Saab a Luxury GM Couldn't Afford

(MoneyWatch)  From the point of view of parent company GM, the present auto industry crisis turned Saab from a fixer-upper to "The Money Pit," so GM decided to cut its losses.

Saab lost about $341 million in 2008, and was expected to lose around the same amount in 2009, according to court documents filed last week with Saab's request for protection from creditors.

Before the present auto industry crisis, that wasn't a whole lot of money by GM's usual standards. GM presumably had tolerated losses at Saab pretty much ever since GM bought into Saab, almost 20 years ago.

GM Europe, which includes Saab, had a pre-tax loss from continuing operations of about $1 billion in the third quarter of 2008, down from a year-ago loss of $398 million. GM doesn't usually break out detailed financial results for Saab, but Saab's 2008 loss was part of the company's court filing last week.

GM can no longer afford that level of losses. According to the documents, Saab was suffering from, "decline in demand for its products, an aging product portfolio with non-competitive lifecycles, a narrow product offer, excess production capacity and associated costs, although some of these disadvantages have been offset by continued productivity improvements."

Therefore, GM notified Saab on Feb. 16 it would no longer fund Saab's projected losses, according the documents. On Feb. 20, Saab filed a "petition for company reorganization order," in Vaenersbourg District Court in Sweden, according to saabhistory.com. The web site posted copies of the original documents.

Saab had 4,108 employees as of Dec. 31, the petition said. Saab officials in Sweden said the company plans to stay in business as an independent company, but that's a tall order, considering Saab's small size and narrow appeal.

Photo Credit: GM