GM Purchases 50% of Saab; Joint Car Production Planned

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.

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.