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Business

Koenigsegg gives up its bid to buy GM's Saab

Video by Catherine VIETTE

Text by News Wires

Latest update : 2009-11-25

Swedish luxury carmaker Koenigsegg said Tuesday it was giving up its bid to acquire Saab from its US parent company General Motors, saying costly delays made the deal too uncertain.

AFP - General Motors hit another road bump in its attempt to downsize its global operations Tuesday after a Swedish sports car maker backed out of a deal to buy the US automaker's Saab brand.

The complication comes as the automaker is working to trim its post-bankruptcy losses, accelerate repayments of government loans, and finance the restructuring of its European operations after deciding not to sell Opel-Vauxhall.

"The question is will they keep it as part of Opel, or are there other buyers, or will they just eliminate it as they did for Saturn," said Michelle Krebs, an analyst at automotive website Edmunds.com.

GM's board will discuss Saab's future at a meeting on Tuesday.

A spokesman told AFP he could not speculate as to what the board will decide to do.

"From GM's perspective it's probably not that big a deal," said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Michigan.

"When the company turns around, as they are doing, they'll be extremely profitable and the size of the issues with respect to Saab will not be that great."

There's a strong likelihood that GM will find another buyer for Saab given how many cash-rich Chinese companies are jockeying for a position in the global auto industry, Cole said.

Purchasing a relatively "cheap" European carmaker like Saab would provide both a foothold in key markets and the technology needed to compete, Cole said.

GM could also decide to hold onto Saab, as it did with Opel, to further strengthen its European position.

But the high cost structure in Sweden could provide an impediment, so "one option potentially from a GM perspective is to shut it down," Cole said.

That decision would be far less complicated and costly than some of the projects GM already has underway, such as winding down its Saturn brand after talks broke off in September with Penske Automotive Group on a bid for the nameplate, Cole said.

It's unlikely that GM will hold onto Saab and finding another buyer might be difficult, said Rebecca Lindland, director of automotive research at IHS Global Insight.

"It's such a shame. We don't know what the scenario would be but we're hearing rumors of a wind down which would be dreadful," Lindland told AFP.

"You have these really iconic names that are just dropping off."

The problem with Saab, Lindland said, is that it does not have a "really well defined identity anymore" nor does it offer potential buyers a very well developed dealership network or particularly valuable proprietary technology.

While Saab is still a "saleable" brand, "it's really tough to say what it's worth," Lindland said, especially give that costly delays and a lack of financing were cited as the root of Swedish luxury carmaker Koenigsegg's decision to back out of the deal.

Keeping the brand simply doesn't make sense for GM, Lindland said.

Saab never made much money under GM's ownership and -- unlike Opel -- is not an integral part of the automaker's operations.

GM should also be able to absorb the costs without too much damage to its post-bankruptcy balance sheet and is "pretty well versed in winding down brands at this point."

"This is a little like getting rid of your favorite pain of jeans because they just don't fit anymore," Lindland added.
 

Date created : 2009-11-25

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