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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?
Saab

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

DanDetroit (not verified)    January 3, 2012 - 10:17PM

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Possible, but it actually never was profitable. Saab was the center of expertise in turbocharging, within GM, the sole area they may have contributed IP.

Your notions about emotional drivers of GM's business decisions are rather naive, and certainly inaccurate.

Saab had far higher product capability and quality, thanks to GM, with double the sales of their best pre-GM year. It was just not enough to ensure the brand's viability.

Markac (not verified)    January 3, 2012 - 11:35PM

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Saab was profitable for at least one year during GM ownership. And there is some evidence to suggest that creative book keeping made Saab look unprofitable at other times. This has been stated by Saab staff.

Much of the design work that went into GM's current Epsilon II platform that underpins the Opel/Vauxhall Insgnia/Buick Regal and the Buick LaCrosse as well as Saab's own NG9-5, came from Saab. Hiperstrut in particular.

There is also some evidence to suggest that it was something of a "knee jerk" reaction that contributed to GM acquiring Saab. It has also been suggested that GM never had the resources to properly develop Saab into a true premium brand.

Trying to sell premium cars based based on far from premium platforms ably demonstrated this. Trying to sell the NG900 using an old Vauxhall/Opel platform never intended for a premium car, up against BMW, Audi and Mercedes competitors was never going to work.

As to pre GM sales, the classic 900 peaked at over 88,00. This plus the 9000 sales put Saab-Scania's efforts not too far behind what GM achieved. Who's being 'naive' here?

Anyway it'll probably all come out in a book one day entitled "Saab: The GM years" or something.
It should make great reading!

Adam Yamada-Hanff    January 4, 2012 - 11:55AM

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Since GM wasn't profitably and did not have viable brands I guess we should have just let them go under, right Dan? :)

I apologize for deleting your other comment. There was a double posting, I tried to remove one and it deleted both. I appreciate you commenting on this discussion.

Dan Detroit (not verified)    January 9, 2012 - 2:25PM

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Adam, as I wrote, it would be up to the Swedish people to decide if their society should bear the cost of recapitalizing the business. There is no doubt but that we made the right decision here in America. GM is the largest carmaker in the world again, and gained share in America last year while making $7Billion in just the first 3 quarters of the year. On top of that, the company has invested $6Billion in America since the collapse. If stock was sold today, saving GM would cost the average taxpayer less than $10. Well worth it.

I am defending the reality that GM owns very valuable intellectual property,and arguing they are fair in insisting it not be transferred to the Chinese. They are notoriously disinterested in IP rights.
Not intending to demean the Saab folks, here are some numbers:

Saab employs 3,200, Opel employs 40,458 of GM's 209,000 employees.
Saab's best year ever, 180,000 came under GM ownership. Their pre-collapse high was 90,000. Opel sold 1.2Million of GM's 8.5Million total sales in 2010. This data supports my comments about Saab's scale. They are incredibly tiny.

Adam Yamada-Hanff    January 9, 2012 - 3:06PM

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Government Motors is most likely going to be a huge loss for the Treasury. I believe the current estimate is almost $27 billion if they sold the stock today. That's a lot of money in my book!

Again, if Saab is so tiny and sooo not important, why didn't they sell it years ago? Sweden didn't want to bailout Saab, ok then a private company can buy it.

You do know that GM does well in China? Foreigner automakers partner with Chinese automakers, to build cars there. GM is no different, so your argument does not add-up.

The real issues is GM execs have incredible tiny brains and can't build competitive cars.

Are you even aware a lot of Americans didn't want to bailout GM?

Lars (not verified)    January 4, 2012 - 12:02PM

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I am sorry, but when you claim that all Saab brought to GM was turbocharging technology you only prove your own ignorance. Just look at crash safety. The GM brands were a disaster until Saab taught them how to design a safe car.

Saab was the global center of excellence within General Motors for structural design, electronic management systems, engine turbocharging, transmissions and electric drivelines, chassis development and safety systems. Furthermore, Saab was GM's R&D office on manufacturing and fuel economy.

Dan Detroit (not verified)    January 5, 2012 - 3:45PM

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I understand the opinions on the street, but 40 years experience inside GM engineering lets me know the truth. I am not knocking Saab, but defending GM's benefits to the brand and ownership of the highest technologies they don't want to give to the Chinese.

Dan Detroit (not verified)    January 9, 2012 - 10:07AM

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As a matter of fact, I had global responsibilities with GM and can assure you that the Euro technical center is not in Sweden! I trust you must not know how few folks Saab actually employes. Still, the advanced work on those systems you cite is primarily right here in Warren, Michigan, where GM is now hiring more engineers to work on advanced technology.
GM has been a world leader in safety and many other technologies for very many years.
I have no beef with Saab, but they were a very tiny organization and my years at GM in quality put me in direct touch with them. They did not bring enough to the table to remain in the GM fold, that is for sure.

Dan Detroit (not verified)    January 9, 2012 - 1:09PM

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Not complicated if you ignore the intellectual property value and the reality that current Saabs all use GM technology. GM did not stand in the way of several investors willing to buy the company and continue operations, as Spyker did. The did insist their technology not be given to Chinese enterprises, particularly with the lax IP environment in China.

Dan Detroit (not verified)    January 10, 2012 - 8:24AM

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GM blocked transfer of technology. The Chinese companies then blocked the deal unless they got the GM technology as part of it. Don't forget. GM did sell the business to Spyker in the first place.

I realize the word on the street is that GM is incompetent, yet they were awarded the bulk of patents in the automotive area last year and they are technological leaders independent of the contributions of the good people of Saab.

You may recall, the Chinese were initially going to invest capital, but decided they wanted more. GM is being reasonable to insist that technologies it invested hundreds of $millions to create is not given to Chinese competition.

The sad fact is, GM's technology is what they really wanted in the first place.

Adam Yamada-Hanff    January 10, 2012 - 8:41AM

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You still miss my point. If this was going to be a problem for GM, why didn't they sell Saab years ago? Why was Ford able to sell Jaguar and Land Rover easily to Tata?

Bob Lutz for longest time said, "Ford was lucky!" No, you guys weren't smart enough to act before the hurricane, and you got hit!

If GM is a technology leader, why couldn't they build and sell reliable and well built cars and not go bankrupt?

Dan Detroit (not verified)    January 10, 2012 - 10:00AM

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It is incredibly presumptuous to assume ANYONE knew the perfect storm of a $4 gas spike, as the US economy fell into recession, would be followed in October of 2008 with a collapse of ALL credit for anything, period.

You can rest assured, Mr. Mulally did not forsee the global financial crisis any more than virtually every business and political leader in the world.

Ford is singularly "lucky" to have hocked everything including the family jewels, HQ and the Blue Oval, in response to their own dire financial straits in 2006-7. Hindsight is always 20-20.

GM made a good faith effort with Saab. It is a matter of fact that Saab's sales and quality levels rose to the highest heights ever as part of GM. The last 9-5 is clearly the best Saab ever, by a long shot. The 9-4x is, likewise, a world class product, and a very well executed platform sharing vehicle a la Cayenne/Touareg. Both are the products of GM, no disrespect to the contributions of our Swedish friends. As a matter of fact, the GM 9-7x was an appealing product, though just another wrapper for the GMT360 product line, and the 9-3's that I test drove were also very nice cars. It is a shame that global forces beyond any management's control set the stage for the current situation.

The world of late 2008 was very different from the days when Ford sold its holdings (at great loss!), They did so as they scrambled to maintain liquidity. By November, '08, GM (along with Ford's Mulally) was forced to beg for Congress to lend a lifeline to avoid complete collapse of the industry and liquidation. Car sales virtually stopped in the last 2 1/2 months of '08 after an already weak market in the first part of the year. (With global excess capacity, there is not much demand for a good used assembly plant, btw. )

Most folks really don't grasp the financial realities of the car business. The margins are very slim and depend on substantial volumes just to break even. Toyota, in the first quarter of '09, actually lost much more than GM, the world's and America's largest carmaker. GM was very much larger than Toyota in America, and thus had much more exposure to the market downturn here. They just had no more credit available, while Toyota was sitting on a pile of cash.

All three American carmakers were in similar financial straits, the causes of which could fill a book. Ford, having gotten into trouble earlier, had a huge credit line adequate to get them through the late '08 market collapse. GM and Chrysler were not so fortunate and there was ZERO commercial credit by that point.

Adam Yamada-Hanff    January 11, 2012 - 8:35AM

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It's ok that you are jealous that Ford is smarter than GM. I understand!

I certainly do grasp the financial realities of the car business, since I write about it for a living. I talk with a lot more people, not just in Detroit, about the what is going on in the car business.

Also I am not alone in thinking GM needs new execs. Even employees at GM think they have bad management.

Consider this, I get paid for writing about my opinions! :)

Dan Detroit (not verified)    January 11, 2012 - 10:00AM

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Jealous of Ford? Why? Their mountain of debt? Their inability to cash in on the Japanese weakness last year?

I am actually a little worried about Ford's long term viability. They are very much smaller than the other global players, having fallen to 5th place behind Hyundai-Kia, and had virtually flat market share between '10 & '11 despite the warm political glow around them now and the struggles of the Japanese. As the Japanese come roaring back, and GM's new product pipeline starts to flow again, it is hard to foresee Ford growing in the future. The bankruptcies, like it or not, relieved their biggest competitor of nearly all debt.

You're entitled to you opinions, as I wrote, and you confirm, it is based on the word on the street. On talking to people, as you say. My perspective comes from actually helping to run a complex and hugely expensive business, from understanding business plans, successes and failures, and most of their causes.

I'll wager every large company has employees who presume to be smarter than their leadership. In my experience, much of that is based on imperfect understanding or outright ignorance. This is not to say that GM management is perfect or has not made mistakes, but is to say they are not fundamentally less competent than other companies' leadership, as your words imply. I cite as evidence that GM's share, relative to the other two domestics. In 1970, GM held 47.4% of the domestic pie and in 2008, GM's share was all the way down to 46.8%! In fairness, GM was over 50% in some years, but this proves my point that GM's market share slide was the result of global competition and the general decline in American manufacturing, and was shared by all three of the Detroit companies.

Consider this, I retired in 2008 and will get continue to be paid for the rest of my life for my opinions and analytical capability! ;)

Adam Yamada-Hanff    January 11, 2012 - 10:12AM

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Wow did GM brainwash you? The market share fell into the 20% range, and remains slightly below that. You are entitled to your biased and extremely wrong opinion.

No offense, your reasoning ability is not based on fact or real math. I don't care if you and GM retirees are getting a larger pensions then you deserve.

Personally I would feel ashamed to have worked at a company that built terrible cars (Pontiac Aztek!) over the years, then expected the Government to shell out cash so it could survive!

Dan Detroit (not verified)    January 11, 2012 - 12:28PM

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Adam, GM market share is actually slightly less than 20% as of 2011 year end. What I wrote is based on hard facts, not the word on the street.

My point is that the entire domestic industry lost share and GM was not much worse than the other two, notably Ford. One thing that is for certain, Ford's share of the domestic pie in 2011 declined substantially with Chrysler, in particular, and GM both gaining share while Ford remained flat.

You may smugly call me wrong, but you can not disprove it, because it is based on real facts. If you were willing to put just a little effort into it, you would be able to see the truth for yourself instead of parroting others opinions and patting yourself on the back for it. The numbers are available at Wards.com.

Adam, the difference between a sideline chatterer, and one who has actually been responsible for something real, is often the method of forming opinion, the relationship of opinion to data and hard facts. You have the luxury of being concerned only about entertaining with your emotion founded world view. Responsibility for real outcomes in the real world does not allow emotion founded views. It must be data driven. What I write is all supported by real, hard data.

btw-I certainly am not ashamed of earning a good living and retirement. I am proud to be associated with the world's largest carmaker and am confident that they are going to continue to do very well.

Adam Yamada-Hanff    January 11, 2012 - 1:48PM

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The opinions I write here are that of my own and are not influenced by TorqueNews editors, other writers, or outside sources.

I do get information from reliable sources or industry insiders. When I have questions regarding legal issues, such as the Saab banktruptcy, I also have contacts. You are certainly allowed to agree or disagree with their statements, opinions, and facts.

I am not the one that threw out a wrong number regarding Government Motor's sales, only to redact it.

Dan Detroit (not verified)    January 12, 2012 - 10:15AM

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Adam, what I said was that if you look at the relative size of the domestic car makers to each other, GM, Ford & Chrysler, GM in 2008 was getting 47% of that subset and that they had gotten nearly the same as long ago as 1970. They are only just a bit smaller compared to Ford and Chrysler than they have been in years past. I also wrote, that GM's current total market share is about 20%.

My point was that it has been our whole domestic industry that lost share. GM got the most press, having the most share to start with, but Ford and Chrysler also had very similar declines in market share.

Sorry if I was not clear. Does this clear it up?

Mr BB (not verified)    January 11, 2012 - 4:34PM

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I have been reading these comments with interest,I find it very dissapointing that you think GM,s bankruptcy is a good thing,They ran a very disorganised ship making bad cars and even worse decisions and are not even capable of paying their depts,shame on you for thinking this is ok.No wonder the worlds economy is in a mess,your as bad as the bankers.You must have been in a management position to have been as important as you think you are.Consider the man at the bottom of the tree who is struggling to pay his bills or may/will lose his job mainly because of GM management incompetence.IYou seem to have an 'I'm alright Jack' attitude wallowing in the splendour of your huge pension without a thuoght for anyone else.Having met many Americans over the years,you seem to be an exception,an arrogant and ignorant person with blinkered vision,GM only survived due to the generosity of the tax payer,nothing to brag about or be proud of.

Dan Detroit (not verified)    January 11, 2012 - 8:02PM

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I certainly am not bragging about GM finding no alternative bankruptcy! I am merely trying to correct gross misunderstandings of reality. As for my personal situation, my comments were intended to be somewhat tongue in cheek, though I have pride for my contributions and refute the emotional concept of shared blame for everyone ever associated with GM. I also know for certain that you do not understand the dynamics that drove the whole US auto sector down. It is rather ignorant to pin it on stupid management at GM. It was far more complicated and there is plenty of blame to go around, starting with a monopolist union created by government policy, damaging and costly government regulations, particulaly in the form of CAFE. You think you understand, but you really have no idea.

As for the generosity of the taxpayer, I surely do appreciate the $10-$20 it may cost you personally in the end, though it is still likely to be even less. I also am sure our country is far better off. Most have no concept of the disruption the cascading bankruptcies would have had on our economy. My 4 decades in the industry informed me about the fragility of the supply chain, unlike the sideline chatterers.

Your emotional reasoning has inspired you to presume me to be ignorant, though all of my opinion is based on observable, documented facts. I did take the time to learn exactly how many employees Saab has to confirm my statements about their size, for example.

Adam Yamada-Hanff    January 11, 2012 - 10:00PM

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I respectfully disagree with your statements about my writing. I would imagine my opinion would be biased too, if I had worked for any major auto manufacturer.

Just so you know, I have a relative that works for GM in a foreign country. I also know lots of people that have worked in a wide array of positions at the company, which includes dealerships.

Benny (not verified)    January 9, 2012 - 12:39PM

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GM a world leader in safety ? Don't make me laugh. GM's cars (including Opel in Europe) were average or below average at best in safety ten years ago. Saab were among the best. And suddenly Opel and GM started building safer cars after GM took over Saab in 2000. It's simple math.

Saab had 1000 engineers and technicians, Opel has 3000. Saab was responsible for the passive and active safety systems and the front structure of the Epsilon II platform. Furthermore, Saab developed the hiper strut front suspension and the H-arm rear suspension. As well as the brake system. The all wheel drive system was developed by Haldex with Saab. GM's successful Buick Regal, Buick LaCrosse, Opel Insignia and the upcoming Chevrolet Malibu and Cadillac XTS all use the Epsilon II platform. That's not bad for a company with "a very tiny organization". I don't know how long ago you worked at GM (if you ever worked there...), but it has to be ages ago and if not, then you were very poorly informed.