Saab likely to close as GM fails to sell car brand

2009-11-25 07:58:00

By TOM KRISHER and DEE-ANN DURBIN, AP Auto Writers Tom Krisher And Dee-ann

Durbin, Ap Auto Writers . Tue Nov 24, 5:13 pm ET

DETROIT . A deal for General Motors Co. to sell Saab to a specialty carmaker

has collapsed, leaving the storied Swedish brand born from jets in 1947 close

to extinction.

Koenigsegg Group AB, a consortium formed by Swedish luxury sports car maker

Koenigsegg Automotive AB, said Tuesday it pulled out of the deal in part

because it was unable to agree with investors on how best to move the brand

from mass-market to premium.

For GM, it was the third time this year that a deal to shed one of its brands

fell apart as it tries to recover from a stay in bankruptcy protection by

focusing on a core of four: Chevrolet, Buick, GMC and Cadillac.

The next move is up to GM's board, which will decide Saab's future in a few

days. But with no apparent backup investors and the Swedish government refusing

to buy Saab, GM may follow through on a contingency plan to let the brand die.

That jeopardizes the jobs of Saab's 4,500 employees, most of them in Sweden.

Joran Hagglund, a senior official at Sweden's Ministry of Enterprise, said the

government will continue talking with GM, but the only solution for Saab is for

another company to buy it.

"We have been very clear from day one that the government will not be the

owner," he told reporters in Stockholm.

GM, which earlier this year conceded it has never made money with Saab, is

unlikely to keep the brand, and industry analysts said any potential investors

likely stepped away when Koenigsegg emerged as the buyer.

Matts Carlson, automotive analyst at Gothenburg Management Institute in Sweden,

said Chinese automakers or Italy's Fiat Group SpA may still be interested, but

he acknowledged there is a substantial risk that Saab could be closed for good.

The chairman of the Koenigsegg consortium told The Associated Press Tuesday

that financing had been worked out, but as negotiations with GM and investors

grew lengthy, it appeared less likely that Koenigsegg would be able to make

money on the deal.

Analyst Carlson said the financial condition of Saab, which went into a

court-protected restructuring Feb. 20, worsened since Koenigsegg announced

plans to buy it in June.

"Saab's situation, they are losing market share all the time, could have given

Koenigsegg cold feet," he said.

Koenigsegg, a tiny company that makes only a dozen high-performance luxury cars

a year, was formed in 1994. Its headquarters and factory . which produces cars

that cost more than a $1 million each . are at a former air force base in

southern Sweden.

Earlier this month, GM's board decided to keep its European Opel unit rather

than sell it to a group led by Canadian auto parts maker Magna International

Inc.

In September, auto dealership chain owner Roger Penske scrapped plans to buy

Saturn after an agreement to get cars from France's Renault fell through. The

GM board decided to phase out Saturn, a possible fate for Saab.

But GM will keep and restructure Opel, which unlike Saab, is considered

critical to GM's international operations. GM was worried that Opel technology

would wind up in rivals' hands.

All three GM deals fell through because few people realize how difficult it is

to unravel years of complex integration by global automakers, said Michael

Robinet, a vice president at CSM Worldwide, an auto industry consulting firm

near Detroit.

Disputes arose over use of technology, use of common parts and factories, and

who would make cars after initial agreements expire.

Financing also had been a problem for the Koenigsegg group, which in August

said it lacked about 3 billion kronor ($417 million) for the Saab deal. But in

September, the consortium struck a deal with Beijing Automotive Industry

Holdings for a minority stake to raise more money.

It will be difficult for Saab, founded as a Swedish aerospace company, to

recover from Koenigsegg's decision. GM has been selling off existing inventory

and preparing to end its role with the company, which would be hard to reverse.

Through October, GM sold only 7,441 Saabs in the U.S., a 62 percent drop from

the same period in 2008. Two models, the 97-X SUV and the 9-3 sports sedan,

make up most of the company's U.S. sales.

Analysts say GM, which bought half of Saab in 1990 for $600 million and the

rest for $125 million in 2000, was unable to differentiate the brand from its

other products or find a sales niche.

GM has one more chance to sell a brand. A deal for Chinese manufacturer Sichuan

Tengzhong Heavy Industrial Machinery Corp. to buy Hummer still must be approved

by the U.S. and Chinese governments.

The Koenigsegg decision comes as the fate of another Swedish automaker, Volvo

Cars, remains up in the air. Last month, Ford Motor Co. announced that it had

picked a consortium led by China's Geely Group as the preferred bidder, but the

deal hasn't been completed.

___

Associated Press Writers Ian MacDougall in Oslo, Norway, and Louise Nordstrom

and Malin Rising in Stockholm contributed to this report.