DETROIT – The global fallout from General Motors Corp.’s financial difficulties worsened significantly Friday as its Swedish unit Saab received credit protection from a court and the Korean car maker GM controls said it asked a government bank for emergency aid.
Meanwhile, GM’s profitable German unit Opel said that market conditions have deteriorated and that it needs at least ?3.3 billion ($4.18 billion) in fresh capital to survive, The Wall Street Journal reported.
The European and Korean car makers’ troubles underscore the severity of the crisis in the U.S. auto industry and its ripple effects. GM, struggling with a $29 billion debt load, is in talks with the governments of Germany, the U.K., Sweden, Canada and Thailand to secure $6 billion in aid and has said a planned expansion in Asia won’t go ahead without support from governments or other partners.
GM has already received $13.4 billion in loans from the U.S. government. This week, it unveiled a new restructuring plan, saying it needs $16.6 billion more in aid. It’s not alone among car makers asking foreign governments to help their units survive the global economic turndown, which has sliced car makers’ sales and battered share prices world-wide. Volvo Cars, a unit of Ford Motor Co., late last month applied to the European Investment Bank for ?475 million in aid.
GM’s Swedish unit Saab received credit protection from a Swedish court Friday, allowing it to start its reorganization. The company’s chief executive said Saab hopes the court process will transform it into a functioning company that is fully independent from its struggling Detroit-based owner.
“We are now recreating Saab Automobile as an independent unit,” Saab Chief Executive Jan-Ake Jonsson said in a statement after the Vanersborg District Court in southwestern Sweden approved its request to launch reorganization.
But Sweden’s government maintained an arms-length approach, saying it doesn’t plan any support for Saab, though it didn’t rule out the possibility of guaranteeing loans that Saab has sought from the European Investment Bank.
Sweden’s government sees Saab as an “independent car company with … low sales volumes,” said Joran Hagglund, state secretary at the Swedish Industry Ministry. “If you listen to analysts, then they say there’s not a chance such a company can survive. So what I’m really saying is that you should keep your expectations very low.”
Saab sold fewer than 94,000 cars last year, down from about 125,000 vehicles in 2007. Its best-ever year was in 2006, when it sold 133,000 cars, though it is a tiny player in the global auto industry. Saab will present its reorganization plan to creditors within three weeks, it said.
Meanwhile, in Germany, Armin Schild, a supervisory-board member at GM unit Opel, said the company needs at least ?3.3 billion in capital to survive and become less dependent on its U.S. parent. The company had asked for state aid in November. GM’s largest European brand didn’t provide financial details.
“It’s the clear responsibility of Opel’s management to paint a realistic picture and consider the change on European markets when asking for guarantees from the state,” Opel said in a statement.
Opel’s predicament was mirrored in Korea, as GM’s Daewoo subsidiary said it asked for emergency funding from state-run Korea Development Bank to help relieve its liquidity crunch. GM and its affiliated companies own a 72 percent stake in Daewoo, while KDB has the remaining 28 percent.
“We are in discussions with the Korean government and KDB to secure credit lines during the current global credit market liquidity shortage in order to fund new product development plans and new plant investment projects,” Daewoo said.
GM Tries to Reassure Suppliers
GM, meanwhile, is hoping to head off problems with global parts suppliers that could arise from Saab’s reorganization moves.
Typically a company in a Swedish reorganization would be required to halt payments to most creditors, including suppliers. But GM worries such a move could interrupt the flow of parts around the world, according to people familiar with the process, as global suppliers could refuse to deliver parts to factories in North America and elsewhere if they’re not getting paid in Sweden.
In response to concerns from suppliers, GM supply Chief Bo Andersson said the auto maker is working to ensure timely payments to suppliers. “GM is fully committed to maintaining a viable and successful local and global supplier base during the Saab reorganization,” he said in a prepared statement.
With GM’s increasingly globalized supply base, many suppliers to Saab also deliver parts to operations around the world. For instance, Autoliv Inc., a maker or air bags and steering wheels, is a major Saab creditor and important supplier to GM’s operations around the globe, including North America.
“The problem with GM is making peace with global suppliers who might face cash flow concerns because of this,” said Jim Gillette, director of supplier analysis for CSM Worldwide.
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