Editorial: Opel Watch: Russia Vs. China

Bertel Schmitt
by Bertel Schmitt

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.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • Dimwit Dimwit on May 23, 2009

    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.

  • Lynn Ellsworth Lynn Ellsworth on May 23, 2009
    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."
  • MaintenanceCosts It's not a Benz or a Jag / it's a 5-0 with a rag /And I don't wanna brag / but I could never be stag
  • 3-On-The-Tree Son has a 2016 Mustang GT 5.0 and I have a 2009 C6 Corvette LS3 6spd. And on paper they are pretty close.
  • 3-On-The-Tree Same as the Land Cruiser, emissions. I have a 1985 FJ60 Land Cruiser and it’s a beast off-roading.
  • CanadaCraig I would like for this anniversary special to be a bare-bones Plain-Jane model offered in Dynasty Green and Vintage Burgundy.
  • ToolGuy Ford is good at drifting all right... 😉
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