Problems remain for Sweden's Saab

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 sceptical 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. "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 euro ($580 million) European Investment Bank loan for the company through its National Debt Office (NDO). Under Friday's agreement, the NDO 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 Trollhaettan which will be leased back. At the same time, however, the EIB financing package for Saab will be reduced to 280 million euros -- as it has already drawn down 217 million euros 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 6 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 Trollheattan 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," Haakan Skoett 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 Wallner, a car industry specialist at leading daily Dagens Nyheter. "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 organised crime ties. However, nothing has yet been decided on whether he will be permitted to follow through with a pledge to invest 50 million euros ($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 euros 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."