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Saab Story

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Swedish company files for bankruptcy.

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Socialist Sweden may be smarter than the still-nominally-capitalist US when it comes to turning around its struggling auto industry.

Saab sought bankruptcy protection Friday, allowing the company to reorganize after parent General Motors (GM) said it plans to sever links to the Swedish automaker after steady losses.

Earlier this week, the Swedish government rejected GM's request for money to toss at Saab. GM now says it needs about $30 billion from US taxpayers to stay alive, up from the previous estimates of $18 billion.

Gone, it seems, is the age of the competitive American economy, in which a company succeeded or failed on its own merits. Instead, Congress seems ready to feed GM billions in additional taxpayer money without demanding basic reforms that would make the automaker competitive.

Politics now drives economic decisions in Washington - hardly a surprise, but, short of bankruptcy, GM is unlikely to take the action needed to compete. A bankruptcy judge, unlike Congress, would force the United Auto Workers to accept necessary changes in pay and work rules. Instead, GM seems to be making just enough progress to shake more money out of Congress in the next round of negotiations.

This suggests GM quickly learned how to play politics by the current rules after discovering that it's unwise to fly to Washington in a private jet when begging for public funds. The price: basic business principles. But with the backing of the US Treasury, who cares?

The argument against bankruptcy: It would drive away potential buyers because they would assume no one would stand behind the warranties on new cars, making them instant dinosaurs. And it's possible Sweden will inject billions into Saab after it emerges from bankruptcy in an effort to "save" jobs, because the automaker is a small company without deep pockets, and can't offer economies of scale.

Bankruptcy proceedings allowed the US steel industry to get back on its feet, but consumers buy cars - not steel.

Blogger Mickey Kaus offers a deft strategy to whip General Motors back into shape: "Set up a special institution, a court maybe, with all the powers of the bankruptcy court, but don't call it bankruptcy. Call it 'Restructuring of Core Industries.' "

That might be a good Madison Avenue fix, preserving what's left of GM's reputation while allowing a judge to swing the meat ax on its uncompetitive wages, work rules, models and clunk-headed management practices.

Admission to the new bankruptcy-in-all-but-name court would be equally deft: "Restrict it to those companies that are too big to fail," Kaus says.

That's brilliant both as parody and as an outline for the proposed court's jurisdiction - a twofer!

And in a government that calls a bill to gut the secret ballot in union elections the "Employee Free Choice Act," it just might be Orwellian enough to roll through Congress.
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