Monday, November 18, 2019

SAAB's Cash Flow Problems Coursework Example | Topics and Well Written Essays - 1500 words

SAAB's Cash Flow Problems - Coursework Example This is where the concept of fair market value and forced sale value becomes important (Curtis, 2011, 1). Discussion Business failure can occur for various reasons ranging from legal, political and economic factors that are beyond an individual firm’s control, to internal factors like cash flow problems, manufacturing and selling difficulties and lack of firm orders on which to base production capacity. If a business finds it difficult to even break even and pay its own operating, selling and distribution costs, it can either look for a partnership, being rescued through a Government or private bailout, being acquired by a more stable entity or file for bankruptcy. Sadly this is what happened with SAAB, after its struggling Automobile Division was taken over by General Motors in 1990. But in the aftermath of the 2008 recession and subsequent bailout of General Motors itself by the American Government, SAAB Automobile Division was sold off to Spyker Cars N.V. with the aid of a Russian sponsor in 2010. Spyker had subsequently been renamed Swedish Automobiles. However, the purchase and operation of SAAB Automobiles proved too heavy for Spyker to manage because Spyker was a small firm and taking over SAAB had drained their cash position as well as tested their managerial capabilities to the maximum. After a purchase offer by a Chinese firm was thwarted by former owner General Motors (they were against the technology being available to Chinese manufacturers) the company filed a bankruptcy petition and started looking for a buyer. Various offers and counter offers were made from China Youngman, Tata Motors, Mahindra & Mahindra, Koenisegg etc. The company could only produce between 20,000 and 40,000 vehicles at its manufacturing plants in Mexico and Sweden. The financial meltdown did not allow it to take advantage of the Chinese demand because it cancelled its plans to expand into new markets due to low cash position, paucity of credit and economic uncertaintie s. Various episodes of being unable to pay worker salaries and even to pay suppliers for materials repeated themselves in 2011. For example, July salaries were paid at the last minute on July 26; August salaries were paid through equity insurance as Gemini Fund purchased 5 million shares in SAAB. September salary payments also seemed to be in jeopardy. The Swedish Enforcement Administration has been monitoring SAAB in case of failure to meet creditor’s claims. The company Union has also threatened to go on strike because of salary payment difficulties that occurred three times in 2011. So we see that even financing from potential buyers had to be resorted to so that the company could be kept afloat (www.swedecar.com). It must be admitted that the lack of cash flow emerged from an apparent lack of attention to the production and marketing mix as well. Everyone knows that when you are trying to put a company or a brand name back on its feet, a sizeable amount of money must be s pent on advertising and press relations, creating hype and curiosity so that buyers are attracted to the upcoming offerings (Kotler & Keller,

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