As Saab Moves To Bankruptcy, Concerns About Detroit Rise

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Will GM (GM) and Chrysler file for protection from creditors, their unions, and supplier costs? Now there is a recent precedent to do so, maybe they are more likely to.

Saab went belly up.

According to The Wall Street Journal, “Auto maker Saab filed for bankruptcy protection Friday and has applied to be spun off from its parent company General Motors Corp.”

The company was turned down when it asked the Swedish government for help.

The Saab situation is very different from those of GM and Chrysler, but the solution may hold some clues as to how the American car companies may act.  Saab has filed to reorganized to buy time to get new investors, both public and private. If it can strip away enough of its obligations to look viable, attracting that money may not be terribly difficult.

So far, the assumption is that the only money which will come into GM and Chrysler is public money from the Treasury. There is a modest chance that the theory is not entirely true. GM might be a valuable asset if it were free from its UAW contracts and creditor liabilities which are now well in excess of $30 billion.

Saab may give GM the guts to take a chance that it can come up with some of its restructuring capital on its own.

Douglas A. McIntyre