Beijing Autos to buy Saab car, engine technology

[December 14, 2009]  SHANGHAI (AP) -- Beijing Autos has agreed to buy technology from GM's Saab Automobile, a breakthrough for the Chinese automaker that could clear the way for General Motors Co. to sell the rest of Saab to another buyer.

An announcement Monday from state-owned Beijing Automotive Industry Holdings gave no details about the cost or timing of the acquisition of car and engine technology.

Beijing Autos, also known as BAIC, said it plans to buy the rights to some powertrain technology for Saab's 9-5 and 9-3 sedans, including engine and gearbox knowhow.

The production equipment used to make the 9-5 will be moved to China to produce BAIC cars, and Saab will help integrate the technology into the Chinese company's vehicles, the two sides said.

Saab will also support Beijing Auto's efforts to build its own car brands, using the Saab technology, said the announcement.

"This arrangement is excellent for both parties, now and for the future. We have developed a good relationship with BAIC and look forward to working with them to integrate this Saab technology into their future vehicles," Jan Aake Jonsson, managing director of Saab Automobile, said in a statement released by GM on Monday.

GM is also in talks with another buyer to sell the entire Saab brand, a person familiar with the negotiations said Sunday.

The sale of the technology to Beijing Autos will help Saab financially but won't hinder a deal to sell the Saab brand and its current production lines to another buyer, said the person, who spoke on condition of anonymity because they were not authorized to speak about the deals.

Beijing Autos has partnerships with Germany's Daimler AG and South Korea's Hyundai, but makes only trucks under its own brand name. The Saab acquisition will enable it to build a passenger car to call its own, but the company still has to build up its own reputation and product line, analysts said.

"BAIC may finally get a self-owned brand, however, the benefit from this deal depends on how much they have spent and on how well BAIC manages its Saab assets. We'll see," said Zhang Xin, an auto analyst at Guotai Jun'an Securities.

Earlier this month, GM had said it might phase out the Saab brand if it didn't find a buyer before the end of December. About 4,500 jobs at Saab are at stake.

However, GM said new potential buyers had emerged after Sweden's Koenigsegg Automotive AB dropped out of a deal to buy the company in November.

Private equity firm The Renco Group Inc. and investor group Merbanco Inc. are reportedly also interested in Saab.

Beijing Autos originally was part of the Koenigsegg team and said it would re-evaluate Saab after that deal fell through.

Beijing Autos, founded as Beijing Auto Works in 1958, was the first Chinese car maker to team up with a foreign partner, when it set up its Beijing Jeep Corp. joint venture with American Motors in 1983.

It and other Chinese automakers are keen to acquire technology at bargain prices that might help them leapfrog to higher quality production and build up their brand names in overseas markets. Several have sought to buy the European brands and technology of Detroit's "Big Three" automakers as they restructure.

Independent Chinese car maker Geely Group was also reportedly vying for Saab and is still said to be seeking to buy another Swedish automaker, Volvo Cars, from Ford Motor Co. That deal has not yet been completed.

Saab had a niche for years with people who wanted small, safe performance luxury cars but filed for bankruptcy in February. Its 9-3 and 9-5 are executive sedans that were first introduced in the 1990s.

Soaring sales, and a languishing American market, have made the China the world's biggest auto market this year, with sales forecast to exceed 13 million units, up a third from last year's 9.8 million.

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Beijing Automotive Industry Holdings: http://www.baw.com.cn/

Saab Automobile: http://www.saab.com/

[Associated Press; By ELAINE KURTENBACH]

Associated Press writer Malin Rising and Associated Press researcher Ji Chen contributed to this report.

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