Aug. 18 (Bloomberg) -- Koenigsegg Automotive AB, the Swedish maker of $1.2 million sports cars, agreed to buy Saab Automobile from General Motors Co. by the end of the year to become a mass-market manufacturer.

Completion of Saab’s sale to Koenigsegg and investment partners is tied to the unit getting funding from the European Investment Bank backed by Swedish state guarantees, as well as transitional assistance from Detroit-based GM, the U.S. carmaker said today in a statement. Sweden said the transaction still requires “several steps” before winning its backing.

Taking over Saab would catapult Aengelholm-based Koenigsegg from its hand-built supercar niche into the volume-car market, adding sedans and station wagons to a lineup of models capable of reaching speeds of close to 400 kilometers (250 miles) an hour. GM said in June that Saab’s sale depends on the division receiving a $600 million loan from the EIB.

“Today’s deal is in a sense a political statement that puts pressure on the government to solve the financing gap,” Matts Carlsson, managing director of Goeteborg Management Institute AB near Gothenburg, Sweden, said today. “Over the next one to two months, the government will find it increasingly difficult to say ‘no’ to more aid or financial backing.”

$300 Million Needed

Koenigsegg, the maker of the CCX and CCXR models, still must secure about $300 million in funding to complete Saab’s purchase, two people familiar with the situation said yesterday. Sweden’s government has reaffirmed a commitment to guarantee the proposed $600 million EIB loan, while Koenigsegg and GM together would contribute about $500 million in capital, one of the people said.

“It is good that the ownership question for Saab now gets clearer but there are still several steps left before it is completed,” Swedish Industry Ministry State Secretary Joeran Haegglund said today in a statement. “Koenigsegg Group has to provide further private capital and negotiate about loans with the EIB as well as agreeing with the National Debt Office about the terms of potential state credit guarantees.”

The sports-car maker has secured 70 percent of the financing it needs for the purchase and wants the government to guarantee or provide a bridge loan secured by Saab’s assets to raise the remainder in the next few months, Chief Executive Officer Christian von Koenigsegg said by telephone today. The bridge loan would be in addition to the $600 million EIB lending that Koenigsegg wants Sweden to guarantee.

‘Solid Company’

Saab is “quite a solid company with a lot of resources and low amount of debt,” von Koenigsegg said, adding that the carmaker is likely to return to profit by 2012 at the latest. Financial-market volatility means that securing an asset-backed bridge loan will be difficult “without some kind of government backup or support.”

The GM division traces its origins to Svenska Aeroplan AB, a planemaker founded in 1937 that’s now a separate aerospace company known as Saab AB. The Trollhaettan, Sweden-based carmaker has been unprofitable for most of the 20 years that GM has owned it.

GM has been looking for a buyer for Saab since February, when the division was granted protection from creditors as the financially struggling U.S. parent company said it was breaking ties in a reorganization.

30 Suitors

Saab received expressions of interest from about 30 suitors. Closely held Koenigsegg, which was founded by its CEO in 1994, was chosen as preferred bidder on June 16 after Saab reached an agreement with creditors to write down its debt by 75 percent. Saab owed about 10.6 billion kronor ($1.46 billion) in April, including 9.6 billion kronor to GM.

Saab predicted in April that it will make fewer cars in 2009 and 2010 than the 93,000 produced last year, and estimated that it must build 130,000 autos a year to break even. Von Koenigsegg said today that Saab could reach break-even building as few as 100,000 vehicles annually.

GM and Saab will continue to share technology and services “during a defined time period,” the U.S. company said today, without giving specifics.

“This agreement is a step in the right direction,” said Carlsson of the Goeteborg Management Institute. “They still lack about 3 billion kronor in financing and some technical problems with their mutual platforms need to be addressed, but I do think they will be able to tie the knot in the end.”

Bankruptcy Exit Planned

GM also said that Saab, which has a workforce of about 4,100 employees, will exit bankruptcy shortly.

“It’s very positive that we have come so far on the journey we’ve embarked on, and it’s an important milestone that we’re getting out of reorganization and will get an owner that takes over all of GM’s stake,” Paul Aakerlund, head of the IF Metall labor union at Saab, said in a phone interview today. “We have come a good way, and it would surprise us very much if the government doesn’t provide guarantees.”

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

Last Updated: August 18, 2009 09:35 EDT