GM's Saab sale collapses as buyer backs out

By @ibtimes on

A deal for General Motors Co to sell its Saab brand collapsed on Tuesday when the buyer pulled out in a move that threatens the Swedish luxury brand with closure.

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Koenigsegg said in a statement on Tuesday that it has withdrawn from the sale process, about five months after the two sides had reached a preliminary deal for Saab.

The time factor has always been critical for our strategy to breathe new life into the company, Koenigsegg said.

The development represents a 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 would also threaten over 3,000 jobs and scuttle a plan spearheaded by the Swedish government to help finance a restructuring of the company.

A tentative deal reached by GM to sell its Saturn brand to Penske Automotive Group Inc also collapsed at the end of September, just before it was expected to close.

Chief Executive Fritz Henderson, who has said the automaker needs to shift its focus away from making deals and back to making cars, said GM would take the next few days to consider the options for Saab.

We're obviously very disappointed with the decision to pull out of the Saab purchase, Henderson said in a statement. We will take the next several days to assess the situation and will advise on the next steps next week.

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.

Aaron Bragman, an analyst with IHS Global Insight, said the impact on GM of closing Saab would be limited.

Saab is a difficult case, he said. Unless they can find a buyer, it is the end of another storied brand.

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 .

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, market analyst with CSM Worldwide.

At a Chicago-area Saab dealership, John Leanardi, general manager of Patrick Cadillac-Saab-Volvo, said the potential closure of Saab would disappoint the brand's remaining core following of loyalists.

As GM struggled with trying to be profitable, Saab as a franchise was not one of their top priorities, Leanardi said.

Leanardi said his Schaumburg, Illinois, dealership once sold about 200 Saabs per year, but will end 2009 selling around 75 vehicles. There are seven more Saabs on the lot.

Saab has said it lost about $340 million in 2008. GM has not released more recent financial information for the brand.

(Reporting by Kevin Krolicki and David Bailey; Additional reporting by Nick Vinocur in Stockholm, Bernie Woodall and Soyoung Kim in Detroit; Editing by Dave Zimmerman and Tim Dobbyn)

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