One of Russia's Richest Men Talks to GM about Buying Hummer, Report Says

One of Russia's Richest Men Talks to GM about Buying Hummer, Report Says

By Michelle Krebs

    DETROIT - One of Russia's richest men Oleg Deripaska reportedly has held preliminary talks with General Motors to buy Hummer, sources told Reuters.

We're not surprised. As GM now has discovered, we guessed interest in Hummer would be high, especially from overseas investors. We figured Deripaska, with heavy interest in the auto industry and ties already with GM, was among them.

Deripaska owns Russian automaker GAZ and purchased a chunk of GM stock about a year ago. In May last year, Deripaska paid $1.54 billion for 20 percent of Canadian auto supplier Magna.  It appeared his purchase was tied to Magna's attempt to purchase Chrysler, which Magna lost to Cerberus Capital Management. 

Deripaska further had been rumored to be interested in buying Jaguar and Land Rover from Ford. Those brands then went to India's Tata Motors.

So Deripaska clearly is shopping for a prestigious global brand. Purchase of the American icon Hummer would do the trick.

What's more, adding Hummer also would give Magna more business. Magna assembles vehicles for other manufacturers globally and likely would be involved in Hummer production if Deripaska bought the brand. After Deripaska purchased a stake in Magna, his GAZ formed a joint venture with Magna to first produce car parts and build Chrysler models for Russia.

SUV sales are booming in Russia. GM established official Hummer sales outlets in Russia because so many were being brought into the country on the gray market. GM had changed some of its business practices in the U.S. regarding Hummer in an effort to curb the Hummer gray market trade, such as offering incentives on leasing instead of purchases to make it more difficult for the Hummer to leave the country. GM also told its U.S. Hummer dealers to be on guard for certain warning signs that would indicate customers were likely buying Hummers for gray market export. Paying cash is the biggest red flag.

Like a Character from a Novel

Deripaska is an interesting character. With a net worth estimated at $13.3 billion by Forbes magazine, he ranked No. 40 among the 2007 list of billionaires, making him Russia's second-richest man. Some reports say he now is the richest.

Deripaska started building his wealth in the aluminum industry. He bought into a huge aluminum smelting plant at age 26. Media reports say he slept next to its poisonous furnaces to protect the plant from a business rival who phoned to issue death threats.

He amassed an even larger fortune by accumulating a business empire through "ruthless, although technically legal, takeover raids after the collapse of the Soviet Union in 1991," according to various media reports, including the Toronto Star.

The U.S. State Department rescinded -- and later reinstated -- Deripaska's visa in 2006 because of alleged ties to organized crime in Russia, allegations that were not pursued nor proven.

Well-connected politically, Deripaska has ties to Vladimir Putin and is related, by marriage, to Boris Yeltsin.

Derispaka's holding are under the umbrella of Basic Element, a Russian holding company. It has controlling interests in: United Company RUSAL, the world's largest aluminum maker; GAZ, Russia's second-biggest automaker that builds its own cars under the Volga and Gazelle brands; Russian Machines; Aviacor, an aircraft manufacturer; and Ingosstrakh, an insurance company. He also owns a construction business.

Michelle Krebs:  is Editor-in-Chief of AutoObserver.com. Follow @AutoObserver on Twitter.