Deal may save Saab

Sinking Saab may have a new lifeline. Saab owner Swedish Automobile (SWAN) - formerly Spyker Cars -- has announced a memorandum of understanding with Pang Da Automobile and Zhejiang Youngman Lotus Automobile, who will buy 100 per cent of the shares of Saab Automobile and Saab Great Britain Ltd for ?100 million ($131m).

The purchase is to be paid in instalments, but final agreement between the parties is subject to a definitive share purchase agreement between Swan, Pang Da and Youngman, which will be conditional on the approval of authorities, Swan's shareholders and other relevant parties.

An important consideration for Swan to enter into the transaction will be the commitment of Pang Da and Youngman to provide long term funding to Saab Automobile.

Court documents show the two companies plan to provide a ?50m ($65m) bridging loan and ?610m ($800m) long-term financing from 2012. The documents were released after the court ruled yesterday that Saab's reorganisation - and essential protection from creditors -- could continue, although the company is likely to eventually axe about 500 of its 3400 workers at their Trollhatten factory in Sweden as part of plans to cut the equivalent of $149m in costs.

The former General Motors brand has been teetering on the edge of financial oblivion for more than a year after being sold by GM. However it's likely the new owners - who's first offer to buy Saab outright was rejected -- could parlay the brand's European heritage into an increase in sales in China's growing market, which has a ravenous appetite for premium western brands.

Youngman and Pang Da have previously said they would add Chinese production lines to Saab's Swedish output, with the target of increasing the 2010 global sales of 32,000 - less than Volkswagen did in Australia's small market alone - to 55,000 next year,  85,000 in 2013 and 185- 200,000 long term.