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August 19, 2009

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GM follows through on deal to pass Saab to Swedish group

GENERAL Motors Corp said yesterday it has signed an agreement to sell its unit Saab Automotive to Sweden's Koenigsegg Group AB, confirming an announcement in June, although government officials warn that more capital is needed before the deal can be closed.

GM said the deal, whose financial details were not disclosed, is subject to a funding commitment for Saab from the European Investment Bank, to be guaranteed by the Swedish government.

Carl-Peter Forster, president of GM Europe, said he expects the deal will be completed within months, but the Swedish Ministry of Enterprise cautioned that there were other conditions to be met.

"Koenigsegg Group should add more private capital, negotiate about loans with the European Investment Bank, as well as agree with the Swedish National Debt Office about the conditions for potential state credit guarantees," said Joran Hagglund from the ministry. "For these, an approval from the European Commission is also needed."

Earlier, GM said it expected to receive US$600 million from the European bank, but Hagglund said yesterday that the amount was uncertain since it depends on how much the company itself is prepared to contribute.

He said a "significant amount" of private capital was needed but gave no figure.

Swedish business daily Dagens Industri reported on Monday that Koenigsegg Chairman Augie K. Fabela II believes about 3 billion kronor (US$412 million) was still needed, in addition to a loan from the European bank.

"We will continue to work with all parties to define the final details and ensure a fast closure of the deal, which we expect to take place in the next few months," Forster said.

The EIB has promised to lend Europe's automotive industry a total of 16 billion euros (US$21 billion) for the development of more environmentally friendly production and was expected to handle Saab's application for a loan in September.

It was not immediately clear how much Saab would seek.

GM said it will continue to share technology and services with Saab during "a defined time period" and that Saab was close to launching several new cars developed with GM.

Koenigsegg Group in June announced its intention of buying the ailing Swedish car brand from its owner in the United States.


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