General Motors Co said it would begin shutting down its money-losing Saab brand after last-ditch talks to sell it to a small Dutch sports car builder collapsed on Friday.
The move by GM to abandon the 60-year-old Swedish auto brand would eliminate 3,400 jobs in Sweden and drop 1,100 Saab dealers who have watched with increasing concern as 10 months of talks to sell the brand sputtered out in recent weeks.
Swedish government officials and representatives of GM had been negotiating as late as Friday morning in Stockholm before the automaker concluded that it was not going to be able to conclude a deal to sell Saab to Spyker Cars.
Swedish Enterprise Minister Maud Olofsson blamed GM for not doing enough to save Saab during the 20 years it controlled the brand and its losses mounted.
It is ultimately the owner who is responsible for the company, Olofsson told reporters. It is difficult to see what we could have done differently.
GM had been in exclusive talks with Spyker this month after an earlier deal with Swedish luxury car builder Koenigsegg collapsed last month.
John Smith, the GM executive who steered Saab negotiations, said trying to complete a deal with Spyker against the month-end deadline for a deal set by the GM board had been a long shot he compared to trying to make a shoestring catch.
GM said it would shut down Saab operations, including its production hub in Trollhattan, Sweden, starting in early January. It said Saab would satisfy debts, including supplier payments and honor warranties.
Saab has been a consistent money-loser for GM. The brand, which attracted a following of loyalists for quirky hatchbacks with turbocharged engines, lost about $340 million in 2008 and had projected a similar loss this year.
Autos analyst Erich Merkle of Autoconomy said GM was spread too thin before it decided this year to retain only the Chevrolet, Buick, GMC and Cadillac brands. It couldn't give Saab the sustenance it needed to compete, he said.
Saab has been starved by GM which had so many mouths to feed that Saab was like the smallest puppy pushed out of the litter, Merkle said.
Efforts by GM to cut costs by building more recent Saab models on GM platforms diluted the brand's cachet and an effort to sell Saab as Born from Jets fizzled.
GM is better off just clearing the decks and taking the pain now, said George Magliano, an auto analyst at IHS Global Insight. This was inevitable.
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.
TWO DOWN, ONE TO GO?
GM, which took $50 billion in U.S. government aid and emerged from a bankruptcy brokered by the Obama administration in July, had been counting on the sale of its laggard brands including Saab as a key element of its restructuring.
Under new Chief Executive Ed Whitacre, who took charge earlier this month, GM had set a deadline of end-December to find a buyer for Saab.
In order to maintain operations, Saab needed a quick resolution, Nick Reilly, GM's president for European operations said.
GM and Spyker both declined to detail the issues that had convinced both sides a deal could not be closed against the tight deadline.
Spyker last year sold 43 of its luxury cars at prices of 200,000 euros ($294,200) and above. Its primary backers include Russian banking tycoon Vladimir Antonov and his Convers Group.
The involvement of Antonov, who was reportedly shot seven times in an assassination attempt in Moscow in March, had raised questions for some people close to the GM side of negotiations about whether a deal could be closed.
A SECOND LIFE FOR THE BRAND?
Smith said GM would negotiate with Saab dealers to try to find a fair way of proceeding as it drops the brand.
Remaining U.S. dealers had signed termination agreements in June that gave GM the right to terminate their franchises unless a buyer for Saab could be found.
This is important for the Swedes and a big deal for the Saab dealers, but in the scale of life of General Motors, it is not a big thing, said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Michigan.
GM had been in talks to sell Saab to niche luxury carmaker Koenigsegg, with the backing of China's BAIC until November.
Earlier this week, BAIC completed a deal to buy some assets from Saab, including the tooling and the intellectual property for older versions of the 9-5 and 9-3 sedans.
GM said it could sell other assets as part of the Saab wind-down, a prospect that analysts said raised the possibility that the brand could find a second life with a new buyer as Chinese automakers gird for expansion overseas.
I have a suspicion that Saab will be reincarnated in China, said Magliano of IHS Global Insight.
Saab marks the second failed deal for GM in recent months. GM failed to close a tentative deal to sell its Saturn brand in late September when Detroit-based dealership group Penske Automotive Group pulled out.
Then last month, GM's board shifted course on a planned sale of Opel, rejecting a deal that former Chief Executive Fritz Henderson had backed and helped broker.
A tentative deal to sell GM's Hummer SUV brand to a partnership led by Chinese machinery maker Sichuan Tengzhong Heavy Industrial Machinery has not yet closed and remains subject to review by the Chinese government.
U.S. sales of Saab through November were 7,812, and only 371 were sold in November.
For the full year 2008, U.S. Saab sales were 21,368 vehicles, and from 32,711 in 2007, according to GM.
(Reporting by Bernie Woodall, Soyoung Kim, Helen Massy-Beresford; Editing by Marcel Michelson, Dave Zimmerman,Richard Chang and Carol Bishopric)