Koenigsegg Leaves Egg on GM’s Face
In a big setback for General Motors, Swedish sports-car maker Koenigsegg yesterday backed out of its deal to take over Saab. The problem it cited was “the time factor,” that is, the deal kept dragging on (over six months and counting), but Koenigsegg would point no fingers as to responsibility.
GM said it was going to reassess the situation and would advise next week. The thinking in most of the car press is that it will finally pull the plug on Saab, unless—and it’s a big “unless”—a buyer in China or India can be found. The Chinese firm BAIC, which was prepared to take a stake in Koenigsegg, said it would also “cautiously evaluate” the situation (whatever that means).
Unfortunately, this seems like a replay of the Penske back-down with respect to Saturn less than two months ago. When Roger P. couldn’t find a Saturn supplier in Renault, his plans rapidly went south. Then GM abruptly reneged on an almost-final deal to sell Opel. Now, there seems no chance that Koenigsegg will reconsider. One month ago, we wrote about that company’s ambitious plans to reorganize Saab and take it upmarket. At this point, one must conclude that there’s simply no market to take it up to.
The Swedes are putting a good face on it, but they are in a tough position, according to Edmunds’ Michelle Krebs (quoted in a CNN story):
Losing the deal could cost GM additional cash to shut down dealerships and manufacturing facilities in Sweden if it is unable to find another buyer. “This might not get much notice here, but they’ll notice in Sweden,” she said. “The big question is what will the Swedish government do now, whether they’ll allow the plants there to shut down.”
There’s also the small matter of GM’s $912 million write-down this year on Saab. Over ten years, GM paid out some $725 million to buy the company. Now, money promised from the European Investment Bank ($600 million) on the Koenigsegg deal is also out the window. Saab has 4,500 workers, most in Sweden, whose jobs are plainly in jeopardy.
Financially, it’s a sad story. Emotionally, it’s hard to see a great car company die.
Can a white knight be found to rescue Saab? Let us have your thoughts.