Saab Breaks Off Deal with Chinese Firms

Troubled Swedish carmaker Saab announced that it was backing out of an investment deal with China’s Pang Da Automobile Trade Co and Youngman Automobile Co. for their refusal to provide desperately needed bridge financing to cover its restructuring costs, the Dongfang Daily reported on Oct. 25.

On June 13 the parties had signed an agreement under which Pang Da was to invest a total of 235 million euro ($341 mil.) to help Saab pay suppliers and resume production. To date Pang Da has already paid Saab 45 million euros ($62 mil.), according to chairman Pang Qinghua.

“I must say that this is a unilateral decision by Saab,” said Pang. “We have not yet received any formal notice from the company but in line with the terms of the agreement, it will not end before Nov. 15.”

If Saab does break off the agreement, it risks being ordered into liquidation by the bankruptcy administrator as it doesn’t have the resources to complete restructuring or to resume operations, said Pang. However, recent reports suggest Saab may have succeeded in arranging a $70 mil. bridge loan from Connecticut-based private equity firm North Street Capital.

With respect to Saab’s reason for backing out of the agreement, Pang said the Chinese firms had no obligation to pay for a restructuring requested by Saab.

“I understand that it is difficult for Saab to pay such a large amount of money at the moment but it is impossible for us to take responsibility for this,” said Pang.

In August of 2010 the Chinese auto firm Geeley completed the purchase of Volvo, another Swedish automaker, from former parent Ford. Beijing Automotive and SAIC were rumored to have been interested in buying stakes in Saab but nothing materialized before it was sold for $74 mil. in June 2010 to Victor Muller’s Spyker Automotive, a Dutch firm specializing in custom sports cars.