Dagens Industri has published a letter from Saab’s union bosses which accuses GM of playing silly buggers with the brand’s accounts. As Saabs United says, “The report tends to support the idea that GM are handy at shuffling results around to suit their reporting needs.” [Thanks for the TTAC translation to commentator Naser Rouholamin]
Recently, the future of SAAB has been the subject of many allegations and much debate. Specifically we are thinking about such claims as “using tax money for playing monopoly”, or “SAAB has always made a loss, hence there is no point in saving it now”.
In order to rebuke the latter claim one must realise that not even GM would have kept Saab afloat the last 20 years from pure goodwill.
No, naturally it has kept Saab because of its development, production gains as well as economic benefits. In a large corporations, accounting procedures can be used to choose were to place profits and losses.
Unfortunately, for a variety of reasons GM has chosen to place losses on Saab.
But it’s the result on the last row in the corporation’s balance sheet that is of interest. As an example of how this can be done we can look at the 2007 fiscal year, when Saab sold 120000 cars, of which 85000 were in Europe.
The cars sold in Europe generated profits for Saab whilst the rest, predominantly US market cars, did not generate profits. However that is not strange considering that sales revenue for these cars was taken by GM in the USA, meaning that Saab bore the costs but saw no sales revenue in return.
The above example shows how the accounts in a global company are treated. It can be very misleading for those who do not know the background information. Thus the allegations that Saab has never made a profit are not correct.
Regrettably the debate on how taxpayer’s money should be spent and invested is more centred on political rhetoric than reliable industrial policy.
Saab has requested that the government guarantee loans from the European investment bank, not that the government should become an owner or give Saab a grant with taxpayer money. Acting as a guarantor on the loan, together with GM, is a prerequisite for in Saabs business plan. This plan means bringing production and development of new products back to Sweden. Furthermore securing the loan will make Saab more attractive to new owners.
The risk involved with guaranteeing this loan is seems quit reasonable when compared the consequences of Saab failing with its restructuring and at least 15000-20000 people in and around Saab loosing their jobs, people who are also tax payers.
This loss tax revenue and the money which the government would have to spend if Saab, and as a result many of its suppliers, go bankrupt would far exceed the 5 billion Swedish kronor which the government would be guaranteeing. And in the case of a bankruptcy the taxpayers will defiantly have to foot the bill.