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Sweden's Saab Can't Pay Wages

June 23, 2011
3 min to read


STOCKHOLM - A Swedish labor union Thursday threatened to force car maker Saab into bankruptcy proceedings over workers' unpaid wages.


Union IF Metall said it now is gathering its members pay slips that haven't been honored in order to prepare requests for payment that will be sent to Saab Automobile. When Saab Automobile receives the requests, likely sometime next week, it will have a week to pay the claims, reported The Wall Street Journal.

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"If it does not have the money at that point, there is only one thing left to do," said Berko Davidovic, lawyer at IF Metall. IF Metall then would have three weeks before it could force Saab Automobile into bankruptcy, he said. The only way Saab's employees can receive money from a state wage fund is if the employer is declared bankrupt. In the meantime, IF Metall is negotiating for an emergency bank loan to support its members.


Saab Automobile, a unit of Swedish Automobile NV, Thursday said it couldn't pay workers' wages because it hasn't secured short-term funding, an indication of the dire state of the company's finances as it tries to finalize agreements with suppliers to resume production and while it waits for regulators to approve a deal with Chinese investors.


Swedish Automobile, formerly Spyker Cars NV, has agreed to sell stakes totalling more than 50 percent of its shares to Chinese companies Zhejiang Youngman Lotus Automobile Co. Ltd. and Pang Da Automobile Trade Co. Ltd. Those investments need to be rubber stamped by Swedish and Chinese authorities but consideration will take time. Approval would provide Swedish Automobile with medium-term financing, although its problems are more immediate.


Despite the agreement with the Chinese investors, Saab Automobile hasn't been able to reinstate its supply chain to enable it to restart production at its only plant in Trollhattan, where it employs 3,800 workers.


Wages to Saab Automobile's roughly 1,500 production workers were due Thursday. Hakan Skott, head of the local IF Metall union, said that members were worried and disappointed that they hadn't been paid.

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"We are approaching one of Sweden's biggest holidays and this will surely ruin Midsummer for many of them," he said.


The latest development is a worrying sign for Saab Automobile: even though production has been suspended for most of the past three months because the company has been unable to pay suppliers, the company has been able to meet its wage bill.


This week it offered to pay 10 percent of its total debt to suppliers upon a planned restart of production. It is offering to make cash payments for all new deliveries until mid-September, when it expects to pay all of its debts to suppliers with 6 percent interest.


Swedish Automobile and Saab Automobile are in discussions with various parties to obtain short-term funding, including through the sale and lease-back of the real estate of Saab. They are also talking to their financiers in connection with current financing arrangements. These discussions are ongoing, but there can be no assurance that they will be successful or that the necessary funding will be obtained.


"We are working day and night to find a solution," said Saab Automobile spokesman Eric Geers.

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Annette Hallgren, head of the local white-collar union Unionen, whose members are due to be paid Monday, said that she was following the situation closely. "We await the company's next move and hope that the funding deals go through."

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