GM's Saab Enters Bankruptcy Protection
Saturday, February 21, 2009
Just three days after telling the U.S. government that it might dump its Saab brand, General Motors placed the struggling Swedish unit into reorganization yesterday.
Saab Automobile filed its application for reorganization at a district court in Vanersborg, in southwestern Sweden, company spokeswoman Margareta Hogstrom said. It was approved late yesterday.
The move protects Saab from creditors while it restructures in a process somewhat similar to Chapter 11 bankruptcy in the United States. Under Swedish law, a company that files for reorganization is protected from bankruptcy during the process and cannot pay debt acquired before the filing.
GM, which is seeking help from the U.S. government to avoid bankruptcy at home, hopes the three-month reorganization process will put the Swedish brand into shape for a sale, GM spokesman Chris Preuss said. "We fully intend to be out of Saab by the end of the year," he said.
GM, which gained full ownership of Saab in 2000, said that the unit would continue operating normally and that it would make sure suppliers are paid so they keep shipping. Saab has about 4,500 workers, mostly in Sweden.
Preuss said $1 billion was needed to keep the company running, of which GM was ready to pay $400 million. The U.S. automaker had asked the Swedish government to guarantee the rest, but "the guarantees have not materialized," he added.
The Swedish government, which insists that Saab's survival is GM's responsibility, rejected the request because GM's business plan wasn't "realistic," Minister for Enterprise and Energy Maud Olofsson said.
Saab's filing came as President Obama's auto industry task force met for the first time to review a multibillion-dollar bailout package given to GM and Chrysler, as well as requests for billions more in funding.
Leaders of the task force, including Treasury Secretary Timothy F. Geithner and National Economic Council Chair Larry Summers, said after the meeting that the industry urgently needs an overhaul.
The panel "discussed issues including financial and operational restructuring, improving competitiveness of wage and benefit structures, and progress toward creating clean, competitive cars of the future," the Treasury Department said in a statement.
GM and Chrysler have received a combined $17.4 billion in federal loans and submitted requests on Tuesday for an additional $21.6 billion. The new requests were included in progress reports required by the government.
In its restructuring plan, GM said it would cut 47,000 jobs worldwide and close five more U.S. factories. GM said it needed about $6 billion in support from the governments of Canada, Germany, Sweden, Thailand and the United Kingdom to provide liquidity for its overseas operations.
GM's Canadian unit yesterday requested $4.8 billion in loans from the Canadian government to maintain production. The automaker said the additional loan request was proportionate to the $30 billion in loans sought from the Obama administration.
The administration said its task force will be composed of other members of Obama's Cabinet, including the secretaries of Transportation, Commerce, Labor and Energy as well as the heads of the president's Council of Economic Advisers, Office of Management and Budget, Environmental Protection Agency and the director of the White House Office of Energy and Climate Change.
Task force designees include Ron Bloom, a Steelworkers union official and adviser to Geithner; Diana Farrell, Summers' deputy at the National Economic Council; Gene Sperling, a former White House economic adviser to President Bill Clinton; and Jared Bernstein, chief economist to Vice President Biden.
Ken Thomas contributed to this report from Washington. Krisher reported from Detroit, and Ritter reported from Stockholm.