21 December 2009

GM To Shut Down Saab

The Wall Street Journal

General Motors Co. said it would wind down its Saab business, marking the near-certain death of one of Sweden's most storied companies and a car brand with a small but devoted following.

GM had given itself a final chance to complete a sale of the quirky 62-year-old luxury auto maker by year's end. But it said unsolvable issues arose in late-stage negotiations Friday to sell the company to Spyker Cars NV, a Dutch maker of ultraluxury sports cars.

It is the second time this year that GM's plans to sell an ailing brand have collapsed. Its efforts to sell Saturn also failed, and the company reversed itself on plans to sell its European car maker, Opel.

While bidders could still emerge for Saab's remaining assets, including two yet-to-be-launched models, GM's announcement ushers the car manufacturer spawned from a Swedish plane maker to the junkyard along with Saturn and Pontiac.

In the end, Saab proved to have too small a following to attract large auto makers looking for scale in a global recession.

The potential buyers it did attract, such as Swedish boutique car maker Koenigsegg Group AB, ran into trouble financing the acquisition.

Few of the car brands that have met their demise this year stirred the passions among car lovers that Saab did.

Saab's offbeat Scandinavian style and unique features, such as an ignition placed between the front seats, won it a small but loyal following in the U.S., where it has been a favorite among the academic set.

"It's a sad news day for Saab owners," said Chris McPherson of Cumming, Ga., who has owned a Saab on and off since he bought his first one, a 1967 Saab 96 sedan, right out of high school in 1973.

GM's announcement also means that little is left of Sweden's once venerable car industry, and what remains may soon be acquired by Chinese car makers. Ford Motor Co. remains in talks to sell its Volvo unit to China's Zhejiang Geely Holdings Group.

GM executives said Friday that their decision to shutter Saab's operations wouldn't affect plans to sell some intellectual property and equipment for old Saab models to Beijing Automotive Industry Holding Co.

Disposing of Saab is part of a broader GM strategy to slim down the company and focus on the four brands -- Chevrolet, Cadillac, GMC and Buick -- it believes are its strongest.

But GM's decision drew a sharp response from Swedish government officials who had been involved in the last-ditch talks to save Saab.

Most of the 3,400 people Saab employs world-wide work at its main plant in Trollhattan, Sweden.

"GM could have done much more to help Saab," Swedish Enterprise Minister Maud Olofsson told reporters.

Spyker's chief executive, Victor Muller, said GM had declined to extend its self-imposed deadline, contending that his company had lined up most of the required financing, though it was still awaiting approval for a [euro ]400 million ($572 million) loan from the European Investment Bank.

But GM Vice President John Smith, who led the Saab negotiations, said that GM concluded that extending the deadline wouldn't have resolved the snags, which weren't identified.

"Like everybody we would have preferred a different outcome," he said.

GM's European chief, Nick Reilly, said Saab, which has roughly 1,100 dealers, would continue to pay its debts, such as payments to suppliers. It will also honor warranties and provide service and parts to current Saab owners.

Though GM wouldn't elaborate on a timetable for winding down the operations, it said the process would start in January.

GM bought a 50% stake in Saab -- founded in 1937 to build planes for the Swedish Air Force -- 20 years ago and took full ownership in 2000.

But Saab's earlier models and their design and engineering idiosyncracies -- such as their outsized rear hatches and the ignition locks -- are what attracted legions of Saabophiles.

So did Saab's reputation as a safety pioneer: Its cars were the first to be fitted with safety belts and impact absorbing bumpers.

"You could have fun with the car, and it handled better than most," said Mr. McPherson, 54, who drives a 1990 red Saab 900 convertible and recycles old Saabs as a business. Plus, he said, "it didn't look like everyone else's car."

Many analysts say GM's takeover of Saab led to better produced cars. But it also dulled the brand's distinct luxury image, and the American parent failed to freshen up Saab's model lineup in recent years.

Saab hasn't made a profit since 2001. It had a loss estimated at three billion Swedish crowns ($413 million) in 2008 and is expected to lose a similar amount this year. The number of Saab cars sold is expected to dwindle to fewer than 50,000 this year, less than 1% of GM's total production.

GM began the search for a buyer for Saab in January as it teetered on the brink of bankruptcy and decided to shed four of its eight brands.

Last month, though, the company reversed plans to sell its European car brand Opel to a group led by Canadian auto supplier Magna International Inc.

A deal to sell its Saturn brand to racing mogul Roger Penske also fell through.

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