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Driven Not by Greed, but by Fear

The Financial Times has an interesting one on Magna’s gamble (as a Trojan horse for Russia) to snap up GM’s interests in Opel to give the weakened Oleg Deripaska “ownership” of what would be the largest car manufacturer in the world.  Motivating this aggressive business move is not business sense, nor even elaborate geopolitical machinations to impact the German polity, but rather fears over the collapse of industry and the spread of more “Pikalyovo-like” protest events.  At least according to some people interviewed for this piece.

“If the Opel deal does not go ahead, Russia’s car industry is only going to survive with the help of the state because it is just not competitive,” says Elena Sakhnova, industry analyst at VTB Capital, the Russian investment bank.

Gaz and Avtovaz are significant employers in their respective home towns of Tolyatti and Niznhy Novgorod, which are as dependent on carmaking as Detroit or Flint, Michigan. The country’s car industry employs 400,000 to 500,000 people, not including jobs at suppliers.

The Kremlin isincreasingly worried about the potential for a social backlash asunemployment in Russia reaches an eight-year high. Vladimir Putin, theRussian prime minister, was forced to intervene in a dispute inPikalyovo, some 170 miles from St Petersburg, where workers at threefactories blocked a highway to protest over unpaid wages.

Mr Putin forced their owners, including Mr Deripaska, to sign contracts to kickstart supplies and pay their workers.

In the words of one senior western banker in Moscow, the Opel deal “is not being driven by greed – it’s being driven by fear”.