Sweden's Koenigsegg, a niche manufacturer of some of the world's fastest and most expensive sports cars, has struck a deal to buy loss-making Saab Automobile from General Motors Corp, the companies said on Tuesday.
In one of the most unlikely pairings in automotive history, the tiny sports car maker with a staff of 45 is expected to take over a company that employs around 3,400 -- a cherished Swedish brand that became a national icon for stability and reliability.
GM Europe said on its website that the deal, set to close by the end of the third quarter, includes an expected $600 million of financing from the European Investment Bank, guaranteed by the Swedish government. Other terms were not disclosed.
Additional support is to be provided by GM and Koenigsegg Group AB to fund Saab's operations and product program investments. This includes plans to launch several new products that are in the final stages of development, GM Europe said.
Like its U.S. parent, Saab has been in bankruptcy protection. It has said it needs $1 billion to see it through the crisis and has asked creditors to write off 75 percent of its 10.6 billion crown ($1.4 billion) debt, most of which is owed to GM.
Koenigsegg, which produces powerful cars that cost around $1 million, came out of nowhere as a front-runner to buy Saab. But analysts are skeptical the tie-up makes sense, noting that Christian von Koenigsegg, founder of the company bearing his name, has no evident experience owning or running so large a company. Last year, Koenigsegg made 18 cars, Saab more than 93,000.
There are no economies of scale between Saab and Koenigsegg. This is a constellation of buyers that probably have different interests than GM, which was driven by volume, said Mikael Wickelgren, an automotive expert at Skovde University, in southwestern Sweden not far from Saab's headquarters.
This will be a business where one would assume that the owners want to chisel out a personality for Saab. The logic would be in the special and unique. Otherwise I cannot understand this deal.
Christian von Koenigsegg told Swedish television the new owner was evaluating Saab's current business plan.
We're following Jan Ake's (Saab CEO) business plan and we're stress testing it to see what the different scenarios would mean. If the downturn would last long, how would lower volumes work and vice versa, he told Swedish television.
Separately, he told Swedish news agency TT that Koenigsegg would pay EIB back and that its plans for Saab were long-term.
Koenigsegg has backing from Norwegian entrepreneur Bard Eker, whose holding company owns 49 percent of the carmaker.
Halldora von Koenigsegg, spokeswoman for the company and wife of its founder, said a memorandum of understanding had been signed, but declined to comment further.
TWO DECADES UNDER GM
The deal would see Saab, which was put up for sale earlier this year, emerge from two decades as a unit of its U.S. parent. GM is also offloading two other brands -- Saturn and its Hummer SUV line -- as it works to restructure its operations in bankruptcy.
Saab's roughly 220 U.S. dealerships have until Friday to sign an agreement that allow their franchises to be transferred to a new owner, a person familiar with the matter said. Dealers have been asked to prepare for an orderly wind-down should the automaker be unable to close a deal to sell the brand.
While Saab is known for its appeal to safety-conscious, but slightly sporty family drivers, Koenigsegg caters to clients who arrive in private jets at the company's factory, which even boasts its own airstrip.
Christian von Koenigsegg, who founded his company 15 years ago when he was 22, is known in the industry as a quality- obsessed car enthusiast as opposed to a businessman.
But Saab and Koenigsegg do share a history of technological innovation. Koenigsegg has patented some of his own gadgetry, while Saab created a sensation in the 1970s with the use of turbo technology in everyday cars.
Now Saab plans to overhaul production and launch new models, while absorbing expected losses of about 3 billion Swedish crowns ($382 million) this year. GM plans to narrow its focus to the Chevrolet, Buick, GMC and Cadillac brands under a plan that would transfer majority control to the U.S. government.
An EIB official said its board needed to have key information some six weeks before a meeting.
That means we will not be able to have it ready before the meeting in July and the next meeting is in September, said Mats Gunnarsson, senior adviser to the EIB management committee.
Joran Hagglund, state secretary for Sweden's industry ministry, told Reuters: We do not yet know if the Koenigsegg group will need loan guarantees or not.
Nonetheless, Industry Minister Maud Olofsson welcomed the news, as did Saab worker representatives. She said Saab the staff and other residents of the town of Trollhattan, where Saab is headquartered, had been waiting for a development.
(Additional reporting by Kevin Krolicki and Soyoung Kim in Detroit; writing by Adam Cox; editing by Greg Mahlich, John Stonestreet and Andre Grenon )
($1=7.850 Swedish crowns)