How Many Countries Does It Take to Make a Saab?

http://www.futureofcapitalism.com/2009/12/how-many-countries-does-it-take-to-make-a-saab

Swedish government officials "could tell" the U.S. government-owned General Motors that Sweden "is open to providing loan guarantees to a new buyer" for the auto brand Saab, now owned by GM, the Wall Street Journal reports. One possible buyer is Beijing Automotive Industry Holding Co. The Journal article doesn't say so, but it is a Chinese state-owned company. In other words, it would take the combined assistance of the governments of America, Sweden, and China to keep this car-maker going. What a downfall for James Bond's "Silver Beast." For a corrective, check out a really wonderful article by Yang Jian, the managing editor of Automotive News China, who writes of "the conflict between serving the interests of the state and achieving success in the market":

State-owned automakers have to listen to the government. They cannot shed historical burdens such as excess overheads and underperforming plants inherited from the times before China started economic reform. Neither can they choose whom they want to acquire or merge with, because target companies are assigned to them by the government. That is why Shanghai Automotive Industry Corp.'s acquisition of Nanjing Automobile Group Corp. in late 2007 looks more like a government-ordered bailout than a sensible business transaction. State-owned auto companies can easily get loans from government-controlled banks. This has blunted their ability to control costs and practice lean production. In other ways, state-ownership has eventually done them more harm than good. Why? Because as well as being its largest, China's auto market is also one of the world's most competitive and fast moving. If they want to survive, automakers have to react swiftly to changing conditions. Because they are controlled by risk-averse bureaucrats, for whom the surest route to promotion is to make as few real decisions as possible, state-owned companies cannot do this. This explains why none of them has developed an independently sustainable business.

by Editor  |  Dec 1, 2009 at 5:30 pm Related Topics:  Auto Industry, China, Government ownership receive the latest by email: subscribe to the free futureofcapitalism.com mailing list