Is Koenigsegg going to buy Saab?

The Koenigsegg CCX is worth about $2.4 million.

Bankrupt General Motors looks likely to sell its Swedish unit Saab to another Swedish carmaker - small-fry supercar maker Koenigsegg.

The two carmakers have reportedly signed a letter of intent and financing has been agreed, leaving only minor issues to be resolved.

GM wouldn't comment on the bid. Saab said the new ownership would be finalised over the next month or so.

Swedish reports say the preliminary deal is being studied by the US Treasury Department, which is helping to manage GM's government-funded restructuring.

Koenigsegg is backed by Norwegian investors. Its 50 or so employees turn out a handful of $2 million supercars each year, most capable of 400km/h (240mph).

Saab, on the other hand, builds upwards of 100,000 passenger cars annually, or 1 per cent of parent GM's global output.

Koenigsegg operates out of an aircraft hangar set up in 1994 by entrepreneur Christian von Koenigsegg, who made his fortune selling frozen chickens.

If the deal goes ahead, Saab would probably become a much smaller niche player, according to Mikael Wickelgren, a vehicle expert lecturer at the University of Skovde, Sweden.

"Saab probably would move towards more specialised niche cars for a smaller customer base," said Wickelgren.

"It is a strategy that one has actually heard Saab speak of, but which has been difficult to achieve in a GM context. GM only thinks about volumes."

But other observers question Koenigsegg's ability to steer Saab through a transition. "I struggle to see how smaller brands can exist as standalone operations - the industry doesn't have a great track record on this," said US automotive analyst Michael Tyndall.

Tough times are producing some surprising automotive partnerships, including bankrupt GM's tentative deal to sell its SUV Hummer badge to Sichuan Tengzhong, a Chinese company that makes cement mixers.

Italian maker Fiat quit the US market in 1983 but will now return under a partnership with Chrysler. Magna International, Canada's largest parts supplier, is in talks to buy GM's European operations centered on Germany's Opel.

The global recession has slashed demand for cars and sent US giants GM and Chrysler into bankruptcy, leaving Ford as the only one of the Detroit Three not needing government aid. GM put Saab up for sale earlier this year and held talks with a number of potential buyers, including Fiat and Chinese carmakers.

Talks narrowed to two or three unnamed bidders in recent weeks. Reports said Merbanco, a group of Wyoming investors, has bid for Saab, as has US billionaire Ira Rennert's Renco Group.