The Story of Saab Buyer Koenigsegg

A boutique maker of super-fast cars, Sweden's Koenigsegg is taking on its greatest challenge by buying ailing Saab from GM

By Sean O'Grady

The Koenigsegg CCXR is almost certainly the fastest car you have never heard of. It will accelerate from standstill to 60mph in 2.9 seconds and top 250mph, if your nerves can put up with it.

The corporate development of this Swedish supercar has also been rapid. Founded in 1994 by the businessman Christian von Koenigsegg, it has successfully emulated the established Italian exotica in an astonishingly short time, and has attracted a following among those who can afford around £1m for a toy. Some 45 staff hand-build about 20 cars a year. Koenigsegg reported sales of 106m crowns ($13.8m) last year. It is profitable, but not spectacularly so.

The aristocratic Von Koenigsegg was apparently inspired to make the ultimate sports car by watching a Norwegian puppet film that revolved around racing cars when he was a child. Years later, after he had made his fortune in a trading company, he founded the sports car firm that bears his name, and uses his family's coat of arms as its logo. That was in his twenties. Now, at age 37, comes Von Koenigsegg's greatest challenge: Saab.

The acquisition of Saab from the wreckage of General Motors' European operations is more or less complete—a memorandum of understanding was signed yesterday. Now all they have to do is haul Saab out of the garage and on to the fast lane to recovery.

According to Joe Oliver, a Saab spokesman, Koenigsegg Group was selected "because it is financially strong, takes a long-term view and fits well with our brand". Perhaps, but Saab's troubles are such that Koenigsegg needs its helpers.

The Koenigsegg equity interest in Saab amounts to 66 per cent, split between 23.4 per cent for the Koenigsegg car company and 42.6 per cent held by the trading company still controlled by Von Koenigsegg, called Alpraaz. The Norwegian investment firm Eker group will take a further 11.8 per cent of the shares, while a San Diego-based businessman, Mark Bishop, will take a 22.2 per cent shareholding. Eker Group, in turn, holds a 49 per cent stake in Koenigsegg. The Norwegian tycoon Baard Eker is behind the eponymous firm.

The European Investment Bank is expected to provide $600m (£365m) in financing for the deal, guaranteed by the Swedish government. And, while the old GM loses all of its former 100 per cent shareholding in the new Saab, it will continue to help Saab with "architecture" (car design) and "powertrains" (engines and gearboxes). GM added that "additional support is to be provided by GM and Koenigsegg Group to fund Saab's operations and product programme investments".

Some $500m in assets and cash plus the equipment needed for the planned 9-5 model will be GM's dowry to the new owners. Around $150m in cash is already with Saab, and most of the company's $1.3bn in debts are being dissolved as it reaches the final stages of its reorganisation under the protection of a Swedish version of Chapter 11 bankruptcy.

There may be other backers, too. A report from Associated Press yesterday said that, in an application to the Swedish Companies office, the company set up by Koenigsegg to buy Saab will have on its board one Augie K Fabela II, a US-based co-founder and former chair of the Russian telecoms operator VimpelCom. How much Russian money, if any, has been channelled into this deal is not clear.

For the time being, at least, Saab will continue to work closely with the former GM Europe, soon to be owned by a Russian-Canadian consortium that includes the Russian oligarch Oleg Deripaska. Most of Saab's new products are based on GM Europe/Opel designs, especially the new 9-5, related to the Opel/Vauxhall Insignia.

Koenigsegg is impressive but, longer term, Saab will need friends in the volume car business. The revived GM, partner rather than proprietor, will be one. The trend among car companies today is to develop a range of alliances. Peugeot, for example, works with Fiat on vans; with Ford on diesel engines; and with Mitsubishi on SUVs. Saab might eventually follow a similarly promiscuous lifestyle.

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