An SMS from Ernst (13): Short Messages Service

Saab

I must admit: almost five months after my initial prediction that the Swedish car company Saab would be bankrupt within three months, the brand is still ‘alive and kicking’.

But it seems certain that the Saab soap will be over soon. Two Swedish labor unions have decided to file for bankruptcy of Saab. The Dutch financial newspaper Het Financieele Dagblad (www.fd.nl) writes on this development. 

Here are the pertinent snips:

Labor unions file for bankruptcy of Saab:

Two Swedish labor unions filed for bankruptcy on Monday, September 12^th for of Saab, part of Swedish Automobile (SWAN.AE). The filing has been done on behalf of 1,130 employees of Saab that didn’t receive their salary for August yet.

Both unions, Unionen and Ledarna, stated to withdraw their filing when the Swedish Court of Appeal will yet grant Saab suspension of payment, something that the District Court denied last week. The appeal will be filed this Monday [this has indeed happened – EL].The future of the company is therewith effectively in the hands of the justices.

The company announced on Monday to have reached an agreement with the Chinese investor Zhejiang Youngman Lotus Automobile Co, enabling the company to tap a bridging loan of €70 mln.Youngman and Pang Da Automobile Trade Co (601258.SH) agreed this summer to take a share of more than 50% in Saab to the value of €245 mln. 

The agreement must be approved by the authorities in Sweden and China. As soon as this happens, the bridging loan will be paid back by Saab.

I’m sorry, but I don’t believe in the timely arrival of the bridging loan, I don’t believe that the Chinese and Swedish authorities will approve of the takeover of the 50% share of Saab and I don’t believe in any promised rescue operation by any sugar daddy from The Netherlands, Russia or China.

To be honest: Saab is a company that is playing in the extra time of its lifecycle and the referee is about to whistle for the end of the match. Game over.

I feel deeply sorry for all workers concerned that might lose their jobs, but Saab was a problem child since the seventies. It still is and will always be a problem child. Since GM took over the brand, it is not sufficiently special anymore for the ´pipe smoking notaries and doctors´ and other people loving ´niche' cars, but it is still way to odd for the lease companies to invest big money in it. 

The reason is that the brand lacks sufficient residual value and therefore has an excess write-off, compared to the usual suspects from Germany (VW, Audi, Mercedes and BMW) and France (Renault and Peugeot). And the lease companies can make or break any middle class-car with their sales figures.

Therefore, it is my opinion that the Swedish government can better save its money for better purposes. It is a bitter pill, but it´s the same pill that The Netherlands had to swallow with the bankruptcy of the Fokker airplane company.

Greece

I hope that anybody that thought that the July 21^st rescue plan for Greece was ´the mother of all rescue plans´, will stop talking now. It wasn´t and I predicted this from the start.

I hope that anybody that thinks that Greece should leave the Euro-zone enjoys his golden doughnut and will stop talking too. 

Although this might seem a solution for the Euro-zone, it is not feasible within 2 years, in practice. Even not with an emergency currency. The latter was suggested by the Dutch member of parliament, Ewout Irrgang, in a Twitter-discussion with me, but this won´t work, as it doesn´t solve the financial/logistical issues of introducing a new currency in Greece.

Fortunately, there have been rumours that Germany is openly thinking of a situation where Greek debt is cancelled: in other words, debt destruction. 

This will be a whole different ball game for the Euro, but this is the only feasible path were the Greek problems are actually solved and the Greek can start to think of a new future, after the dust clouds have settled. The current situation with 108% of yield on Greek 1y paper and 50% on Greek 2y-paper is not sustainable and everybody in his right mind, knows this.

And, of course, this solution bears a large contagion risk for Spain, Portugal and even Italy, but doing nothing has exactly the same contagion risk as the problems continue to cumulate, like a smouldering forest fire.

And the large French, British, German and Dutch banks that get stuck with depreciated sovereign bonds? At the current stock rates, a lot of French, Spanish, German, British and Dutch banks already have a lot of sovereign misery priced in. And in the end, it is always the taxpayer footing the bill anyway, when the banks need to be saved again.

But, at least with this solution the taxpayers don´t put all their saved money in European emergency funds, only to find out a few months later that all their emergency money was not enough and the countries will tumble anyway. It´s a dirty solution and it will cost a lot of money for the other Euro-zone countries, but at least it is quick. In this solution Greece can stay in the Euro-zone and make serious efforts of reforming its economy.

The Netherlands

If you think of a corporate tax haven, you will probably not think of The Netherlands. Well, then you´re WRONG.  Of the hundred largest companies in the world, more than eighty have a legal entity in The Netherlands.

The Dutch financial newspaper Het Financieele Dagblad (www.fd.nl) writes a story on tax haven The Netherlands is so attractive to foreign companies:

The Netherlands fiscally attractive (link in Dutch)

The roll of The Netherlands in international fiscal routes is getting more and more important. Especially popular are the so-called special financial vehicles (bfi), holding and financing companies that are managed by trust offices. 

In 2010, the number of bfi´s soared to a record of 13,000. In 2009, according to the IMF, The Netherlands climbed to a first place from second on the list of biggest investors in the world. 

The amounts that flow through the bfi´s yearly, are getting increasingly bigger. Was the amount in 2003 still €4400 bln, in 2010 this more than doubled to € 10,005 bln, 17 times the Dutch GDP. 

This is all the result of a combination of fiscal measures, like the participation tax dispensation, coupled to the large number of fiscal treaties (more than hundred) that The Netherlands concluded with other countries. 

The increased interest of multinational companies in The Netherlands is remarkable, looking at the American pressure to subdue fiscal routes. On May 4, 2009, US President Obama called The Netherlands a tax haven, together with a.o. Bermuda and Ireland. Under pressure of The Netherlands, the US withdrew this accusation.

I guess that US President Obama was right, when he called The Netherlands a tax haven. And looking at the fiscal yields for The Netherlands of ´a few hundred millions of Euro´, according to a fiscal specialist and ex-director of the Dutch Internal Revenue Service (mentioned in a part of the article not printed here), I truly wonder what is the big advantage for The Netherlands.

I understand that big corporations look for tax havens, as they find it their interest to pay the least tax.

From an American/British/German/Japanese government point-of-view, however, this is antisocial behavior that should be contested. 

And as a Dutch citizen, I am not very proud that the Dutch government enables large corporations to avoid tax-payments that are (sometimes desperately) needed in the home-countries of these corporations. Especially as my country hardly gains from this strategy.