News is starting to come through from Sweden of an announcement from the government of a US$3.4billion package to aid the ailing car industry there.
There aren’t any further details as yet, but I’m searching.
Saab’s Eric Geers confirmed in interviews in the last few weeks that Saab would be seeking aid from the government. Saab were looking for the government to consider taking an ownership stake in Saab’s operations, however the government had expressed a reluctance to do so.
Alternatives to investment as sought by Saab were considered to be things such as research funding, which is allowable by the EU, or loan guarantees should they require further financing.
More info will be posted as it becomes available.
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UPDATE: Reuters had a prequel report, as follows:
The Swedish government is set to unveil on Thursday emergency measures to support Saab Automobile, owned by struggling U.S. auto maker General Motors, a Swedish newspaper reported.
Business daily Dagens Industri reported on its Web site, without identifying its sources, that the measures included short-term loans as well as loan guarantees.
Saab declined to comment on the report. The government has called a news conference for 1100 GMT, but officials declined to comment on what would presented.
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More from The Local:
In a bid to rescue the country’s auto industry, which employs some 140,000 people, Sweden is to commit resources to “increased investment in research and development and state credit guarantees for raising loans in the European Investment Bank,” the government said in a memorandum published on Thursday.
The package consists of 3 billion kronor for research and development, credit guarantees up to a maximum of 20 billion kronor, as well as an additional 5 billion kronor earmarked for rescue loans.
These guarantees would be directed toward automakers’ conversion to green technology, the government said.
“Jobs and development should stay in Sweden,” said Enterprise Minister Maud Olofsson, speaking at a lunchtime press conference.
The government also underlined that a nationalization of the car industry remained out of the question.
“The state should be active but it shouldn’t own; it should take responsibility for taxpayers’ money,” said Olofsson.
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So it looks like Saab have some breathing space. Very little, but some.
It is thought that whether Saab is to be retained by GM or eventually sold, finance arrangements like these would be necessary for Saab to assure its owner of continued operations. Saab have at least one new model, the 9-5, near completion and another, the 9-4x, in testing. These new models are intended to bring Saab a great deal more revenue in future years, bringing them much closer to profitability. The financing announced today will go a long way to making those models a reality.
Saab needs a home run, and soon. They’ll at least have to convince someone influential that the good stuff is just around the corner.
Saab engineers mentioned yesterday that for a relatively minor investment, the Saab 9-3 could be made much more fuel efficient. I think the time for that investment has come.
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15 responses so far ↓
1 Jörgen Trued
// Dec 11, 2008 at 9:32 pm
Finally, a relief for at least some time. Bringing home the convertible from austria sounds like a good plan.
2 joemama
// Dec 12, 2008 at 12:47 am
I don’t get it. If Saab is a GM/US-owned company, why would the Swedish government give them money? Would the US give money to Toyota or Honda because they have factories in the States?
I know jobs are at stake, but wouldn’t the Swedish government demand either a stake in Saab, or some type of return?
How much of Saab would 3.4 billion buy? Why not just buy the whole enchilada?
3 zippy
// Dec 12, 2008 at 12:54 am
joemama, Saab IS Sweden and they need to keep those people working or face a revolution of sorts.
4 Dan Palka
// Dec 12, 2008 at 1:37 am
Joemama, unlike Toyota, which is a Japanese-based company that happens to have plants in the United States, Saab is a Swedish-based company that happens to be wholly owned by GM as a subsidiary. It is not, however, a “division” or merely a brand/badge of GM. Saab has the facilities and resources to be owned by GM, sold to any other company, or operate independently. Essentially, it is a completely unique entity operating under the GM umbrella.
Both Saab and Volvo are essential to Sweden’s economy.
5 rpg (boston, mass usa)
// Dec 12, 2008 at 2:09 am
From what I have read, the $3.4 billion dollars is to be shared with Volvo…
6 ctm
// Dec 12, 2008 at 2:37 am
Since Saab only accounts for about 1-2 % of GM and Volvo for about 8% of Ford, I feel that that sum should be enough. I think it is a good package. The government didn’t fall for all the populistic demands from unions, the left-wing party, and “experts” during November to rush to a decision and basically just hand over money without knowing anything. They waited until GM could explain the terms of the US bailout package, and then they tailored it to the whole auto industry. They have a clear plan on how its gonna be used. Nothing will end up in the US, and they will monitor it very closely and demand results. And as said over and over again. What’s needed is guarantees so that they can find financial support for continue their R&D plan - not state ownership or takeover of day to day operations.
7 Bernard
// Dec 12, 2008 at 5:09 am
joemama,
“Would the US give money to Toyota or Honda because they have factories in the States?”
The Japanese and European brands that manufacture in the US have received massive subsidies and incentives, so the answer to your question would be a resounding “Yes.”
8 Karen
// Dec 12, 2008 at 5:10 am
Seems to be part of the effort by Germany and Sweden to keep GM Europe from falling into accidental bankruptcy because of GMUSA lack of cash to get to January.
$3.4bilUSD from Sweden is a huge amount relative to their total economy. I suppose Sweden could seize the assets if necessary as a last resort…
Senator Levin is now finishing his speech, which included a report from the U.S. Army on how important GM is to battlefield transport and national security. That could sway one or two Republicans. “No other nation is allowing their auto industry to go down…” is his closing statement.
Retiring Republican Senator John Warner (WW2 vet) of Virginia is now speaking. Forgot about his vote!
(I confess to being a Senate watcher, and can explain what happens if this filibuster blocks the bridge financing.)
9 ctm
// Dec 12, 2008 at 5:44 am
Karen,
How many senators are sleeping at the moment?
10 Johan
// Dec 12, 2008 at 6:59 am
“Saab has the facilities and resources to be owned by GM, sold to any other company, or operate independently. Essentially, it is a completely unique entity operating under the GM umbrella.”
These days Saab is well integrated into General Motors operations and they are unlikely able to operate independently. Since GM took over Saab in 2000 the number of employees have been reduced from about 7500 to 4000 and Saab has become one of GM’s three ‘Global Engineering Centers’ in Europe. At these centers they can work on R&D all GM brands, and in a project engineering resources can be taken from any engineering center. This means that rather than an independant company that makes everything themself, they are focused on certain areas and also help other GM brands within these areas.
As for the reason to spend this kind of money on companies with foreign owners; the automotive sector are responsible for about 15% of Swedens export, and there are many smaller and larger suppliers that are dependant on Saab and Volvo. These same suppliers also tend to supply the Volvo Group and Scania, so if Saab and/or Volvo would be unable to pay them their failure would also spell trouble for two of the largest heavy truck manufacturers in the world. Not to mention that the loss of the two automotive manufacturers could mean the loss of a lot of other jobs in the supplier chain. The companies in the automotive sector also have important ‘know how’, and without this support this knowledge is in risk be lost and with that, a lot of future R&D jobs.
11 Karen
// Dec 12, 2008 at 8:18 am
ctm: Senate came back at 5. Bunning of KY is now speaking (the former major league baseball player) who is supporting the Corker amendment. Concerned the new Democrats coming in January will re-write the whole deal. “MUST be painful changes made”
Corker amendment has some merit based on what I read a few hours ago, but busts UAW.
to answer your question, most of the Senate is not on the floor. I doubt they are sleeping.
However, Grassley (R, Iowa) has decided to spend ten minutes questioning Eric Holder’s nomination as Attorney General.
For all of you with parliamentary forms of government, it is an accident of history that the U.S. government was structured in the days of absolute monarchy. The whole world now pays for THAT legacy.
I am still not sure a GMUSA bankruptcy includes overseas wholely owned subsidiaries.
12 Karen
// Dec 12, 2008 at 8:29 am
5:23 pm EDT: Harry Reid says a compromise bill is being worked on for a Senate vote later tonight, but that it will NOT be the version passed by the House yesterday. If the compromise falls apart, then the Senate will take a vote to end debate on Friday morning to see if they can pass the House version.
It is that vote to end debate that requires 60 votes, and they do not have 60 votes, so let’s hope for the compromise, and then see what the House does - they could vote on the compromise tomorrow.
Making sausage is not pretty.
No more reports tonight - but no one really wants a disorderly bankruptcy on December 31. The holdouts want an orderly bankruptcy.
13 Markac
// Dec 12, 2008 at 9:13 am
Unfortunately for the 9-4x and the 9-5, the money would need be spent for Mexican and German production. The Swedish Government would most likely stipulate that Saab only spends the money in Sweden. This is much the same way that Congress in the US would not be happy with either GM or Ford if any of it’s bailout funds made their way to either Volvo or Saab. That’s fair enough, but it does complicate things for Saab at the moment.
14 Karen
// Dec 12, 2008 at 12:15 pm
US Congress is NOT offering a bailout, but a bridge loan in order to let GM pay it’s ongoing bills into March 2009.
Ok, I came back online to check the massive ice storm forecast to see if my power line is going to fall down from ice. Curse global warming - a foot of snow would be just fine right now.
The Senate is still working on Senator Corker’s alternative plan. Based on what McConnell just said, the Corker plan looks like the only option left, which is a more structured onerous bridge loan into an orderly bankruptcy for GM.
Just be glad Saab is not owned by Chrysler, owned by private equity firm Cerberus, which is not offering a dime.
15 Karen
// Dec 12, 2008 at 3:09 pm
Senate voted 52 to 35 to end debate. Seems 11 Senators were not around to vote (Obama and Biden already resigned).
The Corker compromise fell apart when the UAW refused to accept any wage cut before their contract expires in 2011. No comment from UAW on why they refused (they were in the room as part of the compromise effort).
So, the vote to end the debate was in order to proceed to vote on the House bill without amendments (I think - Senate rules are very Byzantine).
I find it hard to blame the 31 Republican and 4 Democratic Senators who voted no. Technically, 60% of those present voted yes, but the arcane rule requires 60 votes.
The pressure will now be on Bush43 to order the Treasury Secretary to lend the $14 billion out of the $700 billion TARP fund, which he can do by insisting a bank like Citigroup lend the money.
The Federal Reserve can take independent action.
Maybe ExxonMobil will give GM a big Christmas gift.
Living history, indeed.
The ice storm is about to cut my electricity.
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