Is This the End of the Line for Saab?

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The end of the line for Saab, the quirky little Swedish carmaker, could come as soon as next week, when the General Motors board of directors is scheduled to meet in Detroit.

GM's effort to sell its Swedish subsidiary Saab has fallen apart, jeopardizing the division's future, which had grown increasingly tenuous over the years as its American owner slid into insolvency and bankruptcy. Saab was tentatively scheduled to begin operating as an independent company starting Jan. 1, 2009, once GM's sale to Koenigsegg Group AB, a Swedish maker of exotic vehicles, had closed.

GM CEO Fritz Henderson said the Detroit automaker was shocked and dismayed by Koenigsegg Group AB's decision to back out of the deal. "We're obviously very disappointed with the decision to pull out of the Saab purchase," Henderson said. "Given the sudden change in direction, we will take the next several days to assess the situation and will advise on the next steps next week."

However, GM insiders say the existence of the Saab brand, which is famous for its quirky styling, aircraft-like interiors and center-mounted ignition switch, could face extinction unless another investor quickly steps forward to rescue the Swedish automaker. So far, no other investor has expressed much interest in Saab. In addition, the Swedish government has been reluctant to provide financing for Saab despite the brand's long and distinguished history and its 2,500 employees. The brand, however, has never made money for GM, which acquired it for $2.5 billion in 1991.

A final decision on Saab's fate could come as soon as next week, when GM's board is expected to meet and discuss the ongoing restructuring of the company's European operations.

In June, GM announced that it would sell or eliminate four of its brands, including Pontiac, Saab, Hummer and Saturn. "We've been very clear that those brands were going to be sold or shut down," said a GM official, who asked not to be identified. "The expectation is that if you don't sell it, you close it."

GM also set a precedent of sorts last month when it announced that it would shut down the Saturn brand completely after a deal to sell it to the Penske Automotive Group also fell apart at the last minute. GM has stopped building Pontiacs, and Hummer is in the process of being sold to a Chinese manufacturer of heavy equipment.

Moreover, GM, which is on the verge of trimming its European production capacity 25%, doesn't need Saab's manufacturing plants in Sweden, and Saab doesn't have any special technology that could save it, a GM official bluntly noted.