GM-Saab update

Three peace activists get jail time for sabotaging a Saab Gripen fighter jet. And yet no-one gets jail time for almost 20 years of sabotage to Saab Automobile?
Representatives from the unions at Saab Automobile went to visit with Sweden’s Secretary of State Jöran Hägglund yesterday. They were seeking talks on some government concessions for the car industry as well as some action on all that money the Swedish government promised, none of which has actually been spent yet.
Unfortunately, they came away empty handed and discouraged, with the only light at the end of the tunnel being that Mr Hägglund has agreed to meet with the again in the near future for further discussions.
The scheme they were promoting are as follows:

  • a scrapping premium of at least 15 000 SEK, similar to that in other European countries. Extra deductions from benefit for new business cars,
  • increased discounts on nybilsinköp (whatever that is) for business, and
  • ten years of tax exemption for green cars.

They took the signatures of almost 13,000 line workers and engineers in support of their requests.
And speaking of unions, IF Metall’s Paul Akerlund says that orders are looking up.
We follow orders all the time and the last week we have seen the trend to a better order intake,”
I’m sure things are still well down, but this is good news.
Over in GM-land, things are looking grim.
There are a couple of reports doing the rounds that show just how big a house of cards this whole situation is. Thankfully, it seems Swedish legislation will protect Saab from much of the fallout if things go belly-up.
First, there’s the whole surgical bankruptcy theory, which the Detroit Free Press describes as being elusive as rocking horse poo.

The notion of a surgical bankruptcy relies on many unproven assumptions, including the idea that a bankruptcy judge will shortcut a legal process designed to make sure everyone gets their day in court, he said.
The only way GM could exit bankruptcy quickly is if its unions and bondholders agreed to concessions before the process began, Bernstein said…..
…..”If they don’t agree, there’s no way you’re going to be in and out quickly.”

So GM would have to rely on the unions to get their quick exit from bankruptcy?
Good luck with that!

The idea that the company’s pension liabilities can be dumped on the “Bad GM” appears equally problematic.
The pension holders have an interest in 100% of GM today, Bernstein points out. Why bet their future on the possible sale of brands and other property GM no longer wants?
“Who’s going to pay a meaningful amount for bad assets?” IHS Global Insight research analyst Aaron Bragman asked. “Can they actually sell these things? If they can, will it be enough to cover the bankruptcy costs and pension liabilities?”
The pension funds would probably fight any bankruptcy that lumps them with GM’s distressed assets.

So it’s not going to be as cut and dried as the powers-that-be would like.
What about the guys on the ground, the dealers?
Bloomberg’s got them covered:

The repercussions from GM and Chrysler franchise cancellations could spread swiftly to other carmakers. According to the NADA, there were 19,790 new-car dealerships in the U.S. as of March 1, fewer than 3,000 representing a single brand. Since most dealers own multiple franchises, their borrowings often cover multiple brands and properties.
If vehicles in a Chrysler showroom were seized and sold at auction, for example, the proceeds might not cover the dealer’s loan. A lender could thus demand repayment on related loans covering the dealer’s non-Chrysler brands.

So basically, GM go bust and the bankers call in loans on inventory and liquidate their fleet to get their money back. If the Chevys in the lot won’t cover the debt, they’ll go for the Nissans/Mazdas/Volkswagens/Whatevers until they’re satisfied.
The long arm of the law, indeed.

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