SEB parks repossessed cars on Latvian airstrip as economy slows

By Niklas Magnusson and Aaron Eglitis

More than 500 repossessed cars, trucks and bulldozers are parked around a disused airstrip in Latvia, a symbol of the deepening recession in the Baltic region. Many will be shipped to countries less affected by the crisis as banks seek buyers for the BMWs, Mercedes and Volvos.

SEB AB, the second-biggest bank in the Baltics, has hired a company to maintain and sell all the vehicles it has repossessed, according to Katja Margell, a spokeswoman for the Stockholm-based lender. The company, Conventus, counts SEB, Swedish truckmaker Scania AB and Norwegian bank DnB NOR ASA’s Vital insurance unit as its clients.

“A lot of the cars that were repossessed in the Baltic states are being sold in Germany, Belarus and the Czech Republic,” Karlis Danevics, head of SEB’s Latvian credit department, said in a telephone interview.

Latvia, Lithuania and Estonia are struggling with the worst recessions in the European Union. Sweden’s largest banks may post loan losses of more than 150 billion kronor ($19.7 billion) in the Baltic states in the next three years, according to the Swedish Financial Supervisory Authority’s worst-case scenario for the region.

Conventus, which stores and sells repossessed vehicles, has 120 trucks stored at the airfield and 400 cars, excavators and bulldozers parked nearby, said sales manager Nikolajs Skotjuks.

“The situation in other countries is better and in Latvia it is very bad, so a lot of people come here to buy cars, especially from Germany but also from Belarus,” he said by telephone. Conventus sells brands such as Volvo, Toyota, BMW, Mercedes and Scania, which are sent to Germany on Lithuanian trailers or driven to Belarus by the buyers.

Swedish Market

Some of the cars may also be bought by Gothenburg, Sweden- based Bilia AB, the Nordic region’s largest car retailer. The company is sending representatives to the Baltics to hold talks with banks as demand for used cars increases in Sweden because of an economic contraction and rising unemployment, Chief Executive Officer Jan Pettersson said in a June 9 interview.

SEB and Stockholm-based Swedbank AB, the Baltic region’s biggest lender, have together lent more than 366 billion kronor in Estonia, Latvia and Lithuania. The Baltics account for 17 percent of Swedbank’s total lending and 13 percent of SEB’s.

Repossessed cars aren’t the banks only problem after the region’s property bubble burst. Latvian house prices fell 36 percent from a year earlier in the first quarter, the biggest drop in the world, according to Knight Frank residential research in London. They were the biggest gainers during the fourth quarter of 2006 and the first two quarters of 2007.

The economy of Latvia, which is relying on a 7.5 billion- euro ($10.6 billion) international bailout to avoid bankruptcy, shrank 18 percent in the first quarter. Estonia’s economy contracted 15.1 percent in the period, and Lithuania’s 13.6 percent.

To contact the reporter on this story: Niklas Magnusson in Stockholm at nmagnusson1@bloomberg.netAaron Eglitis in Riga at aeglitis@bloomberg.net

Comments

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Latvia, Lithuania and Estonia need to merge into a single country.
The new state needs to encourage:
1. Participation, by its citizens, in the world economy. This means that English should become the official language.
2. Immigration. Establish a points system a la Canada and then start recruiting in: India, China, Pakistan, Indonesia, Brazil.