From Russia With - Snags?
July 06, 2009

By Bill Visnic

The Russian connection is becoming a complicated one for General Motors Corp.

GM, emerging from Chapter 11 bankruptcy in the U.S. while simultaneously working to offload its Adam Opel AG division and operations in Europe, looked to have sealed the Opel deal with a consortium including Canada's Magna International Inc. and Russian automaker GAZ.

But last week, it appeared the presence of GAZ was a fly in the ointment, as GM (and perhaps other interests) reputedly balked at GAZ gaining access to certain GM technologies via the Opel purchase.

Now, adding intrigue is the fact GM (and rival Ford Motor Co.) is suspending automaking operations in Russia for nearly two months as the country struggles through in its own economic trials. Russia for some time has been viewed as one of the most promising growth markets on the globe - a situation that seemed to make GAZ's potential connection with Opel such a sensible deal - but Russian consumers have turned the nation's dealerships into mausoleums and GM said it will suspend operations at its assembly plant near St. Petersburg until Aug. 31 as a result (Ford is closing down until mid-July).

GAZ itself has been hobbled by the plunge in Russia's domestic auto sales and will lay off 7,000 workers in a cost-cutting move.

Meanwhile, the Chinese, seemingly involved in every proposed auto deal of this century, also have joined the competition for Opel. Over the weekend, the Wall Street Journal reported Beijing Automotive Industry Holding (BAIC) submitted a bid valued at around $924 million for Opel.

With the Magna/GAZ-led deal looking more sour by the day, BAIC joined Belgian holding company RHJ International in heating up the battle for Opel.

Making any deal seem all the more hazardous, reports have surfaced that GM believes Opel might require multiple billions of dollars in new investment, while it also reported GM was seeking a deal with the Magna/Gaz consortium that contained a provision to allow it to buy back some or all of Opel in the future. It is not known if GM is pursuing that angle with either RHJ or BAIC.

The WSJ report said, however, that sources indicated the BAIC arrangement would see BAIC holding a 51-percent controlling stake and GM retaining 49 percent of Opel and GM's other European operations included with Opel.

In light of the report of GM's desire to retain the option to repurchase all or part of Opel, the BAIC deal may be attractive to GM.

But one twist remains. The Associated Press reported over the weekend that Carl-Peter Forster, head of GM's European operations, said the deal to sell Opel to the Magna/GAZ consortium were progressing towards imminent completion.

"It's only about the details," Forster was reported as saying, adding that worries about the consortium's access to Opel patents were being sorted out and the parties were down to other matters such as the disposition of existing GM factories in Russia.

 

 

Posted by Michelle Krebs at 3:38 AM under Analysis , Companies , GM | Comments (1) | digg this | Seed Newsvine

Technorati Tags: adamopel, baic, beijingautomotiveindustryholding, carlpeterforster, gaz, generalmotors, gmbankruptcy, gmchapter11, gmeurope, gmrussia, magnainternational, opel, rhjinternational