficult but

that employees remained optimistic.

"We think there will be a solution and we'll be producing again. That's the

worst thing, that we can't produce any cars," Håkan Skött said.

In its 20 years as part of GM, Saab never turned a profit and its

production of between 100,000 and 130,000 cars was negligible in the global

market.

In its last year of GM ownership, Saab output plunged to just under 39,000

cars from 93,000, and production stopped before Spyker bought in.

Spyker chief Victor Muller set high ambitions for Saab, saying it would

sell 50,000 cars in 2010 and placing strong hopes on the new 9-5 and 9-3

models.

But it only sold 32,000 cars last year and Muller said earlier this month

he regretted setting targets, feeling "hammered" by the press for not reaching

them.

"Saab is not on the verge of collapse," he told reporters near Stockholm

earlier this month, describing the cash flow issues as "a small glitch."

Friday's arrangement probably will not be enough to get Saab back on the

road to prosperity, according to Jacques Waller, a car industry specialist at the Dagens Nyheter daily.

"It is a too small company with a too weak owner," he told AFP, explaining

Saab was not able to produce enough vehicles to turn a profit, and recalling

that Spyker, before buying Saab, was a luxury carmaker that made only a few

cars a year.

The cash-raising scheme approved Friday also remains a bit sketchy.

The deal will likely allow Saab's real estate to be bought by Russian

businessman Vladimir Antonov, a former Spyker shareholder who has so far been

blocked from taking a stake in Saab due to reported allegations of organized

crime ties.

However, nothing has yet been decided on whether he will be permitted to

follow through with a pledge to invest €50 million ($70 million) in the

company in exchange for a 30 percent stake.

And Holmqvist, who represents suppliers to whom "Saab owes a large amount

of money," said even €50 million would not last long.

"It's been a long time since there was a chance for Saab to survive as an

independent company," he told AFP.

"Unfortunately, I think they will go bankrupt. If it happens tomorrow or in

two or three months, I don't know, but I don't think they will be able to get

hold of the huge amount of money they need."

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