GM's Saab sale collapses as buyer backs out
DETROIT (Reuters) - A deal for General Motors Co GM.UL to sell Saab collapsed on Tuesday when the buyer pulled out in a move that threatens a 60-year-old Swedish auto brand with closure after mounting losses.
GM had been aiming to close a deal by the end of next month to sell Saab to a partnership led by the Swedish luxury car builder Koenigsegg and backed by China's Beijing Automotive Industrial Holding Ltd.
Koenigsegg, a tiny Swedish company that hand builds sports cars that sell for $1 million, said it was pulling out of the deal because of the risk of delays in closing five months after reaching a preliminary deal with GM.
That came as a surprising setback for GM, which has been working to shed brands as part of a more narrowly focused sales strategy after emerging from a bankruptcy in July, backed by over $50 billion in U.S. government financing.
Closure of Saab and its Trolhattan, Sweden, production hub also would threaten over 3,000 jobs and scuttle a plan spearheaded by the Swedish government to help finance a restructuring of the company.
Financing the Saab sale had been seen as a major challenge for Koenigsegg even after Chinese state-run Beijing Auto said in September that it would take a minority stake in the company.
A tentative deal reached by GM to sell its Saturn brand to Penske Automotive Group Inc (PAG.N) also collapsed at the end of September, just before it was expected to close.
Chief Executive Fritz Henderson said GM would take the next few days to consider the options for Saab. "We're obviously very disappointed with the decision," he said.
GM's 13-member board is scheduled to meet next Tuesday in Detroit for a regular monthly meeting and the question of what to do with Saab will now lead the agenda, said one person with direct knowledge of the situation.
There are no other bidders for the brand, meaning that GM's only options would be to restart the sale process or opt for closure, the person said.
Because of the pressure GM faces to focus on its remaining four core brands -- Chevrolet, Cadillac, Buick and GMC -- a wind-down of Saab operations is likely, the person said.
Sweden effectively ruled out a state bailout for Saab, saying the brand's future would have to rest with finding a new private-sector buyer.
"You can't, by state aid, keep a company ongoing, if you don't have any chance for a competitive company," Joran Hagglund, state secretary at Sweden's Industry Ministry, told reporters.
Analysts agreed that the developments pointed toward extinction for an automotive brand that got its start after World War Two with a group of Swedish aircraft engineers tinkering with aerodynamic car designs.
"Hudson, Studebaker, Nash and DeSoto were all great companies too," said Autoconomy.com analyst Erich Merkle. "I think Saab will fit alongside them in automotive history."
DWINDLING APPEAL, MOUNTING LOSSES
The collapse of the sale of Saab comes as GM scrambles to restructure its European Opel unit. GM's board decided earlier this month to keep the unit, which includes the Opel and Vauxhall brands, rather than sell it to a group led by Canadian auto parts maker Magna International Inc MGa.TO.
GM said earlier on Tuesday that it had repaid a loan from Germany for Opel and had trimmed its plan for job cuts at the unit to about 9,000 to 9,500 -- still representing up to 19 percent of the unit's work force.
The next challenge for Henderson will be whether GM can close a deal to sell its Hummer SUV line to Chinese heavy equipment maker Sichuan Tenzhong Heavy Industrial Machinery. That deal, which is awaiting approval from China's government, has been expected to close by year end.
GM bought 50 percent of the Saab car operations in 1990 for about $700 million. It paid $125 million and assumed debt for the remainder of the unit in 2000.
But GM had never made money on Saab during the nearly two decades it owned the brand best known for its 9-5 and 9-3 sedans. Efforts to use GM platforms to engineer recent Saab models failed to win back buyers and an ad campaign to sell the brand as "Born from Jets" fizzled.
GM Vice Chairman Bob Lutz described the brand as having been "on life support" by its Detroit-based owner for years.
Saab sales dropped 35 percent in 2008. U.S. sales this year for the brand were down nearly 62 percent through October at 7,441 vehicles.
Earlier this month, Saab said it would terminate 81 U.S. dealership franchise agreements, cutting its distribution by more than a third from 218 dealerships.
"Saab has very well put together cars, design and engineering. But they have not had that one car that was a game-changer," said George Augustaitis, analyst with CSM Worldwide.
Saab has said it lost about $340 million in 2008. GM has not released more recent financial information for the brand.