November 25, 2009 in Business

As Saab deal falls through, GM ponders brand’s future

Tom Krisher And Dee-Ann Durbin Associated Press
 

For GM CEO Fritz Henderson, above, it was the third time this year a deal to shed a brand failed.
(Full-size photo)(All photos)

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 on 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 $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.

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