By on December 26, 2009

Putin and Gref. Picture courtesy

These days, no Christmas cheer is complete without a little Opel jeer. Russia’s Sberbank has demanded compensation from GM for reneging on the Opel deal, Sberbank CEO German Gref said in an interview on Russia’s Vesti television channel. Groveled a grouchy Gref:

“We have incurred significant costs. We have estimated all expenses and handed over a demand for voluntary compensation to the company. If the demand is not met, we will press for compensation by judicial means.”

Sberbank’s CEO complained that some 9,000 pages of contract had been drawn up over 9 months negotiations with GM, only for GM  to withdraw two days before its planned signing, without providing any “essential explanations,” reports the Russian news agency Novosti.

Sberbank is said to be close to the Russian government, and if they file in Russia, they might find a sympathetic court. It wouldn’t be the first time that GM had to pay after a deal went kaput. Fiat received $2b of go-away money from GM after their romance soured.

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24 Comments on “Sberbank To GM: You Leave, You Pay...”

  • avatar
    John Horner

    Fiat had an actual signed set of contracts with GM under which GM was obligated to buy the rest of the Fiat automotive business if Fiat wished to sell it. In stock option terms, Fiat owned a “put option” on their automotive business and GM was the counter party. GM paid $2 billion for the rights to get out of that contractual obligation. Cash in lieu of performing the underlying obligations of a put option is one of the standard ways in which a put option is settled.
    Sberbank, on the other hand, had no deal with GM. Deals fall apart at the final moments all the time, and unless there were terms in a letter of intent signed by the various parties providing for a breakup fee, no payments are normally due. Individuals, businesses and banks expend great efforts trying to make deals happen all the time, and often those deals don’t get done. Normally that is just one of those things which happens. Everyone dusts themselves off and moves on to the next idea. It seems, however, that in Russia things often happen which are outside the normal bounds of western business practices, so who knows how this will play out.
    In any case, the analogy to the GM-Fiat deal is very weak.

  • avatar

    I’ve heard anecdotal accounts of car dealerships who have the temerity to send a bill to a customer who failed to sign a deal after taking a test drive and putting the salesman and F&I shark through their paces.
    Attempting to collect compensation from a counterparty for hours worked arranging a transaction unfavorable to said counterparty always struck me as exquisitely puerile.

    I wouldn’t put it past them to sue a date in small claims court for half the cost of dinner because she didn’t put out at the end of the night.

  • avatar

    Nice picture of Putin wondering where to stick the knife in his next victim. Sberbank should sic the ex-KGB guy on GM.

  • avatar

    Well, two days after Whitacre got Fritz to pull the plug, Magna said it would be suing GM for $200 million for screwing the deal, and to compensate them for expenses involved in getting everyone to agree to the deal. By that, they meant the governments of Germany, Spain, Belgium, the UK and Poland, everywhere Opel has plants. This was reported throughout the Canadian media, because of Magna’s presence here.

    You may recall that the chancellor of Germany was not in the least amused by GM’s sudden decision to cancel the sale of Opel. Mr. Horner seemed upset by my comments at the time here on TTAC, where I pointed out the complete lack of any knowledge of diplomatic etiquette by Whitacre really cheesed off Germany. This was not merely commercial business, but the blowing off of sovereign governments.

    It may therefore not be out of the realm of possibility that Sberbank has a case for compensation. Frankly, I hope they do pursue the issue, because it seems that GM, as usual, were not bargaining in good faith. They still think they’re special in some odd way.

  • avatar
    Geo. Levecque

    Gm management is to blame entirely for this “screw up” let them eat crow, they deserve what they get and as Phil Bailey says in his recent blog entitled “The Shell Game” they  GM still have many problems in all there vehicles they produce, they can’t hide it either by using every dirty trick in the book.  GM this looks good on you!!

  • avatar

    and who is at the center of these screwed up deals? John Smith. yet I read very little about this totally incompetent failure. can’t find any reason why he is employed by GM, there must be a reason but I can’t find it.

    • 0 avatar

      Buickman it is clear EVERY TIME G.M. puts it’s proverbial business foot down it’s stepped in another pile of excreta! They’re liquidating everything slowly BUT SURELY. I guess(since nothing makes sense) they’re getting ready for 2012, and the end?

  • avatar

    Put on your political filter for a second..  Obama owns 61%…  Russia makes a BIG stink and Hillary has to step in and “work something out”…

    • 0 avatar

      We own it.  Obama is just the chairman.  We are the “shareholders.”  And since we as shareholders (as you note below, it’s the previous president that really put the ownership burden on us) selected the new “chairman” with an a open primary process and general election this marks the first time in history that GM’s “shareholders” actually choose the “chairman” of the company.  That’s not an endorsement at all of the US owning GM, but a critique of how Delaware’s “race to the bottom” corporate governance laws have stripped private shareholders of their power.

  • avatar

    Put on your political filter for a second..  Obama owns 61%…  Russia makes a BIG stink and Hillary has to step in and “work something out”…

    Yeah. We’d be sooooo much better of if W were still running things. W would have either done something similar to keep things sputtering along or the whole industry would be flat on its can.

  • avatar

    Your confusing me.  I didn’t say anything anti-Obama.  In fact “W” created this particular problem with the first round of bailouts.
    I’m just pointing out the fact that this could be a political play vs. a contract issue.

  • avatar

    It is about time that someone take GM to task for not bargaining in good faith with these companies. GM is just wasting everyone’s time and probably never intended to sell Opel anyway. I think that the Russians are on to something. If GM had to pay for wasting all of our time in years past with all of their poor customer service/sales followup they may never have had to go bankrupt. These guys deserve all the crap that is coming their way. And these losers will probably hit us taxpayers up to cover the cost of additional ‘fees’ for their incompetence. What a load of crap.

  • avatar

    And these losers will probably hit us taxpayers up to cover the cost of additional ‘fees’ for their incompetence.

    sure thing…

  • avatar

    Just got to be shmarter next time, u tell him u owe nothing should the deal went South.
    But dealing with the Ruskies it could be a different ball game.
    And they’re even more upset as the Middle Kingdom bagged the Volvo, perhaps the SAAB next.  Putin got Zilch.
    Caveat Emptor

  • avatar
    Mark out West

    This is bogus.  GM, like all U.S. companies, issues a Letter of Intent prior to entering into negotiations.  I seriously doubt they had an expense compensation clause in there for a Russian bank.  Standard boilerplate first-year Contracts in law school.

  • avatar

    From a western legal perspective this probably wouldn’t make it too far in court.  However, this is Russia and there are a completely different set of rules in play.
    GM knows (or should know) that they are at risk to cough up some cash or some small claims judge in Chelyabinsk is going to slap a lien on the local Chevy plant and that will be that!

  • avatar

    Conventional wisdom would tell you that GM shouldn’t be obligated to pay anything.  However, in Russia’s legal system this is replaced by the “Golden Rule” – whoever can offer up the biggest bribe wins.  In this case it looks like the latter wouldn’t apply either since Sberbank is owned by the Russian government, so GM will pay no matter what. Even if there is a political solution, and GM doesn’t end up paying, the Russians will find a way to benefit from this. GM was the best selling foreign brand in Russia for the last couple of years and there is too much at stake for them to piss off the Russian government.

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