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Russia’s Eye on Opel

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Yesterday we wrote about the potential political influence in Germany that could be obtained through a majority stake in the struggling GM car company Opel (never mind that the last thing the Russian economy needs right now is more automotive manufacturing capacity).  Today Reuters has a Q+A on the topic with some background information.

WHY OPEL?

Putin tacitly promotes Russian investment in foreign countries as a way to boost the country’s influence abroad. He has repeatedly named Germany alongside Italy as Russia’s most important trading partners in Europe.

Flush with the world’s third largest foreign currency reserves, the Russian state may be willing to overlook the challenges posed to Sberbank by a shrinking economy, as well as GAZ’s debts and lack of success in passenger cars.

“GAZ has made this mistake before and doesn’t want to make it again. Now the government is making it for them,” VTB Capital automotive analyst Yelena Sakhnova said.


DOES GERMANY WANT RUSSIA’S MONEY?

GM has promised that the German government will have a say in itschoice of investor. Russia, a relative financial powerhouse, could makea promise to Germany to keep Opel running.

That could give a Russian-backed bid a big advantage over a rivalbid by Italy’s Fiat (FIA.MI), which faces union opposition because ofpotential job cuts.

“Putin can say the state will support the project, while Fiat, as acorporation, depends on the market situation,” Sakhnova said. “TheRussian state can offer support for all sides because it still hasreserves.”

DOES RUSSIA NEED MORE NEW CARS?

The Russian car market, which briefly overtook Germany’s last year,contracted more than 50 percent year-on-year in April. Opel sales weredown more than 60 percent.

“Russia was a net importer until recently,” Ernst&Young’s IvanBonchev said. “Currently it is reducing capacity and it will not neednew capacity in the next few years at least. It would not make anysense to increase capacity dramatically.”