Feb. 11 (Bloomberg) -- General Motors Corp. is asking Sweden to guarantee $600 million in European Investment Bank loans to keep the Saab Automobile unit operating until it can be restructured for sale, a person familiar with the talks said.

The loans, along with about $400 million (3.36 billion kronor) from GM, would allow Saab to introduce new models that would keep Saab competitive, said the person, who asked not to be named because the talks are private. If Saab doesn’t get the aid, it may be forced into restructuring under Swedish law, the person said.

It is “possible” that GM has told the government that if Sweden doesn’t help Saab, it may be put into administration or shuttered, said Saab spokesman Eric Geers. He declined to comment on the potential size and structure of a government aid package. GM spokeswoman Joanne Krell had no comment.

The EIB wouldn’t lend to the Detroit automaker without backing by the Swedish government or another entity because of its credit rating, said Mats Gunnarsson, EIB adviser to the vice president. Standard & Poor’s Corp. rates GM CC, or 10 levels below investment grade.

“We can confirm that we’ve met with GM in Europe,” he said. “We haven’t started a formal appraisal yet.”

GM is trying to have a solution for Saab by Feb. 17, when it must present a progress report to the U.S. Treasury on how it will become viable so it can repay $13.4 billion in government loans by 2011. Yesterday, GM said it would cut 10,000 jobs and trim U.S. salaries as it negotiates for concessions from the United Auto Workers union and bondholders.

On ‘Life Support’

GM Vice Chairman Bob Lutz said in January that Saab, in which GM first bought a stake in 1990, has been on “life support” for two decades.

“Saab got watered down and lost its way and nobody at GM has been able to figure out what to do with it,” said analyst Jim Hall, principal of 2953 Analytics in Birmingham, Michigan.

GM, Saab and the Swedish government are in a “continuous dialogue” about aid for Saab, Geers said in a telephone interview today. GM said Dec. 2 it would seek a buyer or other options for Saab.

GM rose 4 cents to $2.74 at 4:15 p.m. in New York Stock Exchange composite trading at 2:25 p.m. GM’s 8.375 percent note due in July 2033 declined 0.5 cent to 13 cents on the dollar, yielding 64 percent, according to Trace, the bond-pricing service of the Financial Industry Regulatory Authority.

Swedish Auto Aid

Sweden’s government has pledged 28 billion kronor to support automakers including Volvo Cars and Saab. The package aims to spur development of fuel-efficient vehicles and provide manufacturers with access to funding. It provides Swedish carmakers with a 5 billion kronor rescue loan, as much as 3 billion kronor for research and development, and credit guarantees of 20 billion kronor for loans by the EIB.

GM wants financing so it can introduce new models, such as the 9-4X sport-utility vehicle and a redesigned 9-5 sedan, said the person familiar with the situation.

The Swedish government wants GM to commit further support, which the Detroit-based automaker is unable to provide, said the person. GM bought 50 percent of Saab in 1990 for about $700 million and purchased the rest of the Trollhattan, Sweden-based company for $125 million and assumed debt in 2000 from Sweden’s Wallenberg family.

GM sold 93,295 Saab models worldwide last year, a 25 percent decline.

“Of course Saab is important,” said Swedish government spokeswoman Lisa Waern. “They must have sustainable plans for the future.” The government has said it will give guarantees only to companies that have a sound business plan, and it won’t comment on whether GM has such a plan for Saab.

Restructuring in Sweden

Under Swedish law, a bankrupt company is then taken over temporarily by an administrator, often a lawyer, whose task it is to share the remaining money among those with claims on the company.

Companies that apply for direct loans from Sweden must have a majority of their business in Sweden, while automakers applying for a government-backed loan from the EIB must use the money to develop green technology.

Ford Motor Co.’s Volvo Cars unit has asked for a loan of 5 billion kronor from the EIB, backed by Sweden, to help it make environmentally friendly cars and keep production local.

To contact the reporter on this story: Jeff Green in Southfield, Michigan at jgreen16@bloomberg.net; Niklas Magnusson in Stockholm at nmagnusson1@bloomberg.net.

Last Updated: February 11, 2009 17:01 EST