High-End Swedish Carmaker to Buy GM's Saab

By Kendra Marr
Washington Post Staff Writer
Wednesday, June 17, 2009

General Motors announced yesterday that it is selling Saab to the Swedish sports car manufacturer Koenigsegg -- the fourth brand to split from the firm and wind up in the arms of a company with little experience as a mass-market automaker.

The sale, scheduled to close in the third quarter of this year, is contingent on a $600 million funding commitment from the European Investment Bank guaranteed by the Swedish government. GM and Koenigsegg, which is leading a group of investors, did not release any other financial details. But Saab has said it needs $1 billion to get through the economic downturn.

"This is yet another significant step in the reinvention of GM and its European operations," GM Europe president Carl-Peter Forster said in a statement. "Closing this deal represents the best chance for Saab to emerge a stronger company."

The deal comes as the automotive industry suffers one of its biggest slumps. It is not just giants such as GM that are struggling; so are the suppliers that depend on them. The Obama administration pushed GM and Chrysler in bankruptcy to help the companies shed debt and cut costs, but government officials have made it increasingly clear that there are limits to its assistance. Yesterday the Treasury Department rejected a request from auto parts suppliers for up to $10 billion in additional federal loans and said it would continue to monitor the situation.

The downturn has forced GM, Ford and others to shed poor-performing brands to focus on ones that might be more profitable. The castoffs are being snatched up by new entrants, who see opportunities in the automakers' stumbles.

Early this month, GM agreed to sell Saturn to the Penske Automotive Group, which operates 310 automobile dealerships. GM also made a deal to turn over its other European operations, British Vauxhall and German Opel, to Canadian parts maker Magna International and the Russian state-owned bank Sberbank. And the automaker has a memorandum of understanding with Sichuan Tengzhong Heavy Industrial Machinery, a Chinese engineering company, to buy Hummer.

Economies of scale are critical to the auto industry, and some of the upstarts hope to form ties with existing manufacturers who will take over production duties, said Michael Robinet, vice president for global vehicle forecasts at CSM Worldwide.

For instance, Penske is already seeking a foreign manufacturer to build new cars for the Saturn distribution network.

"We're going to see some very innovative business solutions to get product to customers in different forms and different methods," Robinet said. "This is not your grandfather's automotive industry any longer."

In the past, this failure to achieve mass production mired small auto start-ups. While the DeLorean DMC-12, with its stainless steel gull-wing doors, was immortalized in the blockbuster "Back to the Future" trilogy, the DeLorean Motor Co. was short-lived. Preston Tucker's 1948 Tucker Sedan, a torpedo-like futuristic "car of tomorrow," was met with wild acclaim, but he only made 51 cars before his company folded.

Even Chrysler, which also entered bankruptcy protection, suffered from not expanding outside North America, Robinet said.

"To be just dependent on one market, one segment, is very dangerous, as we've seen with our friends in Auburn Hills," where Chrysler is headquartered, he said.

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