With the sale by General Motors Co. of a majority stake in Adam Opel GmbH now looking like it will
finally close, the Financial Times on Wednesday published a big
article on an underexamined element of the deal: the partnership between Magna International Inc. (NYSE:MGA) and Russia's OAO Sberbank, which together are buying the stake.
Over at Bloomberg, meanwhile, there's a hefty Wednesday
report on the dilemma faced by Renault SA CEO Carlos Ghosn as he tries to rescue his $1 billion investment in Russia's biggest automaker, OAO AvtoVAZ.
Taken together, what do these two pieces say about Russia's auto market and the aspirations Western companies bring to it? The words that come to mind are "murky" and "risky." That's not to say that staying out was an option for either Magna (which without Russian help couldn't have won Opel) or Renault-Nissan, which aims to be one of a half-dozen or so surviving global auto giants when industry consolidation reaches an end-game.
But it is to say that the Russian auto market resembles a riddle wrapped in a mystery inside the trunk of a shiny new Lada sedan.
Russia is one of the world's great growth markets for the auto industry, except it shrank by more than half last year. There are substantial local companies to partner with, but deals are dogged by governance and tech-transfer issues. To confuse things further, there is speculation that Russia could move to consolidate the auto industry as it earlier did with aircraft makers.
Magna's plans for Opel in Russia are surprisingly sketchy, according to the FT. The expectation is that Sberbank will sell the Opel stake to Gaz, an automaker with which parts maker Magna has an existing partnership, but beyond that there seem to be few certainties. Here's one, though: Count on GM, which retains a 35% stake in Opel, to watch closely to see that Magna's use of its intellectual property in Russia -- a big sticking point in getting the deal done -- remains within the scaled-back limits agreed to in the deal about to be signed.
As for Ghosn, the 25% stake in AvtoVAZ he beat rivals GM and Fiat SpA to capture in 2007 apparently failed to win him much control over the company. Renault managers have been overruled on key decisions, Bloomberg reports. And now Prime Minister Vladimir Putin wants Renault to add to its $1 billion investment, or see its stake diluted.
Globalizing an industry isn't easy. Doing it during a sharp global recession, when the industry in question has a long history and is at once politically charged, capital intensive and technologically demanding, is doubly hard. Still, some countries are harder than others. -
Kenneth Klee
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