4 Reasons to Ignore the $3 Billion Claim on GM
Robbert is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Yesterday, a tiny publicly traded Dutch company Spyker Cars NV decided to sue GM (NYSE: GM) over the 2011 bankruptcy of SAAB which it bought from GM in 2010. The CEO of Spyker Cars claims that a Chinese company was on the verge of saving the company with a fresh influx of capital and that GM blocked the deal. As far as we know, GM didn’t want the technology they leased to Saab to get in the hands of some random Chinese automaker. Because SAAB really needed that technology, it couldn’t be ‘saved’ by the Chinese. Apparently GM investors are worried by this because GM shares lagged Ford's (NYSE: F) significantly on Monday.
I for one think the $3 billion claim is nonsense. And here’s why:
GMs side of the story
First of all GM has the right to protect its property and had reasons to do so in this case. Having their technology falling into the hands of some random Chinese company was a viable threat to GM. The technology of a carmaker is the main source of its competitiveness. And as in the past many Chinese companies have proven to be very untrustworthy when it comes to stealing intellectual property, I don’t blame GM for this move.
The height of the claim is also quite extraordinary. All of Saab’s assets were sold at the bankruptcy. The only thing the Saab shareholders and creditors didn’t get was the value of any goodwill present in the company. Spyker Cars says it’s $3 billion. Well, what would be a reasonable goodwill? To get a clue we take a glance at GM’s European activities, whose goodwill amounts to $1.246 billion with a 6.7% market share and a track record of some profitability. Saab was infinitely smaller and had lost money every year since 1991. So I think a $0 goodwill would have been appropriate. So even in the highly unlikely scenario where Spyker cars is proven to be right, it won’t get $3 billion from GM.
Following Muller in the Dutch news, I can tell he is much like the black knight from Monty Python. Muller doesn’t know when to quit a failing venture and instead tries to lure investors into his fantasy world. The company he runs, has never been profitable and yet he desperately kept issuing new shares and searching for shady Russian businessmen to fund its losses.
Spyker Cars and GM weren’t the only ones to lose money in the Saab bankruptcy; the Swedish government, the European Investment Bank and various parts suppliers to Saab also lost big-time. So why don’t those others file a claim? It’s because they are not as stupid as Muller, and know a lawsuit would be of no use to anyone.
I already gave you three reasons why to ignore the claim. Do you really need another one? The point here is that this claim is just a big waste of our time. So let’s stop thinking or reading about Mullers fantasy world claim.
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