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GM Purchases 50% of Saab; Joint Car Production Planned

<i> Reuters</i>

Saab-Scania AB stunned the automobile world today by agreeing to sell 50% of its Saab auto division to General Motors Corp. for $600 million and set up a venture with GM to produce cars together.

Saab has been hit by weak sales in recent years despite its long-standing image as a maker of quality autos, and its diversified parent has been seeking a partner to invest in the company.

The pact with GM, the world’s largest car maker, came as a surprise since Saab was widely expected to complete a deal with Italy’s Fiat SpA.

Saab was driven to find a partner by a turndown linked to price increases and intense competition. Its relatively small size has been a handicap in an industry increasingly dominated by a handful of global car makers building up for the unification of European Community markets in 1992.

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GM has made strong gains in Europe in recent years while its domestic business has fallen into a serious slump. The Saab purchase was viewed as a move to consolidate its gains in Europe and shore up its quality image at home.


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