Nov. 13 (Bloomberg) -- Saab Automobile AB, the Swedish carmaker being sold by General Motors Co. to Koenigsegg Group, said it will slash its U.S. dealership network by 37 percent after sales of Saabs in North America plunged this year.

GM, which held the contracts with Saab’s dealers, has canceled the agreements with all of the Swedish carmaker’s 218 U.S. outlets because of the sale, Saab spokesman Eric Geers said today by telephone from Trollhaettan, Sweden. Koenigsegg and Saab have decided to renew contracts with 137 dealers based on their size and location, terminating 81 branches, Geers said.

Saab has been struggling in the U.S., one of its four most important markets, since GM said in February it would cut ties by the end of 2009 and the Swedish carmaker filed for bankruptcy protection. Saab’s sales in the U.S. in the first 10 months of this year slumped 62 percent to 7,441 cars, and it sold just 513 cars in the U.S. in October.

“We knew they were going to cut some, but we were surprised the number was this high,” Tim Whalen, general manager of International Motors Ltd., a Saab dealer in Falls Church, Virginia, said by telephone. “I’m happy we’re one of the ones staying.”

GM Europe spokeswoman Karin Kirchner in Zurich declined to identify any of the dealers affected and Koenigsegg spokeswoman Halldora von Koenigsegg didn’t return calls seeking comment.

New Dealer Agreement

“I understand that letters went out to every dealer yesterday and it was either a new dealer agreement to sign with Saab Cars North America, or it was a letter advising them that they were not going to be continued,” Whalen said.

Saab, which has been unprofitable for most of the 20 years GM has owned it, plans to become profitable by 2012 with annual sales of 100,000 cars, Christian von Koenigsegg, one of the investors in the group that plans to buy Saab, has said.

“They have looked at what is best for Saab, in what parts of the U.S. we should be, and at which dealers that have a good possibility to make good money,” Geers said. The downsizing “fits with Saab’s new business plan,” the spokesman said.

The brand’s U.S. market share tumbled to 0.16 percent last year from 0.29 percent in 2003, according to Autodata Corp. This year, Saab accounted for 0.09 percent of U.S. new light-vehicle sales, said the Woodcliff Lake, New Jersey, researcher.

GM, which is also downsizing its U.S. dealer network, plans to eliminate half of its brands after emerging from bankruptcy, selling Hummer and Saab and shutting its Pontiac and Saturn units. It plans to keep Buick, Chevrolet, GMC and Cadillac.

To contact the reporter on this story: Niklas Magnusson in Stockholm at nmagnusson1@bloomberg.net

Last Updated: November 13, 2009 16:32 EST