Swedish carmaker Saab is forced to file for bankruptcy protection

Saab finds itself in financial trouble and is forced to take action in the face of potential bankrup

The troubled Swedish carmaker Saab has filed for bankruptcy protection after experiencing difficulties in production and failing to attract much-needed investment in order to boost its flagging sales. Saab's parent owner Swedish Automobile explained that the decision to file for protection from bankruptcy was "to secure short-term stability while simultaneously attracting additional funding".

In recent months, Saab has suffered from several problems and setbacks, to the extent that the company was forced to stop production altogether in April, when its suppliers stopped deliveries after not being paid. Further to this, Saab's own workers had the payment of their wages delayed for three months in a row.

Swedish Automobile is confident that it will get the support of creditors when it presents a reorganisation plan to them. However car analyst Jay Nagley, of Red Spy Automotive, does not share in the same confidence and instead likens the struggling company to a "wounded animal. You think it is dead, but then it goes and twitches again," he told the BBC. Mr Nagley also spoke up about concerns that motorists might have over the uncertain future of the carmaker. "Why would you risk buying an expensive new car if the manufacturer might not be around in three years time?"

The Swedish company, which was previously owned by US firm, General Motors, has found it difficult to sell its cars with only 30,000 sold in 2010 and this has meant that Swedish Automobile has struggled in its bid to attract potential shareholders for the company. Earlier this year, they announced that a deal had been reached with two Chinese firms to buy minority stakes in the company. However, since that announcement no actual agreement or deal has materialised.

The deals have not yet had regulatory approval in either country nor have they been approved by the European Investment Bank (EIB). According to Swedish Automobile, a total of €136 million (£120 million) is to be paid by Zheijan Youngman Lotus Automobile for a 29.9 per cent stake, while Pang Da Automobile would be willing to pay €109 million for a share of 24 per cent. However, Mr Nagley does not believe that these deals will come to fruition, particularly with this latest development - "it is estimated that it would cost more than €1 billion to put Saab on a sound footing, and I can't see even a Chinese company being prepared to pay that." The EIB has provided Swedish Automobile with €400 million worth of loans but at present has stopped all payments due to Saab's poor sales figures.

Unless Saab receives large injections of cash and places itself on a sounder financial footing, there is a real danger that it will go in the same direction as other former struggling car companies before it.

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