GM Said to see No Saab Bids as Board Nears Shutdown (Update1)

Nov. 25 (Bloomberg) — General Motors co. doesn’t expect tofind new bidders for Saab and may shut the bankrupt unit afterKoenigsegg Group AB canceled a planned acquisition, peoplefamiliar 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 thetalks are private. while directors might opt to keep Saab, asthey did with the Opel division this month, GM has a contingencyplan 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, whichwas part of an unsuccessful bid for Opel in Germany. Saab”really doesn’t matter in terms of technology, and there is nosynergy like there was with Opel.”

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

The collapse of that accord yesterday marked the thirdbrand sale to falter since GM’s July 10 exit from Chapter 11. GMbacked out of the Opel sale to a group led by MagnaInternational Inc., and Penske Automotive Group Inc. withdrew inSeptember from a plan to buy Saturn.

Contingency Plan

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

“We will take the next several days to assess thesituation and will advise on the next steps next week,” ChiefExecutive Officer Fritz Henderson said in a statement. “We’reobviously 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 theinvestment team set up by Koenigsegg to take over Saab, said ina statement it will “cautiously” reconsider plans to buy astake.

Expected Transaction

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

The investment group includes Koenigsegg Automotive, makerof the $1.2 million CCXR sports car; China’s Beijing AutomotiveIndustry Holding co.; and Baard Eker, a Norwegian entrepreneur.The team is led by Augie Fabela II, an American who co-foundedRussian 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 werealized that we had so far to go that we weren’t going to makeit, so unfortunately we had to call it a day.”

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

Koenigsegg Group had sought to obtain in advance all 400million euros ($600 million) of financing approved by theEuropean Investment Bank, while the lender planned to disbursethe funds in tranches, another person said. Rainer Schlitt, abank 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. “Saabhas reached the end of the road, there’s nothing left in thetank.”

Saab traces its roots to aircraft company Svenska AeroplanAB, 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 1990and took full ownership a decade later.

Posting losses in most of its years under GM, Saab hadplanned to become profitable by 2012 with annual sales of100,000 cars, according to Christian von Koenigsegg, one of theinvestors in the acquisition group.

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

Koenigsegg’s rivals for Saab included U.S. billionaire IraRennert’s Renco Group Inc. and Merbanco Inc., a group ofinvestors from Wyoming, a person familiar with the process saidat the time.

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

At Saab’s peak of popularity in the 1980s, it appealed tobuyers who sought a European brand mixing safety, reliabilityand innovation. while Ford Motor co.’s Volvo championedpracticality, Saab peddled its aviation heritage withturbocharged engines and fighter-jet design elements.

Plunging demand and Saab’s losses made the unit a candidatefor disposal as GM slid toward bankruptcy. U.S. sales slumped 62percent this year through October, with just 513 deliveries lastmonth, 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 veryhigh, so I would expect that dealers would get no new productsand the company wouldn’t have to heavily discount them to selloff the remaining stock,” said Eric Ibara, director of residualconsulting for Kelley Blue Book in Irvine, California.

Saab was among four U.S. brands GM planned to unload aspart of its restructuring to focus on Chevrolet, Buick, GMC andCadillac. The Swedish unit has been unprofitable for most of thetwo decades GM has owned it.

GM dropped Pontiac, had the Saturn deal fail and agreed tosell the Hummer sport-utility vehicle brand to China’s SichuanTengzhong Heavy Industrial Machinery co., pending regulatoryapproval.

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

To contact the reporters on this story:Jeff Green in Southfield, Michigan, at Jgreen16@bloomberg.net;Niklas Magnusson in Stockholm at nmagnusson1@bloomberg.net;Katie Merx in Southfield, Michigan, at kmerx@bloomberg.net;

Last Updated: November 25, 2009 01:02 EST