General Motors' loss-making carmaker Saab Automobile on Friday sought legal protection from creditors to allow it to restructure and seek new funding for continued production.
Faced with mountainous debts, parent GM is itself restructuring, and in a plan submitted to the U.S. Treasury this week it said Saab would become an independent business as of January 1, 2010.
Saab made a loss of about 3 billion Swedish crowns ($340.1 million) in 2008, according to documents filed by the company with a Swedish court. It expects a similar loss this year, blaming falling demand, aging products, excess capacity and high costs.
We explored and will continue to explore all available options for funding and/or selling Saab, and it was determined a formal reorganization would be the best way to create a truly independent entity that is ready for investment, Saab Managing Director Jan-Ake Jonsson said in a statement.
Saab said its reorganization plans included concentrating production and that it would seek funding from public and private sources during the reorganization process.
In its court filing, Saab said GM has said it would not fund further the projected losses of the company (Saab), but would provide liquidity for the company to pursue a reorganization.
It was not immediately clear whether GM would cover this year's projected loss.
Saab will hold a press conference on Friday at 8:30 a.m. EST. The court will now assess whether Saab's turnaround plan is viable.
Swedish daily Dagens Industri said on Friday that Saab parent GM is prepared to pump in $400 million to help make its Saab car unit profitable if the Swedish state guarantees a further loan of $590 million to Saab.
The aim is for annual sales of 120,000-130,000 vehicles and profitability in 2011 or 2012, the newspaper said, quoting unnamed sources. The firm sold just over 93,000 cars in 2008.
Many analysts believe Saab would need much more money pumped into it to turn it around and question whether the brand has a realistic future.
Sweden said late last year it would provide its vehicle industry with up to 25 billion crowns in aid to help it through the current global crisis.
The government said this week its talks with GM over state aid for Saab lacked a realistic basis, but a senior Swedish official told Reuters on Friday the state had not closed the door to providing loan guarantees to the carmaker.
That will depend on what the plans look like, said Joran Hagglund, state secretary at the Swedish Industry Ministry.
If you provide loan guarantees to someone, you must be sure the company has a future.
Saab and Volvo have helped shape Sweden's image abroad with a focus on safety, family motoring and high engineering standards.
However, the current economic crisis has plunged the auto industry worldwide into crisis, adding to problems for carmakers in countries with high production costs like Sweden.
Volvo Cars has been put up for sale by owner Ford Motor Co..
Saab and Volvo employ more than 20,000 people in Sweden with thousands more jobs at suppliers tied to the two companies.
(Editing by Will Waterman and Simon Jessop)