Struggling Saab Files for Bankruptcy

Saab may be about to go the way of Pontiac and Saturn. The company filed for bankruptcy after years of struggle to regain a market and find funding to manufacture its cars. Despite future plans, the car firm is almost certainly dead.

Parent Swedish Automobile NV hopes the bankruptcy, filed in Sweden, will allow the corporation to raise short-term funding, but it has faced the same problems for months. The Wall Street Journalreports that "The company has proposed that the court appoints Swedish lawyer Guy Lofalk, who was in charge of a previous Saab Automobile reorganization, as administrator." The action may allow Saab workers to be paid August wages, but that may do little to help. Saab has not made any cars since April when it ran out of money to pay suppliers.

Saab AB was founded in Sweden in 1937 to build aircraft. It later began operating a car manufacturing division in 1947. The company merged with truck maker Scania in 1968. GM (GM) bought 51% of Saab's automotive division in 1990 and the balance in 2000, leaving behind the company's aircraft manufacturing division.

GM decided to sell Saab in 2009. The division was simply too small to fit into the huge car company. GM put Saab into liquidation briefly but found a buyers in Spyker Cars. Spyker paid $74 million in cash and shares in the new company were worth $326 million at the time.

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Saab forecast that it would sell between 30,000 and 35,000 cars in 2010, but it never overcame the fact that it was under-capitalized.

Saab used to offer six mid-sized and mid-priced models in the U.S. Those cars had to compete with offerings in similar segments of the market built by every large manufacturer which sell cars in America, and new upstarts which included Hyundai and VW. The market has become too crowded for a small operator with a limited number of dealers. The same problems exists in other countries where Saab has sold cars.

The sad reality is that Saab might not come back. It just does not have the financial clout to be a player in the cut-throat global car industry.