Citing supply chain woes, Saab moves to halt productionThe Swedish carmaker Saab was forced to shutter its manufacturing facilities for a third straight day this week as it wrangles with suppliers to establish new contracts, according to a published report.

The Wall Street Journal reports that Saab's output was suspended two months ago after parent company Spyker ran out of money to pay its suppliers, forcing the company to overhaul its strategic sourcing strategy. However, its manufacturing was restarted in May after Chinese car distributor Pang Da Automobile Trade Co. bought more than 1,300 Saab cars, paying for the order in cash.

While Saab works for procurement cost reductions, many industry analysts said the automaker's complex supply chain was creating headaches for the company and curtailing previous progress. The latest shutdown was caused by Saab's inability to pay suppliers and settle its debts, according to FKG head Svenake Berglie.

"It's surprising that the company has not been able to make a better forecast for its future financial requirements," Berglie said.

Spyker chief executive Victor Muller acknowledged that it has defaulted on payments to some suppliers, but said that Saab was working to establish new contract terms with a myriad of international suppliers.

"We have a few thousand suppliers world-wide, with each of whom we have to reach acceptable terms and conditions to resume production of parts and subsequent deliveries," he said in a statement. "Many suppliers are located outside Europe and restocking inevitably takes time."

Japan is home to a large number of automobile component suppliers, but companies there have had to scale back manufacturing in the wake of the 9.0-magnitude earthquake and subsequent tsunami that hit the island nation on March 11. While Saab executives are aiming for cost reductions with their suppliers, they must also face the daunting task of overhauling nearly all of their purchasing services.

For his part, Muller did not gloss over the significant troubles the carmaker faces as it looks to resume full production capacity at its manufacturing facilities, warning that there would be "production hiccups in the near future until the supply chain is fully back to normal."

Saab executives said they could not say at this time how long production will be halted for.

"It takes time to negotiate with suppliers and the process continues," Saab spokeswoman Gunilla Gustavs said. "It's important that we continue to strengthen our financial position." 
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