Saab To Be Sold To Chinese Manufacturer, Will Likely Cut Jobs
In an attempt to avoid bankruptcy automobile manufacturer Saab plans to sell to Zhejiang Youngman Lotus Automobile Co. and Pang Da Automobile Trade Co. for the low price of just $142 million.
The company’s have until November 15 to close the deal after singing a memorandum of understanding.
Saab was forced to scale back their production of vehicles to almost nothing starting in March when the company ran out of the money needed for production. The company then almost filed for bankruptcy last month but the process was halted when a Swedish court provided the company with creditor protection.
The announcement of the company’s problems come after General Motors offloaded the manufacturer in February 2010 for $400 million in preferred shares and cash.
Shares at the company fell by 32 percent upon news of the sellout while overall share prices have plummeted by 80 percent in 2011 which give the company a real world valuation of just 19.5 million Euros.
Under the proposed agreement Youngman will own 60 percent of Saab shares while Pang Da will control the remaining 60 percent.
For their purchase the two company’s will take control of an automobile manufacturer who’s production high of 133,000 cars in 2006 has been marred by ever decreasing sales with just 31,700 Saab’s being purchased in 2010.
It should be noted that this isn’t the first time Saab has neared bankruptcy, in 1989 the company was failing until GM purchased half of the company and in 2009 as GM was in a crisis of it’s own they said Saab could be closed down in the same fashion they did with the Saturn, Pontiac and Hummer brands.
With the new deal Saab hopes to offer delivery terms to their suppliers and begin full production again in the near future.
While governmental regulations and Sweden and China must approve the deal the biggest hurdle could come from former owner General Motors. Saab Chief Executive Officer and Chairman Victor Muller revealed:
“This is a transaction that requires a lot of consensus from General Motors. It’s not just the preference shares and technology rights. There are many, many relationships with General Motors, all of which need to be taken into consideration, so it will be a lot of work. What I can tell them is that Saab will be a fantastic client for them.”
Included in their debt to GM is $326 million in preferred shares which Pang Da and Youngman will assume should they purchase the company.
It is expected that the deal will see at least some of the company 3,7000 employees laid off.