New Investors Face Tough Road Ahead to Right Saab

For the new owners of Saab Automobile to make money selling small numbers of cars across the globe, they have to return to the Swedish automaker's roots, industry analysts say.

FILE - In this Feb. 23, 2009 file photo, a Saab logo is displayed on a car in Frankfurt, Germany....

FILE - In this Feb. 23, 2009 file photo, a Saab logo is displayed on a car in Frankfurt, Germany. Saab Automobile, General Motors Corp.'s struggling Swedish unit known for its family cars, was rescued Tuesday, June 16, 2009, by a consortium led by Koenigsegg Automotive AB, a tiny luxury car maker which produces only a dozen custom-made models a year. (AP Photo/Ferdinand Ostrop, File)

(AP)

Somehow, a consortium of investors led by custom sports car maker Koenigsegg Automotive AB must restore Saab to the quirky, cutting edge and reliable brand once favored by professionals who wanted to look smart rather than wealthy.

"It was seen as a discerning choice," said Tim Urquhart, senior automotive industry analyst with the consulting firm IHS Global Insight in London. "It was a professional's vehicle, a doctor's or an architect's. A quality vehicle, but not an obvious statement like Mercedes or BMW."

GM announced Tuesday that it has struck a tentative deal to sell the storied brand, which started as a Swedish aircraft maker. The sale is to include a $600 million funding commitment from the European Investment Bank, guaranteed by the Swedish government. Additional funding would be provided by GM and the new investors.

GM gave no details on the financing but said the sale should close in the third quarter. The troubled Detroit-based GM initially will get no return on its investment and apparently will have no stake in Saab. If the new company turns a profit, GM could receive the $150 million in cash that Saab has left over from GM's ownership, plus the value of Saab's assets.

The lack of an immediate payoff for GM is similar to the position of Chrysler LLC's former owners, New York private equity firm Cerberus Capital Management LP, which exited the Chrysler bankruptcy with nothing to show for its $7.4 billion investment.

Koenigsegg, (KOH-nigs-egg), a tiny company which produces only a dozen super cars a year costing more than $1 million each, was founded in 1994 by von Koenigsegg, a Swedish sports car fanatic and entrepreneur who remains chief executive. Its factory and headquarters are located at a former air force base in southern Sweden.

Analysts say GM, which bought half of Saab in 1990 for $600 million and the rest for $125 million in 2000, was unable to differentiate the brand from its other products or find a sales niche.