Koenigsegg, a niche sportscar maker that rolls out 18 luxury cars a year, stunned the automotive industry Tuesday when it announced it was abandoning its bid to buy Saab from its US parent GM, citing costly bureaucratic delays in the takeover process.

The decision left Saab's 3,400 workers in the Scandinavian country in a state of shock, sparked a heated political row over the government's handling of the sale, and raised questions about the future of the rest of Sweden's automotive industry as well as the fate of Saab's hometown Trollhaettan.

"Saab is very important to Sweden," summed up Trollhaettan mayor Gert-Inge Andersson, whose son and son-in-law have both worked at Saab in the southwestern Swedish town of 55,000.

Between 8,000 and 15,000 jobs could disappear if Saab were to close, including those of suppliers and subcontractors, and if they also shut down that could pose a big problem for Sweden's other carmaker Volvo, owned by US group Ford.

A Saab closure "could have major consequences for subcontractors and so on. This will affect a lot more people. If this goes in the wrong directon it's also going to impact Volvo," the head of the IF Metall union Stefan Loefven said.

"We risk losing a big chunk of our exports, which is important for Sweden's general welfare," he warned.

GM is set to discuss its plans for Saab in Detroit on Tuesday.

"But the most likely course of action is closure of the brand," predicted Paul Newton, an auto analyst at IHS Global Insight -- a forecast echoed by most of the Swedish media.

Saab has barely turned a profit in two decades.

No other suitor has turned up on Saab's doorstep, but China's Beijing Automotive (BAIC), which had linked up with Koenigsegg to take over Saab, has said it will now "reassess" its options.

China's fifth-biggest automaker is looking to grow internationally, and could possibly be interested in acquiring Saab.

"The problem is that Beijing will be interested in the one thing it is unlikely to get its hands on -- the technology from GM -- and is therefore unlikely to reach an agreement and prevent the Saab brand from disappearing from the automotive landscape," Newton said.

One of Sweden's most respected auto analysts, Matts Carlsson of the Gothenburg Management Institute, suggested GM could hold on to Saab now that the US group has begun to recover from the economic crisis.

He noted that Saab's new 9-5 model, its first major launch in seven years, has just been introduced.

"It would be totally crazy" to shut Saab down after investing billions of dollars "in a product that is finished and just hitting the market."

"If I were in GM's management I would look at the opportunity to increase its share in the premium segment, which is traditionally the most profitable one," Carlsson added.

The Swedish centre-right government has repeatedly refused to take a stake in Saab, arguing that the state should not own companies -- and especially not one that a major car corporation like GM has been unable to turn around.

"I don't believe in that kind of command economy where states run commercial businesses," Prime Minister Fredrik Reinfeldt said on Wednesday.

But with less than a year to go to Sweden's next general election, in September 2010, the issue is a highly sensitive one that the left-wing opposition has pounced on.

It has slammed the government for not doing more to help Saab.

"This is about the thousands of jobs that are at stake right now, and the nation needs to rally around the automotive industry," opposition leader Mona Sahlin of the Social Democrats stressed.

Saab, whose coffers were rapidly dwindling as the sale process dragged on, had been given the green light for a 400-million-euro (600-million-dollar) loan from the European Investment Bank.

But it was still waiting for the Swedish government to agree to act as a guarantor when Koenigsegg decided to pull out.

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