George S. May Business Blog

GM and its subsidiary Saab seem to have their stories crossed. Who is telling the truth?

Swedish car-maker, and GM subsidiary, Saab, has filed for bankruptcy. A reported loss of $340.1 million in 2008 and an even more grim outlook for 2009 has forced the carmaker to finally throw up a white flag. The problems outlined in the filing included a failing demand, aging products, excess capacity and high costs. Saab has also announced that as part of its game-plan for reorganization it will focus on streamlining production and will seek public and private funding to get back on its feet.

What I found a bit suspicious is how Saab, although it is a subsidiary of GM, gave a completely different forecast for the future demand of their products? How can that be? How can GM trot up to Capitol Hill and hold out its hand for more money as it predicts an increase in demand, while its subsidiary Saab, less than a week later, comes out and publicly announces their predictions for the future are the exact opposite? Well look closer, grasshopper, because the answer is in the question.

If GM told the lawmakers on Capitol Hill that the future sales of the company were headed even further down the tubes, do you think that they would get more cash? Obviously not. Why would Washington hand out money to pull GM out of debt if they knew the car maker was headed right back into it? It just does not seem sensible. I can only imagine that lawmakers, provided with that type of forecast, would stop feeding GM and instead force them into bankruptcy so that they would clear their debts, reorganize and start again.

Why should GM receive the next $30 billion they are asking for, if sales are going to continue to tank under their current plan? I urge somebody to give me a good reason.

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