Car manufacturer General Motors has agreed to sell its Saab Automobile division to Swedish high-performance sports car maker Koenigsegg by the end of this year.

Koenigsegg, which was chosen as favorite bidder for Saab earlier, raised its demands for funds from Sweden and the Detroit-based carmaker to a total of $1.5 billion from $1 billion.

It was believed that Koenigsegg still needed to secure an additional $300 million to complete the transaction.

GM and Koenigsegg, based in Aengelholm, Sweden, are pushing forward with the deal while talks continue with the Swedish government over funding, said the sources.

GM recently completed a 40-day restructuring under bankruptcy protection, and is now 61 per cent-owned by the US government, with smaller stakes held by Canada and a few bondholders. The restructuring has cut debt from $54.4 billion to $17.3 billion.

The US and Canada have provided about $60 billion in loans.