Beijing Auto to Buy Some Saab Assets
The deal, sealed over the weekend in Sweden, will enable Beijing Auto, one of China's main state-owned auto makers, to integrate the Saab technology into its own vehicles. The agreement covers some models of Saab's 9-3 compact sedan series and the current 9-5 midsize car, along with their engines and transmissions, the person said.
Financial terms of the agreement weren't immediately available, but the person said Beijing Auto plans to finance the acquisition in part through loans from Chinese state banks, and noted that the company already has a 20 billion yuan ($2.93 billion) line of credit from Bank of China.
An announcement regarding the deal is expected to be made soon, said the person, who added that Beijing Auto and GM were continuing to negotiate over other possible aspects of cooperation on Sunday.
The deal is part of a broader push by China to create a small number of globally competitive auto makers through domestic consolidation and by acquiring troubled foreign auto makers or their technology. Chinese car makers are gaining strength thanks in part to a home market that has boomed as the rest of the world has sputtered. China's domestic passenger-vehicle sales were up about 50% in the year's first 11 months, and the country is on pace to post total vehicle sales of more than 13 million vehicles this year, surpassing the U.S. as the world's biggest auto market.
Zhejiang Geely Holding Group Co., a privately owned Chinese car maker, was named by Ford Motor Co. in October as the preferred bidder for its Swedish unit, Volvo. And a Chinese machinery maker earlier this year struck a deal to buy GM's Hummer unit, although that deal still awaits government approval. Beijing Auto was a leading contender earlier this year to buy GM's Opel GmbH unit in Europe, before the U.S. company chose another suitor, and, later, canceled the sale.
Selling Saab is a key element of GM's revitalization strategy, but the U.S. auto maker has struggled to seal a deal. Last month Swedish sports-car maker Koenigsegg Group AB unexpectedly dropped a separate bid for Saab. Beijing Auto had been putting the finishing touches on a deal to help Koenigsegg finance that acquisition, in exchange for which the Chinese company was supposed to secure access to Saab's technology and know-how.
Other potential investors in Saab since the Koenigsegg deal collapsed have included investor Ira Rennert's Renco Inc. and Wyoming-based Merbanco LLC, founded by merchant banker Christopher Johnston. GM'S bankers informed Merbanco about two weeks ago that it wasn't invited to participate in further talks about Saab.
"We are negotiating on various aspects of Saab and will announce when there is any further development," a GM spokesman said Sunday in an email. He declined further comment "at this time."
The new deal between Beijing Auto and GM was put together over the course of about two weeks after Koenigsegg pulled out, the person with knowledge of the agreement said.
The person suggested an additional agreement may still be squeezed out of the continuing discussions, which are taking place near Saab's production hub in Trollhattan, Sweden. The person said Beijing Auto President Wang Dazong is there leading the team from Beijing and is "still exploring ways to reach further deals for cooperation." The person declined to elaborate.
One element of this weekend's deal that couldn't be learned is whether it will allow Beijing Auto to use the Saab name in China or elsewhere. It wasn't immediately clear whether Mr. Wang in the continuing talks is trying to acquire a right to use the Saab name, or the rest of Saab's assets.
Some reports have said the partial sale of Saab technology and other assets could lead to the end of Saab, with its other assets, including its headquarters, liquidated. That outcome, the reports have said, could threaten at least 3,000 Saab jobs in Sweden.
Beijing Auto was China's first auto maker to team up with a foreign counterpart, when it partnered 25 years ago with then-American Motors Corp. to produce and sell Jeeps in China. But it has failed to develop a strong brand of its own, even as rivals such as Shanghai Automotive Industry Corp. have roared ahead.
Beijing Auto's main businesses now are joint ventures with Hyundai Motor Co. and Daimler AG's Mercedes-Benz unit, as well as a heavy-truck producer called Foton. Beijing Auto's own brand is a minor competitor in China's domestic market, with only a small lineup of aging sport-utility vehicles.
Mr. Wang, in an earlier interview with The Wall Street Journal, has said that developing a strong brand would require foreign technology and know-how, which is best achieved by buying into a troubled overseas auto maker. He cited Shanghai Auto's development of its Roewe brand using technology from MG Rover.