By on May 23, 2009

One amazing aspect about the hunt for the distressed assets of Chrysler and GM is the absence of the Chinese. Weren’t they eager to snap up anything they could get their hands on? And who would have thought that Fiat of all auto makers would walk away with Chrysler—and possibly large parts of GM—if their Opel bid gets approved? The absence of the Chinese was duly noted in Ed Niedermeyer’s piece “Where Is China?” It talked about xenophobia, and the discussion soon turned into a xenophobic slugfest and had to be closed.

Guess what: China is still interested. But a more serious cold war adversary is currently in pole position to get their hands on the European part of General Motors: Russia. Some see the Kremlin itself running Opel.

Yesterday, we reported that a Chinese company had voiced their interest in Opel, a day late after the bidding was closed Wednesday.

Financial Times now fingers Beijing Automotive Industry Corp (BAIC) as the Johnny-come-lately which “has expressed an interest in buying a stake in Opel together with the rest of General Motors’ European operations.”

Beijing Auto is no stranger to joint ventures. Their joint venture with AMC actually predated Volkswagen’s China engagement by a hair: Beijing Jeep started cranking out Cherokees in 1983. That led to Chrysler and later to a joint venture with Daimler Benz, which is still on-going. Yes, you can buy a Made-in-China E-Class and C-Class Benz.

Beijing Auto’s offer is a bit mysterious and is generally not taken seriously. Even in China, people have their doubts: “No Chinese car company can afford to pay that much money,” said Li Chunbo of Citic Securities in Beijing. Wrong choice of words or bad translation perhaps. They surely “can” afford the €650 million, which is the current bargain-basement price for a controlling stake in Opel. They may not “want” to, but, as the letter from Beijing shows, it doesn’t hurt to ask.

The hot prospect for control of Opel is . . . no, it’s not Magna. It’s pretty much the Russian government. At a Friday briefing in Berlin, Magna co-Chief Executive Siegfried Wolf “laid out the company’s Opel plan for the first time, confirming it aims to team up with Russian partners,” as Reuters has it. In the briefing, Magna confirmed that together with the Russian bank Sberbank Rossii they made a “non-binding indicative” offer to invest €700 million. A portion of this investment would be guaranteed by the German government, which is also expected to underwrite billions of loan guarantees for Opel.

Under the offer, GM would keep a 35 percent equity stake in Opel, while Sberbank would take 35 percent, Magna would get 20 percent and Opel’s employees would get 10 percent. The German magazine Der Spiegel analyzed the deal. Their conclusion: “The one who profits most: the Kremlin.” According to the magazine, Sberbank is a “quasi governmental organization” (60 percent of its stock is owned by Russia’s central bank).

Sberbank is run by German Gref, Russia’s former Minister of Economics and Trade, and part of Putin’s inner circle. GAZ, also part of the Magna bid, is also close to the Kremlin. GAZ’s owner, oligarch Oleg Deripaska, also a Putin faithful, had stock in Magna until last year. The linkup between Magna/Sberbank/GAZ and Opel was an early favorite of the Social Democrats and the German metalworker union.

“A Russian-social democrat-union old boys network for Opel?” asks Der Spiegel. Opel has a cool image in Russia, GAZ can use Opel’s know-how. And Sberbank would finally pull of the Western takeover they had wanted so much and could never complete.

Now what about Magna? With its 20 percent, it would play third fiddle. Says Der Spiegel: “Investment bankers have a suspicion: The Russians knew that they would have met with political opposition if they would have bid directly for a Western company. They simply sent Magna ahead. The partnership with the Austro-Canadian parts maker is only a tactical maneuver. The Russians are in the driver’s seat.”

Funny coincidence: Before striking a deal with AMC, Beijing Auto made Russian Jeeps. Production continued well into the new millennium. Conspiracy theorists to the front, please.

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9 Comments on “Editorial: Opel Watch: Russia vs. China...”


  • avatar
    Rday

    I think the chinese are wary of getting too involved in europe where the governments have so much power to interfere with the manufacturing system. Or maybe the chinese think that they can just steal all the designs and not have to pay for them. seems like they have been doing this quite successfully so far. Why pay big bucks if you can copy it for almost nothing?

    Russia just wants to get the knowledge too. They will not support jobs in europe over their own people. Seems like Open must be in really big trouble to have the germans looking at dealing with either of these two countries. The germans must be absolutely desperate.

  • avatar
    Steven Lang

    No, it’s not a matter of desperation.

    The German government could easily chose to keep Opel within the EU umbrella. Fortunately they realize that the level of overcapacity in the EU and throughout the world make an automaker like Opel little more than a ‘jobs’ issue.

    If they do decide to make a deal with the Russians/Magna there will be very strong guarantees against moving or diverting production.

    The Russians are trying to become less oil dependent. Sad to say that this will remain a chronic issue so long as the corrupt elements make the rules there. The United States went through a similar period (and is still ongoing to be quite honest) but at least the federal government had minimal influence during it’s early economic development.

    Russia… China… not so much.

  • avatar
    ThisWas

    Put a diesel in that green Chinese jeep and a $20,000 sticker on its window and I could overcome my xenophobia.

  • avatar
    OldandSlow

    It doesn’t sound like the German’s are going to get their cake and eat it too with whoever bids for Opel unless taxpayers pick up some of the tab.

    http://www.nytimes.com/reuters/2009/05/23/business/business-uk-gm-opel-magna.html

  • avatar

    Put a diesel in that green Chinese jeep and a $20,000 sticker on its window and I could overcome my xenophobia. Last time I looked (2005,) those “Russian” Jeeps did cost less than $10K in China. I actually wanted to buy one, for old times sake.It didn’t have a diesel, but a very dirty gasoline engine. Even the sales droids recommended against it. Couldn’t drive it now inside of the city with the new anti-smog rules.

  • avatar
    BMWnut

    This is getting too complicated for me. The communists are buying up car factories from the capitalists? And I thought we won the Cold War.

  • avatar
    ra_pro

    BMWnut,

    I asked the same question months ago; who won the cold war from todays perspective?

  • avatar
    Dimwit

    It’s obvious that China’s companies are very wary of foreign adventures. As long as they can control the playing field, they will be a force but once they go offshore things are not as assured and they aren’t willing to go that extra mile.
    I doubt that anything will come of this.
    Russia, OTOH, is trying to slip the bonds of their economy and that means foreign investment. If getting controlling interest with a reliable manager on board it becomes a no brainer.

  • avatar
    folkdancer

    This is getting too complicated for me. The communists are buying up car factories from the capitalists?

    China for small and medium size enterprises is far more wild capitalistic than anything in the U.S. or Europe. For larger enterprises it becomes an old boy network and the Communist party is just a name for the club house.

    Russia appears to be closer to a gangster operation. Neither the labels Communist or Capitalist fit.

    When you think about it the pure ideal of Communism and the Christian idea of heaven are the same thing. We know that Communism doesn’t work among living people and Christians have to take it on faith that it might work with just their souls. “From each according to his abilities to each according to his needs.”

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