Bankruptcy: Saab, GM and the Banks

There’s an interesting article/blog over at Forbes

The author, John Tamny, writes that the United States government feared that jobs would disappear if they allowed the auto-makers and banks in the United States to go into bankruptcy. So the United States government stepped in with bailout packages.

Tamny then goes on to look at Saab and how they dispelled the myth that bankruptcy means that the jobs will disappear. Saab went into the Swedish equivalent of Chapter 11 bankruptcy and came out the other side at its “market clearing level”. He then goes on to outline bankruptcy as a positive, and companies come out of it with better management practices ready to succeed.

Saab’s story is a reminder that as opposed to something we should fear, bankruptcy often is what ensures the perpetuation of things we like. Saab survived bankruptcy and lived to tell the story, and it’s time we apply the lessons of Saab to other corporate entities living off of the money of others.

Feel free to pop over and read for yourselves.
http://blogs.forbes.com/johntamny/2011/03/20/bailouts-bankruptcy-and-the-revival-of-saab-automobile/

Brendan

Bravada from GMI
Guest
5 years 6 months ago
I am tempted to say, pardonnez le mot, bollocks. A bank can’t just go into bankruptcy, as the money it owes are not to some suppliers and whatnot, but to the people who have their current and deposit accounts with them. If banks were allowed to “go bankrupt” on general terms just like regular companies, nobody would have ever dared to open a current account, let alone make a term deposit. Just imagine any day your bank can tell you they don’t have your latest paycheck and you have to arrange for your groceries some other way, tee-hee! As concerns… Read more »
Bravada from GMI
Guest
5 years 6 months ago

(I love pressing Enter too soon)

…dismissed.

All in all, however, both the large investment firms and carmakers have gone through Chapter 11 bankruptcies, and the Big Two shed a fair amount of jobs, so what’s the author’s point anyway?

GerritN
Guest
GerritN
5 years 6 months ago
…..A bank can’t just go into bankruptcy, as the money it owes are not to some suppliers and whatnot, but to the people who have their current and deposit accounts with them….. Not right. Of course a bank can declare itself bankrupt and all account holders loose all their money. For exactly this reason many countries have some government backed insurance in place to guarantee that account holders get at least some of their money back in case that a bank fails. in the US it’s the FDIC. I don’t know what the maximum insurance amount per person is, but… Read more »
Bruce
Guest
Bruce
5 years 6 months ago

Banks can and do go bankrupt or out of business. To keep confidence in deposits is why there are things as deposit insurance (such as FDIC in the US).

Chris
Guest
Chris
5 years 6 months ago
Brendan: I think it was my post that was lost overnight. My only point being that John T. was just writing a good tale learning of Saab’s survival at the movies. He is far too well informed to have missed that news. His meaning is well taken, however. You need big bucks to advertise here in the Sates. Being an American I can tell you it is very hard to get the public to focus on items that are not directly affecting them. For example it was revealed tonight that only 29% know who Joe Biden is. And yes many… Read more »
100%Saab
Guest
100%Saab
5 years 6 months ago

“If banks were allowed to “go bankrupt” on general terms just like regular companies, nobody would have ever dared to open a current account, let alone make a term deposit.”

It was called the Great Depression, which was in general terms a banking crisis. That is why the deposit insurance in the US was increased from $100,000 to $250,000 per account. Bankruptcy is not a good thing. It means someone loses money.

Just a thought.

Smoke_Jaguar4
Guest
Smoke_Jaguar4
5 years 6 months ago

The article is whistling past the graveyard. He focuses on Saab’s success while conveniently ignoring Pontiac, Saturn, Hummer, and many parts manufacturers that did not survived. Unemployment in the Rust Belt is still far above the national average. And while Saab has survived bankruptcy, it’s still holding on by a thread. The majority of companies that go into bankruptcy fail. Overall the political commentary at Forbes is typically self-serving and one notch above Fox News (which is like being the thinnest person on The Biggest Loser).

Jeff
Member
5 years 6 months ago

Hate to say it, but +1. His flip flopping between Spyker and Stryker was the last straw for me 😛

It feels more like he reached his conclusion well before he examined the case of the auto industry, and was really struggling to force the argument that Saab somehow fit a nice a neat mold for successful bankruptcies. Ah well.

Stephen Goldberger
Guest
Stephen Goldberger
5 years 6 months ago
I think we tried the “let ’em fail” scenario in 1928. That created an economic doldrum that persisted until the joint Hitler/Hirohito Economic Stimulus Program finally shook the federal printing presses into action. And let us not forget *all* the lessons in the Saab bankruptcy/sale/attempted recovery program. Something as innocuous as a dashboard had to be cobbled up in a make-do effort for two (count em) model years as the company signed on to produce the original design crushed the molds once GM declared Saab to be dead. Imagine the disruption to the supply chain if GM had gone into… Read more »
North Toronto Punter
Guest
5 years 6 months ago
Excellent points Stephen (inter alia,’Jaguar’ too). In fact, the tentative embrace of our beloved brand outside The Inner Circle (here) is proof positive that many are still wary of Saabs viability (and given debate about what numbers constitute sufficiency under the Business Plan there may be a difference of opinion between The Principals themselves). It would be interesting to know more about the Western Swedish supplier of that unique dashboard surface, the absence of which caused such consternation among us (never mind John Public) and nearly brought Our House tumbling. Where did that expertise go? Saab’s Resurrection (nor the Ores… Read more »
Bankruptcy
Guest
5 years 6 months ago

There are ups and downs to the situation. I mean bailing them out would save time and money but it says ‘hey go ahead and mess up, the gov. will play mom and dad and fix your mistakes’. Over all I say we just let them fall so companies walk lightly when they mess up.

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