GM Moves Quickly to Shed Saab in Financial Crisis - VIDEO ENHANCED

DETROIT - February 20, 2009: Tom Krisher writing for the AP reported that just three days after telling the U.S. government that it might dump its Swedish-based Saab brand, General Motors Corp. placed the struggling unit into reorganization Friday.

Crisis, it seems, has forced the U.S. auto behemoth to move faster than ever to shed unprofitable brands, leaving European governments to decide whether they are worth saving.

GM Chief Operating Officer Fritz Henderson told U.S. industry analysts Tuesday that the company is in talks with European labor unions and governments about cost reductions and possible factory closures or spinoffs.

GM also wants to shed the Hummer and Saturn brands as it tries to conserve cash and focus on Chevrolet, Cadillac, Buick and GMC to make it through an unprecedented global auto sales slump that has pushed it to the brink of bankruptcy.

"A sustainable strategy for GME (GM Europe) could very well include partnerships with the German government or other European governments," Henderson said. "We do expect to bring these discussions to some resolution, particularly around, for example solvency, by March 31."

Punting Saab into Swedish court protection is a final effort to get the brand prepared for sale, or spin it off into a separate company that is not a constant drain on GM's cash. But the danger of Saab's collapse looms because neither GM nor the Swedish government appears ready to provide enough money to keep it as a freestanding entity.

GM, which has said it needs a total of $30 billion in U.S. government loans to avoid bankruptcy itself, hopes the three-month reorganization process will make Saab marketable, spokesman Chris Preuss said.

If not, it appears the days of "Generous Motors" are over, with GM saying it will let Saab go and it may do the same with other unprofitable brands.

"We fully intend to be out of Saab by the end of the year," Preuss said.

Click PLAY to watch video about Saab's future intentions

GM's other European brands are Opel in Germany and Vauxhall in Britain. GM also markets Chevrolet in Europe.

A union official who sits on the supervisory board of GM's Adam Opel GmbH unit said Friday that it needs some euro3.3 billion ($4.2 billion) -- twice as much as previously discussed -- to weather the economic crisis.

German officials have indicated a willingness to help keep Opel plants open but are insisting that the company have a long-term plan. Economy Ministry spokesman Steffen Moritz said in Berlin on Friday that the automaker is expected to produce that "by the end of next week."

In Britain, auto industry officials launched calls to increase government help as new figures showed new car production fell 58 percent in January from a year ago.

But Fiat Group SpA announced Friday it has canceled factory shutdowns affecting more than 8,000 workers, saying the Italian government's incentive program to help boost the flagging auto industry has helped market conditions.

With Saab, GM and the Swedish government are saying the other needs to come up with money to keep the brand going.

Preuss said $1 billion was needed to keep Saab operating, of which GM was ready to pay $400 million. The U.S. automaker had asked the Swedish government to guarantee the rest.

The Swedish government, which insists that Saab's survival is GM's responsibility, rejected the request because GM's business plan wasn't "realistic," Industry Minister Maud Olofsson said.

More capital is needed to construct a credible and sustainable plan, she said, and "GM or someone else needs to provide that capital."

While both sides haggle, the publicity likely will scare customers from showrooms, said Michael Robinet, vice president of global forecast services for the auto consultancy CSM Worldwide.

"People want to buy vehicles from a brand or a company that's going to continue to reinvest in the company," he said.

Saab, which has 4,500 workers mostly in Sweden, had a niche for years with people who wanted small, safe performance luxury cars with comfortable ergonomics that were good winter weather, Robinet said.

But over time, mainstream brands, including GM's own, got better at everything Saab was good at, Robinet said. At the same time, GM began building its cars on the same underpinnings globally, and Saab lost its individuality.

"The really sad thing about Saab is that in the 1980s when yuppies were looking for a flashy, fast and stylish ride, Saab was mentioned in the same breath as BMW and Mercedes-Benz," said Stephen Pope, chief global markets strategist for Cantor Fitzgerald. "There's nothing special about them anymore."

The move into court protection will give Saab protection from creditors while it restructures in a process somewhat similar to Chapter 11 bankruptcy in the U.S. Detroit-based GM said in a statement that Saab would continue operating normally, and that GM would make sure suppliers are paid.

Saab said it would seek funding "from both public and private sources" to keep the company afloat. With three new models ready for launch in the next 18 months -- the 9-5, 9-3X and 9-4X -- Saab Managing Director Jan Ake Jonsson said it had an excellent foundation to grow, assuming it can get funding for engineering, tooling and launch costs.

In its own restructuring plan, GM said it would cut 47,000 jobs worldwide and close five more U.S. factories. GM said it needed about $6 billion in support from the governments of Canada, Germany, Britain, Sweden and Thailand to provide liquidity for its overseas operations.

Originally an aircraft maker, Saab started manufacturing cars after World War II. GM bought a 50 percent stake and management control of Saab Automobile in 1989 and gained full ownership in 2000. The aircraft division remains a different company.

Associated Press Writers Karl Ritter, Louise Nordstrom and Stephan Nasstrom in Stockholm and Geir Moulson in Berlin contributed to this report.