Saab is set to be purchased by Chinese company Pang Da Automobile Trade Co and Zehiang Youngman Lotus Automobile Co., the latest carmaker to crumble under monetary pain. The two companies will pay around $141 million to rescue the Swedish auto company, which hasn't been able to manufacture cars for months, because of credit problems.
The automotive industry has had its share of problems over the last century, suffering from technology changes, oil price spikes and the rise of competition throughout Europe and Asia. But when times get tough, the U.S. government or foreign companies often step in to save Detroit. Here are some of the biggest auto bailouts.
During the recession and oil crisis, Chrysler sought aid from the government, eventually receiving a $1.5 billion federal loan. According to a report from the Congressional Research Service, debate swirled, with proponents citing Chrysler's role as a job creator, while opponents said that the loans could go towards other firms, who would create the same jobs. The government would establish the Chrysler Loan Guarantee Board and have oversight over Chrysler's operations. Eventually, the carmaker repaid its loans, and not cost was incurred for the government.
General Motors, Chrysler and Ford, 2008
The economic collapse led to the government bailouts of two of the Big Three carmakers, General Motors and Chrysler. Meanwhile, Ford secured a line of credit. Aside from the banking meltdown, high U.S. labor costs and gas prices rising above $4 per gallon stymied SUV sales, which had been the profit leader for manufacturers. GM would declare bankruptcy and dramatically reorganize its structure, with the U.S. government taking a majority stake. Ultimately, the U.S. government lost $14 billion on the auto bailout, considered less than expected. Saving GM and Chrysler preserved a total of around $28.6 billion in tax revenue and avoided assistance to the unemployed in two years. The automobile industry had lost over 400,000 jobs, but the Treasury Department said in June that around 113,000 jobs have been recovered, and profitability has returned in the last year. Detroit, the nexus of car makers, has actually seen housing gains in the last years.
Volvo and Saab, 2008
The Swedish government gave the two companies a $3.5 billion bailout, following the U.S. bailout of the Big Three. Sweden, however, would not go as far as a government takeover, with Finance Minister Anders Borg saying, We should not own companies, although he addded, we must meet the concerns in the car industry and create conditions for them to be able to operate on the market. The car industry is 15% of Sweden's exports and employs around 140,000. General Motors would eventually sell Saab to Dutch company Spyker, which ran into its own cash problems. Meanwhile, Volvo has had its own problems of late, recalling almost 20,000 cars for improper tire labels.