In Bid to Revive its Fortunes Saab Inks Engine Deal with BMW

Saab Automobile has signed a deal to begin using BMW engines as the struggling Swedish automaker seeks to restore its profitability and prestige.

BMW will supply Saab with 4-cylinder 1.6 liter turbocharged gasoline engines that will be adapted to meet Saab's specific requirements, beginning in 2012, Saab said in a statement. The deal was signed Wednesday in Trollhattan, Sweden, where Saab is based.

"This is a major step for Saab on our road to becoming a profitable independent premium car maker," said Saab chairman Victor Muller (pictured) in a statement. The companies are also open to exploring other future opportunities, he added.

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Saab's parent, Spyker Cars, bought loss-making Saab from General Motors in February for $400 million, after Detroit-based GM had tried to unload the brand for a year. Saab sold fewer than 10,000 cars in the U.S. last year, and it was never profitable during GM's 20 years of ownership.

Worldwide, Spyker's long-term goal is to sell 120,000 Saabs a year, Reuters reported. The BMW deal aids Spyker's effort to obtain new technology despite a lack of capital.

"BMW's engines and their fuel-savings innovations are widely regarded as a benchmark in the premium segment," said Saab CEO Jan Ake Johnson in the statement.

"A deal with BMW would help the brand," Keijser Capital trader Peter Jurgens said earlier this week when reports surfaced of an imminent engine deal, according to Reuters.

For its part, BMW said the deal builds upon the German automaker's plan to expand its powertrain business worldwide. "[The] agreement marks another important milestone along this route," said Ian Robertson, BMW's sales chief.