German factory wins the battle to build new Saab

Fears over the long-term future of Saab's main Swedish car plant intensified yesterday after the company's owners, General Motors, said that the replacements for the 9-3 model and the Opel Vectra would be built in Germany.

Confirming what the workforce in Sweden had long suspected, GM announced that its Rüsselsheim plant in Germany had been chosen in favour of Saab's Trollhättan site to produce the new mid-sized cars from 2008 onwards.

Fritz Henderson, the chairman of General Motors Europe, said that Rüsselsheim had been selected over Trollhättan because it would save the car maker €200m (£134m). "Both plants presented compelling business cases but, in the end, the scale for this particular allocation tipped in favour of Rüsselsheim," he added.

GM officials said the biggest financial penalty of building the new cars in Sweden would have been the cost of expanding the Trollhättan plant to cope with much higher levels of production. Rüsselsheim has a capacity of 275,000 cars while Trollhättan's is less than half that at 130,000 cars a year.

As a sop to the Swedes, GM pledged to expand the Saab range with a new "cross-over" model to complement the 9-3 and 9-5 models. GM also confirmed that the new Cadillac BLS model unveiled this week at the Geneva motor show and "selected Saab vehicles" would continue to be built at Trollhättan until at least 2010. GM executives pointed out that few of its other European car plants had guarantees beyond that date.

Apart from Rüsselsheim, only GM's Zaragoza plant in Spain and Eisenach in Germany, which have been selected to build the next Corsa, have certainty of production beyond 2010.

Opel and Saab, which GM bought in 1988, have been loss-making for years. In an effort to stem its European losses once and for all, GM announced a total of 12,000 job losses across Opel last year.

A new pay and productivity deal agreed this week between Opel unions and management was seen as the key to Rüsselsheim winning the contest with Trollhättan. As part of the efficiency savings, 2,700 jobs are being cut at Rüsselsheim, which will reduce the workforce to 3,300 by the time the new Vectra and Saab models go into production.

GM officials declined to say what sort of production levels would be maintained in Sweden once the new 9-3 began to be built in Germany. However, output of the new Cadillac BLS is expected to reach only about 10,000 a year. Trollhättan has a workforce of about 1,000.