By on March 24, 2009

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.

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15 Comments on “GM tog Saabs USA-vinst (Union Says GM Cooked Saab’s Books)...”

  • avatar

    Wow, hard to fight through the translation a bit, but the general idea is understood. It wouldn’t surprise me one bit to find out that it’s all true. GM had “accounting errors” regarding their American brands, why would anyone believe that they’re above manipulating Saab’s numbers? The bottom line regarding Saab, IMO, is that GM did little more than use Saab and refuse them product (the 9-3 was just a bone and had to be done to limp Saab along for a few years), and now that they’re on life support GM wants to drop them. They had a European brand with some name recognition, a true way into Euro markets, and they blew it. More support for my belief that GM is run by morons.

  • avatar

    Global, multinational corporations are not going to go away, nor should they. However, this interconnectedness is only going to give rise to accounting shenanigans like this–while (probably) technically not illegal, definitely rotten.

    I would contend that GM, in fact, did not purchase the brand, (to wit, the Saab SUV for sale here, demonstrating that they have no knowledge of that brand) but rather the intellectual capital. And now that they have learned all they could from Saab’s engineers, they seem content to let the company die.


  • avatar
    bill h.

    Haven’t similar allegations been made recently in Germany regarding GMNA and Opel?

  • avatar

    There is obviously no way for a division to make money if a huge cash-sucking machine owns it. Sure, it would be nice to have each business unit do its own independent accounting, but that never works because the “value” (or cost, in this case) of being connected to the mother ship, which is charegd back to the business unit, is very subjectively determined.

    With absolutely no R&D costs over the last 20 years, I wouldn’t be surprised if Saab made money on its cars, even at ultra-low volume.

  • avatar

    Ha, my dad worked at GM during the 80’s and the contract then paid UAW workers a yearly bonus that was dependant upon GMNA profit. Funny thing is, GMNA never made much profit at all after that. But international operations and GMAC sure did.

    But GM would never cook the books!

  • avatar

    Yes, similar allegations have been made in Germany and are still on the table. It is common practice in international companies to shift profits from high tax countries to lower tax countries, or to generate losses so that a nice tax refund is the result (as it was the case in Germany.) The whole German patent story smacks of a tax exercise where “license fees” are siphoned off to a holding company which of course sits in Delaware.

    The nasty part of a bankruptcy is that in the course of the proceedings, these shenanigans usually come to light.

  • avatar

    Yah, trust the unions on the allegations of stealing…yah right. This is the same wrap the unions have with Opel…the noble Europeans have run the business at a profit…it’s only through GM’s tricky accounting that they lose money at Opel and Saab. And the poor quality issues are the fault of GM. And the fact it rains a lot in Germany is the fault of GM. Whatever it is, it’s not the Europeans fault.

  • avatar

    Hollywood style accounting in MoTown ?

    I’m shocked, shocked……

  • avatar
    Paul W

    superbadd75: Actually the English translation is an improvement over the Swedish original. Say what you want about union officials, but grammar doesn’t seem to be one of their strengths. I guess working yourself up from the factory floor has its drawbacks (like you never bothered to get a proper education).

  • avatar

    GM cook the books? you want fried, broiled, steamed? Wagoner is the Martha Stewart of book baking. in fact, he co-authored the Deloitte Recipe Collection, now available on the SEC website.

  • avatar

    well, duh.

    It’s all so depressing. I’m going to go take my 900 Turbo to get a cup of coffee. That should cheer me up…

  • avatar

    @ Mrb00st – what coffee shop you going to? I’ll meet you there in my recently acquired lightning blue Viggen. Last of the true SAABs before GM – predictably – fucked everything up in Trollhattan.

  • avatar
    johnny ro

    That 92 is beautiful. Closer to Aptera than Jimmy SUV.

    Put a modern small drive train in it (suppliers are standing by), galvanize it, and have it be first new SAAB.

  • avatar
    Robert Schwartz

    Agreed. A little work and the 92 would sell like hotcakes.

  • avatar
    Robert Schwartz

    The car in picture was the prototype. Link.

    The production 92 was dumpier. Link.

    I think the prototype would be a great place to start from for a modern reinterpretation. I don’t think you would use a 3 cyl. 2 stroke engine cooled by thermo-siphon, though.

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