Mike Stevens | Sep 26, 2011

Saab has been given a reprieve this week, with the Court of Appeal for Western Sweden overturning a lower tribunal's ruling and granting approval for the struggling carmaker's voluntary reorganisation plan.

Announcing the decision on its website, the Gothenburg-based court's ruling halts any pending bankruptcy petitions filed by Saab's creditors.

“This is fantastic news, not the least for the employees that will get their salaries,” Saab spokesperson Eric Geers told BusinessWeek.

“But while this improves our circumstances a lot, we’re still facing a huge challenge.”

The court's decision is good news for Saab, but it is not the first time the brand has found itself in dire financial straits. The question now is whether parent Swedish Automobile can find a permanent fix for Saab's money woes.

“It’s essential now that they figure out a way to deal with the suppliers. There’s still huge uncertainty," Amsterdams Effectenkantoor analyst Martin Crum said.

As part of the reorgnisation, the Swedish state will cover salary payments for at least three months - and possibly up to one year.

In a statement released this week, Swedish Automobile said that it will now work to establish "a more flexible and more competitive cost structure" - including, the company says, the possibility of cutting jobs.

Saab CEO Victor Muller confirmed recently that the carmaker owes nearly AU$200 million to its unpaid suppliers.

The company hopes to pay its bills and workers through its AU$320 million funding deal with China's Pang Da Automobile and Zhejiang Youngman Lotus, although the Chinese Government has yet to approve the deal.

As for restarting production, which has been halted since June, Saab spokesperson Eric Geers would only say that it is "very hard to judge" if the assembly lines will be active at all this year.

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