A BBC News article reports that Volkswagon (VOW:XETRA) is backing away from merger talks with Porsche (PAH3:XETRA). I first told you about this merger, which would consolidate company operations, back on May 8, here on the Emerging Markets Blog. The BBC reports that VW is suspending talks with Porsche saying that, “constructive negotiations were not possible at the moment.” Porsche has a significant amount of debt, and VW wants the luxury car company to reduce that debt. Ironically, Porsche took on about $12.2 billion in debt so that it could increase its stake in VW… The history between these two companies is long and complicated, and while VW says its backing away from the table, the two own stakes in each other and were founded by the same family. Porsche says the talks are still ongoing.

The news made my jaw drop a bit: “Toyota Motor Corp. lost 765.8 billion yen ($7.74 billion) in its fiscal fourth quarter, leading the world’s largest auto maker by car sales to its first full-year loss in 59 years and setting the stage for even worse results in the current fiscal year.” (from the Wall Street Journal) The first full-year loss in 59 years! That’s astounding… It seems like the auto industry doesn’t quite know which end is up… General Motors (GM:NYSE) just posted a $6 billion loss in its first quarter, but is seeing some interest in the potential sale of its Opel division from some European buyers - including Fiat SpA (F:Milan), who has already entered a deal with Chrysler, and has said it would be interested in GM’s Latin America, Russia and China operations. Porsche (PAH3:XETRA) and Volkwagon (VOW:XETRA) are going to merge… Russia’s OAO GAZ Group (GAZA:Russia) is selling its LDV brand (a U.K. van maker) to Malaysian-based Weststar - and also showed interest in GM’s Opel division. And Ford (F:NYSE) wants to convert one of its SUV manufacturing plants to an electric vehicle production line. It’s like a giant game of 52-card pick up, where the cards raining down magically turn into cash… GM gets leaner, losses debt and gains potential government investments… European car makers find synergy and savings in merged operations… And everyone goes home happy, right? Only when people start buying cars again.

I woke up fairly early this morning, considering my 21-hour, three-legged flight yesterday. I was still a little tired, but I was hungry, and my stomach won out, particularly since I remembered that I bought the breakfast buffet with my room stay at the Protea Hotel Balalaika.

Let me start throwing some numbers at you.

I booked two nights at this hotel for $73 a night, including the breakfast buffet. The coffee was outstanding by the way. Somewhat a cross between an espresso and a cafe americano. I was happy… I booked through Expedia, and I’m not sure if I just got a special, or if that was the regular going rate. I’m literally 200 meters from the Hilton, and a quarter mile from a large Radisson, both of which had rooms at more than triple the rate I got.

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You know, it’s not just U.S. automanufacturers that are feeling the heat from this global financial crisis. Swedish automaker Saab (SAAB-B:Stockholm) just announced that it would be filing for bankruptcy.

Turns out, there’s a connection between U.S. problems and this latest news.

You see, General Motors (GM:NYSE) used to “own” the Saab brand… And that meant owning the company’s debt, too. Like the $340 million loss in 2008. Well, now that GM is in hot water here, and is restructuring its own business, it’s trying to cut out the diseased parts. That’s Saab…

So, the Swedish company is looking for protection from creditors in the bankruptcy filing, and may even sell itself, if there are any potential buyers.

Know anyone that wants to buy an indebted Swedish car company? Anyone? Anyone?