September 7, 2011 / 2:03 PM / 6 years ago

Saab town caught between hope and despair

7 Min Read

<p>A general view of Spyker Cars Saab factory in Trollhattan September 7, 2011.Bjorn Larsson Rosvall/Scanpix</p>

TROLLHATTAN, Sweden (Reuters) - At a sports center next to Saab's sprawling, now idle, factory, former employees gathered for calisthenics last week, one sporting a union shirt that read: "Never never never give up."

The carmaker has never been so close to the end of the road, however. On Wednesday its owner sought creditor protection in a Swedish court so it can reorganize most of its domestic operations and seek funding.

Saab has been trying to hold out for new Chinese owners in the hopes it can win the kind of backing that Volvo, another famed Swedish brand, has had with China's Geely.

The problem is that the regulatory approvals in China could still take weeks. And with its factory silent for months and wages and bills going unpaid, Saab needs the cash now.

Auto enthusiasts and Saab devotees worldwide are anxiously watching to see whether the carmaker can survive, but no-one is more worried about the fate of the firm than the people of Trollhattan, the western Swedish town that is Saab's home.

"They have never been in this deep before," said Lars-Erik Johansson, who worked for almost 50 years at Saab and now enjoys a pensioner's membership to the company's sports complex.

"It is going to be very tough," he said in between exercises in the large aerobics room.

The ultra-modern plant, which can produce about 220 cars a day, employs about 3,400 people. If you include those employed at suppliers and local businesses more than twice that number could be affected by a closure.

One Saab dealer in town is sacking almost 40 percent of staff because of Saab's woes. He has only 15 Saabs left to fill his showroom, where the 9-3 SportCombi was once his best seller.

"There is hope that Saab will survive, but everybody is affected because there has been a very long production standstill now," said Joachim Lind, CEO of the dealership, ANA Trollhattan. "The situation with Saab is very serious."

The saga began when Saab was rescued from closure by former owner General Motors in early 2010 by Spyker Cars, a Dutch loss-making producer of luxury sports cars led by mercurial chief executive Victor Muller.

Spyker said it was pinning its hopes on the Saab brand -- the carmaker has a cult-like following among fans of a certain northern European cool -- and the fact that the model range was being renewed this year, which would attract new buyers.

The rescue brought much relief to the workforce, but early this year Spyker, which has since changed its name to Swedish Automobile, said it was facing cash problems due to a sales shortfall in 2010.

A failure to pay bills from suppliers forced a halt to production at the beginning of April. Production lines have been closed almost continuously since even though Muller has raised more than 100 million euros in the last few months.

August wages are still due and unions have threatened to exercise their right to demand their employer is declared bankrupt to activate a state scheme which will pay their salaries.

The main hope has been a deal agreed by Muller with two Chinese saviours -- car maker Zhejiang Youngman Lotus Automobile Co. and car seller Pangda Automobile Trade Co Ltd.

A Russian businessman with links to the Baltic states, Vladimir Antonov, a former partner of Muller in Spyker Cars, is also waiting in the wings. His ambitions to take a 30 percent stake have been frustrated by the European Investment Bank, which has an outstanding loan to the car maker and must approve any shareholder changes.

Scepticism

Pangda, which wants a 24 percent stake, has already kept Saab afloat by paying in advance for Saab cars it has not yet received. In the longer term, Saab plans a manufacturing partnership with Youngman, which wants an almost 30 percent stake.

But the Chinese rescue is far from a done deal.

Authorities in China have started to scrutinize such investments much more closely. Beijing wants to consolidate a fragmented domestic auto industry already crowded with too many small and inefficient players.

Saab has the capacity to produce just over 100,000 cars a year running on two shifts. Volvo made almost four times that last year and plans on selling 50,000 cars in China alone this year.

"(Saab) is tiny in the scheme of things. They produce vehicles for a very niche premium buyer," said Ian Fletcher, automotive analyst at consultancy IHS.

While endorsing Geely's $1.5 billion Volvo takeover, which gives the Chinese full control of the famed Swedish marque, regulators rejected tiny machinery maker Sichuan Tengzhong Heavy Industries' attempt to buy the now defunct U.S. brand hummer.

The privately owned Youngman, one of China's many less well-known players keen to join the big players through acquisitions, employs only a similar number of staff as Saab.

Investors remain skeptical that after months of stitching hasty deals together Muller can pull Saab through.

The Swedish Automobile share price has fallen 81 percent since the start of the year from as high as 6 euros to under one euro by early September. It posted a loss of 200 million euros in the first half of the year.

"You try and take a balanced spin on these things and it is very, very difficult at the moment to see them surviving," Fletcher said. "For the amount that they need you would have to be a very brave business or banker to even work with them at the moment."

Tom Muller, an analyst at Dutch private bank Theodoor Gilissen, said Saab needed about 500 million euros to get production going again and keep a sustainable pace of output.

"It all depends on the money," he added.

Heart and Core

Indistinguishable from hundreds of other medium-sized towns across Sweden except that one in five cars is a Saab, Trollhattan, with a population of 50,000, is also home to a small film industry and a university college.

The riverside town already has an almost 11 percent jobless rate, above the roughly 7 percent national average.

"If it continues like this, I won't be able to make it. I may have to find another job or move," said Charles Karam, who runs a toy shop in the city center. "I'm giving it one more year."

Trollhattan is bracing for the worst.

"I'm skeptical," said Roland Hallstensson, a Saab employee for four decades, standing on a quiet shopping street. "It's not so easy to come back from this. It's going to take a lot of money."

Paul Akerlund, mayor of Trollhattan and the former head of the Saab branch of Sweden's powerful IF Metall union, said: "Saab is the heart and core of this town."

"Many work for Saab and indirectly it (a closure) would affect many other firms in the area," he told Reuters in an office where he has a framed poster of Saab concept cars.

"It would affect business and everything else with it. Times would be hard."

Additional reporting by Patrick Lannin in Stockholm and Fang Yan in Beijing; Editing by Sonya Hepinstall

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