Saab deal falls apart as the brand nears extinction

Swedish sports car maker Koenigsegg Group AB has come to its senses. The company decided to pull out of its earlier agreement to buy Saab from General Motors. Barring some new edict from GM’s board, the auto maker will likely just wind the brand down. Management doesn’t want to keep it, say two GM executives familiar with the company’s planning. So unless the board overturns their wishes, Saab will join Pontiac and Saturn on their way to the auto industry’s Boot Hill.

For GM CEO Fritz Henderson, this is the third attempted deal that has fallen apart. His own board decided to keep Opel rather than sell it to a consortium of parts maker Magna International and Russia’s OAO Sberbank. Renault-Nissan wouldn’t provide the new cars to fill Saturn showrooms once dealer chain Penske Automotive Group took it over. So the deal died. And now the Saab deal has fallen apart.

Of the three failed deals, only the Opel sale effort puts heat on Henderson. Two sources inside GM say he never liked the deal. But the German government wouldn’t fund a GM-led restructuring or a sale to another bidder. The German government would only fund the sale of a controlling stake to Magna and Sberbank. But several board members thought that GM could have used its leverage to get the German government to bend, say two sources who are familiar with the discussions. Eventually, the board’s stubbornness succeeded in getting the German government to bend. GM will keep Opel and the German government appears more willing to help with financing.

As for Saab, collapsing the brand really is the best thing for GM. The last thing the company needs as it is trying to find profits in North America, get attention for its besmirched brands and restructure Opel in Europe is wrestle with Saab. GM has never been able to adequately fund it ever since buying 50% of it back in 1990. The brand commands a niche in the northeastern U.S. quite nicely. But that only gets GM 7,441 sales in the U.S. this year. That’s off 62%. Sales in Europe are off just as much.

We’re talking about a brand that struggles to sell 100,000 cars a year globally. It only really sells two models, the 9-3 and 9-5 sedans. Even sharing parts and platforms with Opel, it’s tough to make a profit. “I don’t know that you can make a business case for it,” says IHS Global Insight analyst John Wolkonowicz. That’s especially true for GM.

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE