Saab Automobile, General Motors Corp.'s struggling Swedish unit known for its family cars, was rescued Tuesday by a consortium led by Koenigsegg Automotive AB, a tiny company that produces only a dozen custom-made sports cars a year.
Having penned a memorandum of understanding, GM said the sale would include an expected $600 million funding commitment from the European Investment Bank, guaranteed by the Swedish government. Additional funding for Saab's operations and investments would be provided by GM and the Koenigsegg Group AB consortium, it said.
"This is yet another significant step in the reinvention of GM and its European operations," GM Europe president Carl-Peter Forster said in a statement.
GM will get nothing initially for Saab, but would be paid $150m. - capital Saab had left over from GM's ownership - on top of the value of Saab's assets if the new company turns a profit, a person briefed on the deal said. The informed source could not estimate the value of those assets.
The company fronting the consortium, Koenigsegg Automotive, was founded in 1994 by Christian von Koenigsegg, a Swedish sports-car fanatic and entrepreneur, who remains the chief executive. It makes luxury sports cars at its headquarters, a former air force base near Angelholm, in southern Sweden.
With a full-time staff of 45, Koenigsegg (pronounced KOH-nigs-egg) makes about a dozen cars a year, customized for every buyer. The company doesn't advertise prices for its models, but they are believed to range between 8 million and 18 million kronor ($1m.-$2.3m.) each.
Saab, on the other hand, has more than 4,000 staff worldwide, is represented in some 50 countries and typically produces more than 100,000 cars a year.
Saab chief executive Jan Ake Jonsson called the deal "great news" and said it would help the brand to maximize it's potential "through an exciting new product lineup with a distinctly Swedish character."
The sale is expected to be completed by the end of the third quarter and is subject to regulatory approvals.
Nelson Silveira, a GM spokesman in Zurich, declined to give any financial details and would not disclose information about the investors.
On Monday, public documents showed that Koenigsegg Automotive AB had applied to start a new company named Koenigsegg Group - fueling speculation that a takeover of Saab was in the pipeline.
Shareholders in the new company were listed as Koenigsegg Automotive AB, with a 23.4 percent stake; its owner and CEO Christian von Koeningsegg's firm Alpraaz AB, with 42.6%; Norwegian holding company Eker Group, with 11.8%; and San Diego-based Mark Bishop, with 22.2%.
Board members would include Naples, Florida-based Augie K. Fabela II, the cofounder and former chairman of Russian telecoms operator VimpelCom; von Koeningsegg; Eker Group owner Baard Eker; and Mark Bishop. Washington, DC-based Melissa Schwartz was named deputy board member.
Saab went into creditor protection February 20 in an effort by GM to sell the unit. Interested bidders reportedly had also included private-equity firm The Renco Group Inc. and investors Merbanco Inc.
Matts Carlsson, an analyst of Goteborg Management Institute, called the deal "exciting, interesting and challenging," adding that although no price sum has been made official, the Trollhattan, Sweden-based unit is likely to have been more or less a giveaway.
"[Money] is not really what it's about right now; it's about the possibility to back up this deal," he said.
Carlsson has, along with other market watchers, voiced criticism of the idea of a small sports-car maker taking over the reins of a large company such as Saab.
More specifically, market watchers wonder how reliable the anonymous consortium will be and whether they have the finances to see the deal through.
"We still need to find out if they have the financial muscles," Swedbank Market analyst Anders Bruzelius said. Saab has been losing money for more than a decade, he said, adding that he didn't recognize any of the investors.
Originally an aircraft maker, Saab started manufacturing cars after World War II. General Motors bought a 50% stake and management control of Saab Automobile in 1989 and gained full ownership in 2000. The aircraft division remains a different company.