Russia has taken a gamble by seizing a lead role in the take-over of German automaker Opel as its performance will be closely scrutinised by Europe as a test of Russian reliability, analysts said. With diplomatic relations with the West still strained, Russia will need to show that it is sufficiently mature to help rescue the struggling German firm almost two decades after the collapse of the Soviet Union's command economy.
Germany earlier Saturday picked Canada's Magna International and its Russian financial backers to take over General Motors subsidiary Opel, in a deal that will also involve leading Russian automaker GAZ. "Russia's behaviour in this deal will be the acid test as to how future Russian investments will be accepted in key industries in Europe," said Chris Weafer, chief strategist at Moscow's based UralSib investment bank.
"To that extent, it's dangerous. If that deal doesn't work, it can slam the doors very hard." Efforts by major Russian companies to expand their footprint in Europe have met with resistance in recent years over concerns that the Kremlin is keen to use its oil and gas money to advance political goals.
A purchase by Russian state-owned VTB bank of a five percent stake in aircraft manufacturer EADS in 2006 raised hackles in Europe, with the firm warning that Moscow would not be welcomed as a decision maker. "It is clearly a gamble," said Stanley Root, partner and automotive analyst at PricewaterhouseCoopers in Russia.
"There has not been as successful a track record in this kind of ventures as one would like to see." Backed by Sberbank, Russia's largest state-controlled lender, Saturday's deal will see the country's privately-owned automaker GAZ, which is mostly famous for its Soviet-era Volga sedan, making Opel vehicles in Russia.
Russian officials say the deal gives a chance to boost the country's ailing car industry - which has been hammered by the financial crisis - and obtain top European automotive technologies and expertise on the cheap. "In my opinion, this is a very good chance for Russia to receive one of today's most technologically advanced European producers at an unprecedentedly low price," said German Gref, Sberbank chief executive.
For years, the Russian government has said it would not give up on its highly inefficient car industry and has taken steps to shield it from foreign competition. In 2005, the government took over the country's flagship carmaker AvtoVAZ and sold a 25 percent stake in the company to France's Renault in 2008 for one billion dollars.
Meanwhile, foreign companies like GM, Ford and Toyota moved to set up shop in the country and Russia was poised to become the largest car market in Europe before the crisis hit. It remains to be seen whether GAZ is really in a position to make good use of the Opel tie-up at a time when it is struggling amid the crisis and turning to the state for help. Repeated attempts by GAZ to modernise its vehicles have so far been largely unsuccessful, analysts say.
In 2006, it bought British van maker LDV but announced earlier this year it would sell the unit to a Malaysian company. GAZ has also launched production of a new car based on an old platform it acquired from Chrysler in 2006. "I just don't understand what they will do with the plants in Germany," Ivan Bonchev, a Moscow-based automotive analyst with Ernst & Young, said of the deal.
He said it would be much cheaper to buy technologies alone as opposed to the entire company, adding that GAZ had to sort out its own problems first. However the involvement in the deal of the government - through Sberbank - rather than just an individual tycoon might bode well for the future of both GAZ and Opel. "This deal is too important for them to get it wrong," UralSiB'S Weafer said.
Under the deal, GM would keep 35 percent of the company and Opel's workers would retain 10 percent. Magna would hold a 20 percent stake and Sberbank 35 percent. The Canadian company, front runner in the race to snap up Opel from the beginning, fought off rival bids from Italian car maker Fiat and Brussels-based investment firm RHJ International.