Koenigsegg Offers Saab Salvation

Koenigsegg, the Swedish maker of luxury, tailor-made sports cars, is taking over Saab, the troubled division of General Motors. Koenigsegg is tiny compared with Saab, with around a 10th of its employees and cars retailing at around $1.2 million. It’s a combination that could work and analysts seem confident in the arrangement.



Crucially GM is pledging Koenigsegg its “platform and powertrain technology.” It’s very likely to include the “Epsilon 2″ platform — the model (metal frame, geer box, technology) on which the latest GM European cars are based, such as the Opel and Vauxhall Insignias, says Tim Urquhart, an analyst at IHS Global Insight in London. That’s hugely significant for Koenigsegg as research and development of these platforms are a massive expenditure for automakers, he added.

It should help it increase sales volumes at Saab, which have fallen off sharply in recent years. Having access to GM’s technology will give the Swedish car maker several years to come up with a model for the future.



Koeningsegg’s technology could prove valuable to Saab too. Koeningsegg has made a big push into green technology, making low emission, high-efficiency cars such as a flex fuel super car operating on both ethanol and petrol. It’s an area where Saab has been lagging behind its competitors, and could eventually help the company sell more cars.



The brand name could be helpful as well: Before the GM partnership began in the early 1990s, Saab had built itself a reputation as somewhat of an innovative brand — an image it has lost almost completely in recent years, says Urquhart.



But it won’t be without its share of challenges. Saab sales have been falling sharply; the company says it could be break even by selling around 130,000 cars a year, but even that might not be enough. Late last year, Sergione Marchionne, the head of FIat, warned that only companies selling 6 million cars a year would survive the downturn.



Koeningsegg is a tiny company employing 45 people and sold 18 bespoke cars last year, while Saab has around 3,400 employees in Sweden alone and sold 92,000 cars last year.



A consortium headed by Koeningsegg has signed a memorandum of understanding with GM to buy Saab after the division filed for bankruptcy in February. The sale to Koenn-backed by $600 million funding from the European Investment Bank, guaranteed by the Swedish government and should take place in the next quarter, the companies said on Tuesday

The extra support from anti-protectionist Sweden is surprising, since it has said in the past that it would only help contribute some funding to Saab’s research and development, with no further plans to shore up the company. (See “Saab: No Rescue From Sweden.”)

The government’s stance may have been softened by pledges to bring jobs back to Sweden: under the deal with Koeningsegg, production of Saab’s new version of its 9-5 model will be moved to the main factory in Trollhaettan, Sweden, from Ruesselheim in Germany.

Koeningsegg also appears to have trumped other suitors, including Italy’s Fiat , which was interested in buying Saab after losing out in the race for Opel to Canada’s Magna International . (See “Fiat Keeps An Eye On Saab.”)



The sale of Saab to Koeningsegg marks a return to Swedish ownership after nine years in GM hands. Last year Saab posted a loss of 3 billion Swedish kronors ($384 million). It says it needs $1 billion to overhaul its business.