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Dealers, GM surprised by demise of Saab sale

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Dealers, GM surprised by demise of Saab sale



NOVEMBER 24, 2009 - 4:29 PM ET

UPDATED: 11/24/09 5:17 P.M. ET

Saab dealers knew of the chance that GM would wind down Saab if a proposed sale to Koenigsegg AB went sour. Still, dealers say they had every indication the deal was progressing smoothly.

So the decision from Swedish supercar maker Koenigsegg this morning to back out came as a surprise to everyone -- even GM.

"We're obviously very disappointed with the decision to pull out of the Saab purchase," GM CEO Fritz Henderson said today in a two-paragraph statement announcing Koenigsegg's decision.

Dealers had signed termination agreements in June that said General Motors Co. would wind down Saab and terminate its dealers if a sale fell through, unless another buyer wanted Saab, said Michael Simon, general manager of a stand-alone Saab store in suburban Chicago.

“The way that it was set up was the same way as the Saturn agreement,” Simon said, speaking of GM's failed sale of Saturn to Penske Automotive Group Inc. Penske backed out on Sept. 30, and GM is now winding down Saturn.

But everything seemed to be going smoothly with the Saab sale. Dealers say brand representatives contacted them yesterday and early this morning about ordering 2010 models, and Simon said he got an eight-page e-mail yesterday with vehicle identification numbers for new vehicles.

Still, even when Kevin Jones, co-owner of two stand-alone Saab stores in suburban Los Angeles, ordered 30 to 35 new Saabs for next year, he was reminded that Saab could soon close.

“That deal was contingent upon the Saab deal going through,” he said of the order.

GM is ‘disappointed'

Unless another buyer materializes, Saab looks likely to shut down.

“Obviously, this was both a disappointment and a surprise,” GM spokesman Chris Preuss said. “We believed that we were on a pathway for closing this deal and that GM had met all of its obligations.”

GM's board and management will now weigh the next steps, Preuss said, and the company hopes to give details next week.

GM spokeswoman Ryndee Carney said two weeks ago that if the Saab deal fell through, GM would close the brand and all its dealerships would be terminated.

Reached today, Carney reiterated GM's statement that it's evaluating options.

“I don't feel that it would be accurate to say definitively that that's what's going to happen … that the dealerships would be closed,” she said today.

Getting into used cars

If Saab winds down, Jones is going to try to sell used vehicles, especially Saabs. His two dealerships have been selling about 30 to 40 used vehicles a month, and more than two-thirds of those are usually Saabs. That compares with the three or four new Saabs the stores together sell each month. They have 13 new Saabs in stock.

“So if they wind down, we've got 13 cars to move. And I'll be out there buying all the other guys' '08s and '09s,” Jones said. “We've basically been in the used-car business for the last two years with Saab's reorganization.”

Simon, of Saab of Downers Grove, is part of a management group that took over the stand-alone store in July under new ownership. The owners' investment comes to $10 million, including the facility and property.

If GM winds down Saab, the store will have to find a new franchise, he said. The store already has a strong used-car business, selling at least 65 used cars a month. Monthly new-car sales haven't topped 14 since the new management took over.

Koenigsegg's decision to back out followed months of sparse communication about the brand's status, dealers said.

For Ted Nicholas, president and CEO of Three-Way Automotive Group in Bakersfield, Calif., Saab's lack of communication was enough for him to drop the brand. He had been waiting to see how Saab's future would shape up and told GM Nov. 12 he wanted to terminate his franchise.

“It's never been a volume unit for us,” said Nicholas, who also sells Chevrolet, Cadillac and Hummer. “You have to look at the return for your investment.”

A couple days later, he received a letter from GM saying his store was one of the 81 rejected by Koenigsegg to go forward with the brand. That move would have left Saab with 137 dealers after the sale.

Saab's U.S. sales had fallen 62 percent in the United States through October. That's on top of a 35 percent sales drop last year.


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