Who will bail out Swedish carmakers?

I have owned two Volvos, a 1958 model and a 1960 model. They looked like 1948 Fords, but smaller. Neither were worth a damn. They spent much of their life with me in the shop where mechanics looked for solutions to undiagnosable problems. They both overheated constantly.

I have not owned a Volvo since, although I have been told they are fine cars and whatever their faults long ago, today they are pristine examples of excellence in automotive engineering.


Volvo and another splendid Swedish car, Saab, are made in Sweden. Volvo and Saab, like U.S. automakers, are in financial trouble. For Volvo and Saab, however, a bailout is even more unlikely than for their American counterparts.

That's because Volvo and Saab are owned, respectively, by Ford and GM. U.S. tax dollars cannot be used overseas. So if GM gets a Congressional bailout, it can't be diverted to Saab.

In addition, the European Union has "competition regulations, which make it difficult for countries to directly subsidize industry."

Thus, the talk is about loan guarantees.


In Sweden, though, politicos are not easily swayed by the car makers' dilemma. Prime Minister Frederik Reinfeldt said "When someone thinks the state should come in and fix the situation, then I think they're crazy."

In other words, the car makers got themselves into this mess so they can fix it themselves.

Trouble is, "If Ford or GM go bankrupt, ... Saab and Volvo could disappear entirely. Their loss would be a blow to Swedish identity. Saab and Volvo account for 15 percent of Sweden's exports."


Whatever else this says, it does illustrate clearly and dramatically, how the national economies are intimately tied together, thus creating a disastrous domino effect when a financial giant like the U.S. goes berserk.

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