Saab

GM gets Bailout, Why not Saab

It was recently announced that Saab, the venerable Swedish automaker, filed for bankruptcy protection. Saab did not need to do this though, as it had a chance with two Chinese firms to pull itself out from the dire financial situation it found itself in. However, General Motors (GM), blocked the deal. This begs the question... why can't Saab get a bailout?
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General Motors received a large investment by the Treasury Department back in 2009, when GM was forced to declare bankruptcy on June 1st of that year. This was not the Government's responsibility or obligation to give GM bailout money, but the Obama administration felt forced to save Chrysler and GM from collapse.

Saab was one of many brands that GM owned, that went on the chopping block along with Saturn, Pontiac, and Hummer. This lead Saab on a rocky road to save itself from financial collapse. I could go through all the ins and outs, banks, supercar makers, Russian billionaires, and other seemingly odd and tumultuous stories that Saab has been through over the past few years. However, it would take a book to write about all of them.

Saab's most recent lifeline was going to come from two Chinese car companies, Zhejiang Youngman Lotus Automobile Company and Pang Da. The plan was for the two companies to buy Saab and infuse cash into the company so it would not have to go bankrupt.

GM, who has been known to make smart and rational decisions (remember the EV1?), blocked the deal in fear that the Chinese automakers would gain an edge by utilizing Saab's technology and expertise. GM was able to block the deal because it still has rights over technology licenses over some Saab products.

This might seem like a smart decision at first, but as my colleague Keith Griffin pointed out in his recent News Opinion piece, this was a extremely large misstep on GM's part. When Saab's assets go up for sale in bankruptcy court, they will be able to be bought by any company. GM will have little control in dictating who will be able to buy those assets. The Swedish bankruptcy courts are not going to say “No” to willing buyers just because some GM lawyers are complaining about it.

Besides when you buy a company, it is a given you gain technology and expertise. GM obviously wanted to gain something from buying Saab back in 2000. (Maybe to improve a terrible lineup of cars.)

Saab has gotten a bad reputation over the years. Car people sometimes refer to SAAB as “Something Always About to Break!" The cars have always had a bit of flair and fun, that somehow you can only get from a driving Saab though.

The reality is GM was scared of letting these Chinese car companies gain an edge. Maybe they know something we don't, but this aversion to embracing the competition is partly what has led them to a much deserved demise.

This is reminiscent of the Japanese showing GM how they made cars 20-30 years ago. GM management and workers were totally against their more efficient and better processes.

It seems to me that the GM, while claiming to have changed, still is stuck in their old ways of thinking. If GM executives still want to cling to the old ways of doing business, they should have been thrown out with the bailout.

Soon the Geely Emgrand EC7 will be available in the UK. The Emgrand EC7 has even received a 4-Star Euro NCAP safety rating and looks to be a competitive car. Eventually Geely, a Chinese car company, will make it over to the US.

If GM is allowed to get a bailout and pull itself out of financial ruin, so should Saab. Sad times for the automotive world when GM executives can lead Saab into bankruptcy. Especially when their stupidity is funded with my money... and your money!

Please contact Adam Yamada-Hanff – [email protected] – for comments, questions, or topics. You can also follow him on Twitter @AdamsAutoAdvice

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Comments

Victor Muller owned Saab, not GM. "Muller, a Dutch entrepreneur, used his luxury sports car maker Spyker Cars to buy Saab from GM in 2010 for $74 million in cash plus $326 million worth of preferred shares. He vowed to gradually increase production while restoring Saab’s Swedish identity — which critics said was diluted under GM ownership. But the company ran out of money just a year later."
Louis, Thank you for commenting. GM owned Saab for many years. You are right it was sold to Muller who then created Swedish Automobile NV aka SWAN. The GM-Saab relationship never really worked very well. Muller at least tried to do everything he could to save Saab. Adam
GM aka Communist Obama Motors was out to kill Saab from the start. They were afraid to see Saab becoming successful because it would point out their own failures while they owned it. It is unpatriotic and unamerican to buy any GM product. I'm not so worried, GM stock is less than half what it needs to be for the treasury to break-even from the bailout. So finally all Americans will see bailing out GM was a mistake. We, the taxpayers, lost billions. All this and GM is still producing trash. The Chevy Volt cost taxpayers $250,000 PER VEHICLE and they catch fire and are unsafe.
Hello Walton, Thank you for commenting. Where did you get that number about the Volt? Adam
Great article telling it how it is...GM is not so smart after all. I hope someone buys the brand and produces cars from scratch with technologies from other auto makers.
Most likely this will happen!
I think this article is right on target. Government Motors is being extremely selfish. I am waiting for some high profile litigators of international flair to step up and step into the fray. Why should GM be allowed to get away with this. Ford allowed the Volvo transaction to go through as did Chrysler in the best interest of global competition and technology. GM is awful and should be reprimanded is some way. As far as I am concerned GM needs to show the taxpayers some respect!!!!!
Thank-You for your comment Steve. I feel it is right on target too! Of course... I did write it! :) Adam
The last deal brokered to sell Saab complied with all GM's stipulations and would've given Youngman only a part ownership in Saab (19%). It was also stressed that Youngman was only interested in future Saab technology, not existing GM IP. GM still refused and that was unfair.
I wouldn't be surprised if GM buys the Saab assets just to kill off anything Saab for good. GM are terrified of the Chinese, and after owning Saab for 20 years and seeing the expertise the Saab engineers have (just look at the Epsilon II architecture, all the goodies are developed by Saab), GM took the easy decision of letting 10,000 workers in Sweden go into a Christmas with no jobs to go to in the new year. What puzzles me the most is that Ford found a way to sell Jaguar, Land Rover, Aston Martin and Volvo and protect its technology at the same time, while GM only kills, kills, kills, kills. The GM graveyard is getting bigger and bigger and in a few years time also Opel will join Saab, Hummer, Pontiac, Saturn and Oldsmobile. I for one will never touch a GM car again in my life. My next car will be 100 percent GM free! And I still have a hope that it can be a Saab built on the Saab Phoenix platform funded by Chinese money.
Ford has proven time and again that it is a smarter, stronger, and more efficient than Chrysler and GM. Remember... they didn't require Government $$$ to stay afloat. I highly doubt GM has the cash on hand to buy up Saabs assets, or that they would be interested. It would be buying technology they most likely already have and know about. They probably just wanted to delay anything technology information going to Chinese automakers. Adam
As a matter of FACT, GM has nearly $32B in cash and marketable securities,$5.4B more than at 2010 year end . You can easily check the data. It is a publicly held company. If you want respect for you opinions, you should do a little homework! The Chinese were talking no more than hundreds of $millions. GM owns all the technology, regardless of whether some of it was developed by the, at the time, GM employees in Saab, Sweden, or not. If the company was worth much of anything, it would still be going.
True, they have everyone's cash! :) I didn't mention Ford's finances. Of course... what company is paying out a dividend?
GM was re-capitalized with federal money, but most of the pile they have now was generated from business operations. The have made net profit of over $11B in 2010 and the first 3/4 of 2011. They have not been given a dime beyond the initial capitalization of the new business coming out of bankruptcy. It is disappointing that their stock (almost in lockstep with Ford) has fallen despite strong profitability. Ford's decision to pay a dividend in the future is a little hard to understand, giving the huge debt they have to retire. btw- I wish them well. The car business is very tough.
Selling cars is tough, especially in this economy. Nobody's gonna argue with that!
Saab's problem was that people didn't buy Saabs.
Saab has not sold the volume like other manufacturers and the last year's bumbling has locked that. But I've bought several, joking aside they've always been a solid car for me. Looking at the economies of scale for auto manufacturing; GM should have solved this for Saab upon acquisition. Right? Unless propped up by subsidies and bailouts, economies of scale for a large companies may be a myth. Large organizations tend to be less nimble and responsive to customers. I believe the line was, "I want to work in a company large enough that nobody really knows what I do."
This is a valid point Neil. Keep in mind though it is hard to sell cars when you are not producing them.
GM can go to hell. Will never purchase, lease or even rent one of their cars again. Those clowns grossly underestimate the addition hate they've gathered. The GM employees who need their jobs long-term should have dealt with the arrogant execs who did this. Too late now, and they will suffer for it. FUGM.
Same here!
Saab sold 100,000 - 130,000 cars every single year until GM started ruining the brand by calling it a disaster and a money-losing company and threatening to liquidate the company time after time during 2009. If GM had acted like Ford when it sold Volvo, the Saab brand wouldn't have been that damaged and the company would have a chance of surviving. But who dared to or wanted to buy a Saab after all the bad things GM threw Saab's way? And like the article says, GM doesn't seem to changed since then. The company is still lead by incompetent people who can't see the big picture. The Chinese will eat GM alive.
Benny, Thank you for commenting! GM definitely needs better leadership. Maybe they should go hire some Ford execs! :) Adam
Agreed! Saab with the commitment & funding of the Chinese had GM running scared. That's why they said no.
As opposed to the ignorant perspective of the author, GM bought Saab because they needed more capacity to build Opels, at the time. Saab reached new heights in quality and sales under GM. In spite of that, Saab never managed to make a profit and was far too small to survive as an independent carmaker. Obama's auto task force declared Pontiac too small to maintain despite US sales three times the global sales of Saab. Regarding EV1, the facts of the matter are that GM made a full faith effort to comply with California's Zero Emission Vehicle mandate with the innovative car while the illustrious Japanese successfully lobbied to kill the mandate, erasing EV1's reason for existence, cutting the legs out from under the car. It is a shame to see such sloppy journalism.
Dan, which rock in the GM Rennaisance Center did you roll out from under? GM has repeatedly failed at every opportunity. The only reason GM owned the IP that Saab was using is that any Intellectual Property developed by Chevrolet, Holden , Saab, Opel or any held GM marque was registered in GM's name. So, for all Saab pioneered technology it was all registered in GM's name. GM screwing down Saab has basically had the effect of GM protecting Chinese jobs at the expense of US jobs, Swedish jobs as well as many other of the 50+ countries around the world that Saab operated in. Sounds short sighted to me. As far as the EV1 GM tried long and hard to scuttle all product and policies that dealt with making autos/truck more fuel efficient. They even lobbied the US Cogress to give huge tax write-offs to buy trucks with 6000+ GVW, you know the ones that get 10-15 mpg.. Why those and not the cars and truck that got 30 mpg? Greed, plain and simple. GM is shortsighted, greedy and on a course to fail yet again. All US citizens willing to bail out GM again please sign below.....
You are entitled to your opinion, however uninformed. GM has had an integrated global product development organization for many years. Your notions of the roles of the nameplates you cite betrays your ignorance of that fact. Rest assured, GM is not concerned about technology developed in Sweden. GM's opposition to fuel economy standards was shared by all of the American makers and most others, as they understand it forced product changes at odds with what American customers want, and uniquely burdened and financially harmed the domestics in particular. What I wrote about the ZEV mandate is precisely accurate.
Dan according to you everyone is ignorant. You really must take a look in the mirror too. Because again all technology developed by ANY GM nameplate got trademarked as property of GM. If you don't understand how that helps GM play God with all brands you really don't get it. Maybe in your office in the Renaisance Center (that name always makes me laugh, thats the last palace where there is a renaissance going on,) all this GM IP is being developed, according to your not so sound logic. GM has long and hard fought all fuel economy battles. GM makes more money on full size trucks and never spent dime one to develop high mpg cars or trucks. Hence the GM lobby in the US Congress to make tax breaks for full size trucks and SUV's. That is a major reason GM was bankrupt in 2009. When gas hit $4 a gallon GM dealers were left sitting with thousands of gas hogs and no customers (You know the one you said wanted those vehicles.) For you to deny the obvious is ludicrous. Time to crawl back under the rock and wait for your next bailout. Not.
Maybe I am naive but I don't think the Government would bailout the banks or automakers again. At least not in the next few years. The public outrage would be too great. GM went bankrupt for many reasons. Bad management, the UAW, lack of quality, etc. Gas prices hitting $4 a gallon is one factor among many. Thanks for commenting!
Your opinion is clearly biased, since you put "DanDetroit" down as your name. I assume you either work for GM or clearly live in an area that is heavily dependent on GM. You don't think the towns and communities that are based around Saab deserve a chance to survive? I guess that is the GM mentality. We deserve a bailout, but nobody else does.
It is quite possible that Saab was more profitable than it seemed. There is reason to believe that GM Europe losses were logged against Saab, so that even in years it was profitable it appeared as if it wasn't. GM bought Saab because it was miffed that Ford bought Jaguar in late eighties and it missed out. So GM accquired Saab so it could play "me too" at buying a European premium car manufacturer. I don't think it understood what it was buying and in all the years it owned Saab, it never understood what Saab customers actually wanted. That's not to say that GM didn't benefit from owning Saab. GM benefited from Saab's extensive design and technology and many of it's cars would not be what they are today without it. But did Saab benefit from being owned by GM? Probably not much. It is unfortunate that Saab today has to license much of it's own intellectual property back from GM to produce cars, at least until Saab's next generation platform is made. Hopefully the Phoenix platform makes it into production and Saab can bid (a less than fond) farewell to GM.

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