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GM to sell Saab to tiny Swedish carmaker

General Motors signed a deal on Tuesday to sell Saab to Koenigsegg, a tiny Swedish luxury carmaker, the first in a series of big sales the U.S. group is planning as it slims down.
The Saab corporate logo is seen on the hood of a Saab automobile in Trollhattan
Saab's own reorganization will be completed this month.Bob Strong / Reuters
/ Source: Reuters

General Motors signed a deal on Tuesday to sell its Saab car business to a tiny Swedish luxury carmaker, the first in a series of big sales the U.S. group is planning as it slims down.

The agreement comes after weeks of uncertainty about the degree of support for the bid from Koenigsegg's backers, after a preliminary deal for the sale was struck in June.

Previously little known outside of luxury car circles, Koenigsegg is a tiny Swedish outfit with some 45 staff. It makes high-performance sports cars that can sell for $1 million.

But questions remain regarding the financing of the deal and a statement from GM Europe was vague about the terms beyond calling the deal a "stock purchase agreement."

"This contract is an important step in the journey to a potential deal," said Carl-Peter Forster, head of GM Europe, in the statement. "The closure of the deal is contingent on the funding commitment from the European Investment Bank, guaranteed by the Swedish government."

GM, which emerged from bankruptcy protection on July 10, also plans to sell its Saturn and Hummer brands and its European operations, centered on Opel.

The German government and GM both played down hopes last week of a quick Opel sale, but Berlin reiterated its support for a deal with Canadian bidder Magna.

Saab Managing Director Jan Ake Jonsson called the deal a "milestone" in a video on the company's Web site but added that there were still some issues to be resolved.

He said Saab's reorganization, which will be complete this month, had helped to create a better supply and demand balance through reduced inventories and restore the carmaker's balance sheet.

"So now is the time to exit the reorganization," he said.

However, the Swedish government is still negotiating with Koenigsegg on a possible guarantee for a loan to Saab from the European Investment Bank, a pre-condition for the deal.

Sweden's industry ministry said several steps remained to be taken before a transaction could be concluded.

"The Koenigsegg Group will inject more private capital, negotiate loans with the European Investment Bank and agree with the Swedish National Debt Office on the terms for possible state loan guarantees," Joran Hagglund, industry ministry state secretary, said in a statement.

Swedish daily Dagens Industri reported on Tuesday that Koenigsegg Chairman Augie Fabela said 3 billion Swedish crowns ($413.6 million) of financing were still required in addition to the EIB loan.

Koenigsegg spokeswoman Halldora von Koenigsegg told Reuters on Tuesday the firm expected to close the deal within about a month. GM said it saw the deal closing by the end of the year.

GM said it and Saab would continue to share technology and services during a defined time period, which would be managed through licenses and service agreements.

More on: General Motors | Saab