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GM to discontinue Saab after deal talks collapse

General Motors Co. today said it will shut down Saab after talks to sell the brand to a Dutch carmaker collapsed, marking the third time this year that a deal by GM to sell an unwanted brand has fallen through.

General Motors Co. today said it will shut down Saab after talks to sell the brand to a Dutch carmaker collapsed, marking the third time this year that a deal by GM to sell an unwanted brand has fallen through.

GM said it had a small window of time to complete the deal and issues arose during the sale talks with Spyker Cars that could not be resolved. GM Vice President John Smith said representatives from GM, Spyker and the Swedish government were still in discussions this morning when talks fell apart. Smith declined to elaborate on the reasons.

"We've been trying to restart, if you will, an investment process without a great deal of time," Smith, who is in charge of GM's corporate planning and alliances, said during a conference call with reporters. "Like everybody, we would have preferred a different outcome, and we all worked very hard for that different outcome and we've come up short."

Saab employs about 3,400 people worldwide, most of whom work at its main plant in Trollhatten, Sweden. It also has a parts distribution center and a design center in separate locations in Sweden and an engine plant in Finland.

The brand has 1,100 dealers, whom GM said will continue to honor warranties as the brand winds down.

"It's devastating. It was a very unique brand," said Ray Ciccolo, owner of two Saab dealerships in the Boston area, one of which has been in business since 1957.

The announcement marks the death of brand with a small yet loyal following. To enthusiasts, the Swedish company became appreciated for quirks like placing the ignition lock between the front seats rather than on the steering column. It was the first to offer heated seating in 1971.

GM bought a 50 percent stake and management control of Saab for $600 million after Saab split from Swedish truck maker Scania in 1989. It bought full ownership in 2000 for $125 million. But even after the GM takeover, Saab remained closely associated with Sweden and its history of making safe, reliable cars.

GM never made money on the acquisition and industry analysts complained that under GM, Saab lost its uniqueness in the crowded luxury segment.

GM first sought a buyer for Saab in January as part of its restructuring, which included plans to cut the number of its brands to four from eight. It was previously in talks to sell Saab to a consortium led by the Swedish sports car maker Koenigsegg Group AB, but it turned to Spyker after Koenigsegg withdrew from the talks in November.

GM's Smith said it is possible other buyers could emerge, adding that the brand still has vehicles in development "that might be attractive to some folks." But no such buyers have stepped forward and the liquidation of the brand will begin in early January.

"I can't rule it out, but I guess the clock starts now... on those kinds of expressions of interest," Smith said. He declined to say how much it might cost to wind down the brand.

On Monday, China's Beijing Automotive Industry Holdings - originally part of the Koenigsegg consortium - announced it had agreed to buy some power train technology from Saab. It gave no details of costs or timing of that purchase.

Beijing Autos said it wants to explore further cooperation with GM's Saab Automobile such as "new energy vehicles." However, Smith said the company has not shown any interest in buying the rest of the brand.

The Swedish government called the decision "surprising and regretful."

"It's GM who took this decision, on their own grounds, and they have to answer to that by themselves," Enterprise Minister Maud Olofsson said at a news conference in Trollhattan.

Representatives of the Swedish industrial workers' union, IF Metall, declined to comment on GM's announcement. Hakan Johansson, a Saab worker at the Trollhattan plant, told broadcaster Swedish Radio he was devastated by the news.

"It's not a good Christmas gift," he said.

GM's failure to sell Saab is the third deal to sell an unwanted brand that has fallen through this year.

In September, auto dealership chain owner Roger Penske scrapped plans to buy Saturn after an agreement to get cars from France's Renault fell through. GM is now phasing out Saturn.

GM's board last month ended a deal to sell the European Opel brand to a group led by Canadian auto parts maker Magna International Inc., fearing that Opel was too heavily integrated into GM's global operations and that GM technology would fall into the hands of competitors.

GM will keep and restructure Opel, which unlike Saab, is considered critical to its international vehicle development.

One success has been GM's effort to sell Hummer. The brand is going to Chinese heavy equipment maker Sichuan Tengzhong Heavy Industrial Machinery Corp.

Niche brands like Saab have been especially hard hit by the drop in auto sales as the few customers in the market are looking for more mainstream models, said Rebecca Lindland, auto industry analyst for the consulting firm IHS Global Insight.

Those difficulties make it hard for GM to sell some of its smaller brands as it restructures. GM failed to find a buyer for Saturn earlier this year and backed off plans to sell Opel to a consortium of buyers.

"This is a bad time to sell your house and it is a bad time to sell car companies," Lindland said. "This market is incredibly challenging right now because these are capital intensive purchases."

Sales of Saab cars reached an all-time high in 2006, when GM sold 133,000 cars globally. Sales slipped to 125,000 in 2007 and fell to 93,000 in 2008.

In the U.S., Saab sold 7,812 cars through November this year, down 61 percent from the same period last year. Most of those sales came from two models, the 9-7X SUV and the 9-3 sports sedan.