Jan Ake Jonsson, the CEO of Saab, is in Detroit today – along with a number of Swedish government officials – in hopes of speaking with other potential buyers after the deal with Koenigsegg Automotive AB fell apart.

Three potential buyers have slowly come forward including Beijing Automotive Industry Holdings, The Renco Group Inc. and investors Merbanco Inc. Obviously, the biggest name on the list is BAIH, and they are truly in a position to execute a Saab business plan; however, will BAIH and GM be able to finish a deal?

Frankly, this sounds like a last, desperate, Hail Mary type of play on the part of GM but if Beijing Automotive Industry Holdings plays their cards right they company can walk away with Saab at a fire sale price.

On another note, it looks like the problems of Dubai are going to magically go away… OK, the situation is not exactly that happy but it now looks as if the central bank of the UAE will provide a funding to insure against a default of Dubai debt. The roughly $700 billion the UAE central bank has on the books is more than enough to save Dubai, it is sad to see this happen.

Why?

Quite simply the action will calms fears and perpetuate the unrealistic belief that there will always be someone to bailout those in need, that too big to fail is a reality. If a default can happen to Dubai, it can happen to any government, but not every government will have an angel to provide them with a rescue package.

What would the world to then?

My guess is panic.

What was a shock yesterday is truly reality today.

GM is not in talks with another party to purchase Saab in the wake of the failed attempt to sell the brand to Koenigsegg Automotive AB. Unless something major happens, and happens quickly, the 60-ish year old car company will be a causality of the financial downturn – along with roughly 3,400 jobs world wide.

I wonder how many other classic brands and companies will fail during the downturn.

Here is some big news – GM’s deal to sell off Saab to Koenigsegg Group AB has fallen apart. When it first became apparent that GM was going to sell or shut down Saab the Swedes had their sense of national pride kick, leaving Koenigsegg with the desire to turn their VERY small car company into the savior of Saab (and the Swedish brand).

Initially the deal made no sense. Koenigsegg only produced 34 cars during their first years of operation, how could the company become a high volume company?  They do not have the capacity or management experience to run the brand.  Turns out the deal didn’t make sense in the end as well seeing the stockholders did not believe Saab could switch from being a “high volume” brand to a luxury brand.

Without a buyer Saab is heading to the giant junk yard in the sky, that is to say Saab is going to close down. If the deal does fall apart it will be the third time GM has failed at selling off a unit – Opel and Saturn being the other two. These broken deals only go to show how bad the car industry really is.

I haven’t posted business bits in the last few days, trying to take care of a few other things made my time limited, but there are a number of things in the financial world to pass along.

GM to sell Swedish unit Saab to Koenigsegg

Frankly, I’m surprised GM managed to pull off the deal. From a U.S. sales and distribution point of view, Saab’s footprint is insignificant compared to other luxury auto makers. When you look at the company that purchased Saab, however, one can see that any footprint is a good footprint:

Saab Automobile, General Motors Corp.’s struggling Swedish unit known for its family cars, was rescued Tuesday by a consortium led by Koenigsegg Automotive AB, a tiny company which produces only a dozen custom-made super cars a year.

GM said in a memorandum of understanding that the sale would include an expected $600 million funding commitment from the European Investment Bank, guaranteed by the Swedish government. Additional funding for Saab’s operations and investments would be provided by GM and Koenigsegg Group AB, it said.

On a dozen custom-made cars a year? Does a company that only employs 45 people and produces 12 cars each year have the ability to take over a company of 4500 with a global presence? Hmm… Why am I skeptical of this purchase? Oh, and take a look here for some facts on both companies.

Saab only sold 93,295 cars last year.  Ouch.

Two notable bankruptcies

To recreational (for lack of better words) companies filed bankruptcy in the last few days. Six Flags Theme Parks went belly up due to $2 Billion in debt. Also, the Extended Stay hotel chain fell to the crushing $7.6 Billion it had on the books.

Further signs the consumer is hurting

Credit Card default rates hit another record high.

Bank of America—the largest U.S. bank—said its default rate, those loans the company does not expect to be paid back, soared to 12.50 percent in May from 10.47 percent in April.

In addition, American Express, which accounts for nearly a quarter of credit and charge card sales volume in the United States, said its default rate rose to 10.4 percent from 9.90, according to a regulatory filing based on the performance of credit card loans that were securitized.

As unemployment continues to rise, so will the default rate.

It was just a matter of time before someone woke up and made a hard, and arguably right, choice.  The Swedish Government told Saab automotive, who recently filed for reorganization, the step before bankruptcy, “tough luck”.  With General Motors completely pulling out Saab by the end of 2009, it appears the car born of jets may be one of the first to die from the economic meltdown.

As the enterprise minister, Maud Olofsson, put it recently, “The Swedish state is not prepared to own car factories….We are very disappointed in G.M., but we are not prepared to risk taxpayers’ money. This is not a game of Monopoly.” 

It’s about time someone says it the way it is, and I’m glad the Swedish Government is willing to make such a statement.  Without a doubt, if Saab goes away, a large number of Swedish people will be impacted.  In turn, unemployment will rise and the economic conditions will continue to deteriorate within the country.  As painful as it sounds, there is no reason to bailout a brand that continues to lose money.  

The U.S. needs to do the same with General Motors and Chrysler, but I suspect they will not if the recent bank bad asset plan is any indication, which just insures the problem will continue on for years to come.

Economic Musings – The US

Driving in today I heard that the latest GDP numbers for the 4th quarter and it turns out that the U.S. economy contracted 6.2% in the last three months of 2008. This ends up being significantly weaker than the 3.8% originally predicted at the beginning of the month.

Not only this is the worst GDP drop in 25 years, but the magnitude of the revision is truly astounding. When one looks at the unemployment numbers and the large waves of layoffs in the last two months, Q1/2009 could easily be on par – if not worse than – Q4/2008.

Economic Musings – International

Two days ago I commented that people need to look beyond our boarders for additional indicators of the economic climate. I specifically singled out Japan and Germany. Both countries saw significant contraction in recent months, but what about other countries?

Chilean industrial production fell the most in 10 years as output declined 8.9% year over year, another country we can add to the recession list.

By now it should be clear that this is a world wide recession and no country is safe.

Don’t understand the credit crisis? Watch this.

I know a number of people who do not fully understand the credit crisis and how the economies of the world ended up where they are today. Here is an outstanding cartoon that manages to explain a rather complicated situation in a very simple, yet effective method.

This is a must watch!

• In German, Opel workers stage a mass rally demanding that GM (the Parent Company) keep their plant open.
• Saab, who just filed Bankruptcy in their home country last week, is also staging a protest against GM closing production facilities.
• The Latvian Government is on the verge of collapse due to the financial crisis.
• Greek farmers shut down airports and public services as a form of protest to the current economic conditions they face.

And the final random thoughts for this post…

It’s the weekend and I need a break – time to get away from the stresses of work, the world, and life in general.

I’ll be having dinner with my Parents on Sunday, which will be enjoyable, and I expect to watch The Curious Case of Benjamin Button as well.

There will be no cooking, exotic or otherwise… though I do have a few new things I want to try. One specifically is the Paprika Chicken Roast over @ ReTorte! Wandering Coyote really has some good food selections.

Finally, my review of The Prodigy’s Invaders Must Die will come this evening…

Until then!