GM Said to See No Saab Bids as Board Nears Shutdown

GM Said to See No Saab Bids as Board Nears Shutdown

Nov. 25 (Bloomberg) -- General Motors Co. doesn’t expect to find new bidders for Saab and may shut the bankrupt unit after Koenigsegg Group AB canceled a planned acquisition, people familiar with the matter said.

Saab’s future will be decided at a Dec. 1 GM board meeting, said the people, who asked not to be identified because the talks are private. While directors might opt to keep Saab, as they did with the Opel division this month, GM has a contingency plan that calls for winding down the brand, the people said.

“They should just get rid of it,” said Tom Stallkamp, industrial partner at buyout firm Ripplewood Holdings LLC, which was part of an unsuccessful bid for Opel in Germany. Saab “really doesn’t matter in terms of technology, and there is no synergy like there was with Opel.”

Closing Saab instead of selling would still help GM achieve the goal of trimming U.S. brands to four from eight while working to return to profit after a U.S.-backed bankruptcy. A Koenigsegg sale would have protected jobs at Saab while wrapping up GM’s affiliation with the brand by year’s end.

The collapse of that accord yesterday marked the third brand sale to falter since GM’s July 10 exit from Chapter 11. GM backed out of the Opel sale to a group led by Magna International Inc., and Penske Automotive Group Inc. withdrew in September from a plan to buy Saturn.

Contingency Plan

GM’s Saab contingency plan is modeled on its blueprint for Saturn, one of the people said. Saab owners would continue to be covered by GM warranties and be assigned to a new dealership for service, the person said.

“We will take the next several days to assess the situation and will advise on the next steps next week,” Chief Executive Officer Fritz Henderson said in a statement. “We’re obviously very disappointed with the decision to pull out.”

Earlier today, Beijing Automotive Industry Holding Co., which in September agreed to take a minority stake in the investment team set up by Koenigsegg to take over Saab, said in a statement it will “cautiously” reconsider plans to buy a stake.

Expected Transaction

Saab had expected the transaction with Koenigsegg Group to close by the end of this month, pumping in fresh funds to finance a ramp-up of production of older models and production of new car types.

The investment group includes Koenigsegg Automotive, maker of the $1.2 million CCXR sports car; China’s Beijing Automotive Industry Holding Co.; and Baard Eker, a Norwegian entrepreneur. The team is led by Augie Fabela II, an American who co-founded Russian mobile-phone operator OAO VimpelCom.

“We’re extremely disappointed. It’s like a plane crash,” Eker said. “Our deadline was Nov. 30 and at one week away we realized that we had so far to go that we weren’t going to make it, so unfortunately we had to call it a day.”

GM began getting indications of a possible snag over the weekend, and Koenigsegg Group’s board decided on Nov. 23 to back away, one of the people said.

Koenigsegg Group had sought to obtain in advance all 400 million euros ($600 million) of financing approved by the European Investment Bank, while the lender planned to disburse the funds in tranches, another person said. Rainer Schlitt, a bank spokesman in Luxembourg, couldn’t be reached yesterday.

‘End of the Road’

“That’s it, goodnight, goodbye,” said Stephen Pope, chief global strategist for Cantor Fitzgerald in London. “Saab has reached the end of the road, there’s nothing left in the tank.”

Saab traces its roots to aircraft company Svenska Aeroplan AB, founded in 1937 to secure production of Swedish warplanes, and is based in Trollhaettan, a cradle of the country’s 19th- century industrialization. GM bought one half of Saab in 1990 and took full ownership a decade later.

Posting losses in most of its years under GM, Saab had planned to become profitable by 2012 with annual sales of 100,000 cars, according to Christian von Koenigsegg, one of the investors in the acquisition group.

Saab got Swedish court protection in February after GM said it was cutting ties. Koenigsegg won the bidding for the unit in June, and the European Investment Bank approved a 400 million- euro ($600 million) loan for Saab on Oct. 21 after an initial delay. Saab had about 4,100 employees as of August.

Rivals for Saab

Koenigsegg’s rivals for Saab included U.S. billionaire Ira Rennert’s Renco Group Inc. and Merbanco Inc., a group of investors from Wyoming, a person familiar with the process said at the time.

An aide to Rennert said yesterday that the billionaire wouldn’t comment on Koenigsegg’s exit, and a voice-mail message left with Merbanco President Chris Johnston wasn’t returned.

At Saab’s peak of popularity in the 1980s, it appealed to buyers who sought a European brand mixing safety, reliability and innovation. While Ford Motor Co.’s Volvo championed practicality, Saab peddled its aviation heritage with turbocharged engines and fighter-jet design elements.

Plunging demand and Saab’s losses made the unit a candidate for disposal as GM slid toward bankruptcy. U.S. sales slumped 62 percent this year through October, with just 513 deliveries last month, and the European total plunged 59 percent. As of Nov. 15, Saab planned to reduce its U.S. dealership body by 37 percent, cutting 81 of 218 dealers.

Inventory Levels

“I don’t think that the inventory levels on Saab are very high, so I would expect that dealers would get no new products and the company wouldn’t have to heavily discount them to sell off the remaining stock,” said Eric Ibara, director of residual consulting for Kelley Blue Book in Irvine, California.

Saab was among four U.S. brands GM planned to unload as part of its restructuring to focus on Chevrolet, Buick, GMC and Cadillac. The Swedish unit has been unprofitable for most of the two decades GM has owned it.

GM dropped Pontiac, had the Saturn deal fail and agreed to sell the Hummer sport-utility vehicle brand to China’s Sichuan Tengzhong Heavy Industrial Machinery Co., pending regulatory approval.

“You feel sorry for the guys at GM, because they just need to get Saab, Saturn and Hummer off their plate,” said Ripplewood’s Stallkamp, a former Chrysler Corp. executive. “Suddenly GM has all these leftovers when what they really need to do is start cooking a whole new meal.”

bloomberg