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Saab's future still in doubt

After a production line shutdown on June 8 and the need for three funding injections of £54 million within a week, Saab Automobile’s recent cash crisis has the UK automotive industry on edge, according to the Retail Motor Industry (RMI).

The RMI, which represents the interests of dealers in the UK’s automotive industry, said there were concerns about the Swedish manufacturer’s current financial state and its inability to secure funding so far.

“This is causing doubt over its long- term viability,” said a spokesperson.

While an announcement that Saab was getting back on track – with plans to resume production by August 9 after the continuing summer shutdown – might be the first step in rebuilding trust with UK car dealers, there is still quite a way to go, according to Saab spokeswoman Gunilla Gustava.

“We have a lot of work to do to rebuild trust with our retailers and our customers,” she said.

On June 29, Saab said its corporate parent, Swedish Automobile NV, had entered into a third short-term funding loan agreement to help the company stay afloat while awaiting long-term funding of about £215 million from Chinese companies Pang Da Automobile Trade and Zhejiang Youngman Lotus Automobile.

Before production actually came to a halt, Saab had faced a mounting liquidity crisis that had repeatedly slowed production as suppliers stopped deliveries over unpaid bills.

Back in February 2010, Saab was bought out for £245 million (€279 million) from US automobile giant General Motors by Dutch company Spyker Cars, which has lurched from one cash crisis to the next ever since.

“Where things first kind of got out of balance is when Spyker took over Saab Automobile while GM had already started the liquidation process,” said Gustava.

It changed its name to Swedish Automobile NV in June.

Saab’s UK sales stood at 7,486 in 2009, the year GM put it up for sale.

Sales figures have slid ever since – in 2010, UK sales were at 5,898, and, in the first six months of 2011, sales stand so far at 3,507, according to Jackie Allard, of Saab Great Britain.

But the RMI said that, despite the last rocky couple of years and inevitable industry concern, Saab cannot be counted out just yet: “If Saab secures sufficient funding, then the brand has a loyal customer base that is likely to continue purchasing its vehicles.”

Professor Peter Cooke, head of the centre for automotive management (CAM) at the University of Buckingham in the UK agrees.

“Many auto industry players experience these sorts of hiccups…I think it’s fair to say that UK dealers will ride the situation out, and focus on keeping relationships going with both their customers and with Saab. If they don’t, what’s open to them?

"They’re not going to look for another franchise,” he said.

“The industry has seen production shut downs in the past. That’s business.”

“Saab is working hard to strengthen the car manufacturers’ financial situation in order to re-establish stable operations and to get a stable flow of cars back into showrooms in order for retailers to maintain stable relationships with their own customers,” said Gustava.

“When Spyker took over, production had already been down for some time…there was a lot of work to do to come back to a normal flow of sales - that took longer than we thought – and the damage from that downtime was worse than we’d expected,” said Gustava.

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