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Analyst: GM 'Scared' Off By Partners In Proposed Opel Deal

German Opel employees demonstrate outside the company's headquarters in Ruesselsheim.
German Opel employees demonstrate outside the company's headquarters in Ruesselsheim.
The board of directors of U.S. automaker General Motors (GM) has decided not to sell its shares of Opel, putting an end to months of talks that seemed to be leading to the acquisition of Opel by a consortium consisting of Canada's Magna and Russia's Sberbank.

Andrei Sotnik, financial analyst for RFE/RL's Russian Service, discusses the forces behind GM's unexpected decision.

RFE/RL: The reasons the Americans have put forward to explain their rejection of the deal sound extremely politically correct: the economic situation in Europe has improved. Do you think this is the real reason or just something for public consumption?

Andrei Sotnik:
I can only give you my impressions. I think that the real reason for such a decision could be connected to the lack of transparency in the proposed deal.

RFE/RL: But it seems perfectly transparent. They explained officially that the Magna-Sberbank consortium would pay 500 million euros ($750 million) for 55 percent of Opel. The German government would pitch in 4.5 million euros in guarantees. The partners are solid; the sums are known. What else is there?

There are questions. Very serious questions. For example, which Magna was planning to buy Opel? According to some, we are talking about a Canadian company. Others say it is a Canadian-Austrian company.

And there was never absolute clarity in the announcements from the Russian partners. In some reports, they were only talking about Sberbank. Others spoke about Sberbank and the GAZ group. And where was the Russian money coming from -- was it theirs or were they borrowing it?

Murky Aspects To Deal

RFE/RL: Surely the seller knew exactly what consortium they were dealing with....

Most likely. And that is what scared them.

RFE/RL: What do you mean?

Let's look at it from the beginning. What is Magna and what role would that company play in the deal? The Canadian firm Magna International Inc. is one of the world's largest producers of auto parts and one of the largest firms in Canada. It is based in Aurora, Ontario.

As of April 2007, about 84 percent of the company belonged to institutional investors, while the rest was owned through trusts controlled by the family of Magna board Chairman Frank Stronach and its top managers. The Stronach family controlled nearly 70 percent of the voting shares of the whole company.

Was Russian oligarch Oleg Deripaska part of the deal?
As of May 2007, Magna International Inc. owned 235 production enterprises and 64 design centers in 23 countries across Europe, Asia, Africa, and North and South America. It employed 83,000 people.

What about the Canadian-Austrian Magna? It is a joint venture with the well-known firm Stayer, which is the Austrian daughter company of the Canadian firm. The Austrian Magna assembles the BMW X3, Mercedes E and G class cars, the Saab 9-3 convertible, and several other brands at a factory in Graz.

So, which of these companies was Sberbank dealing with? It is a crucial question since these are completely different legal entities with different assets and ownership rights.

If you look deeper into the ownership structure of the Canadian Magna, even more questions arise. During the negotiations, for some reason, no one mentioned that in 2007 the Russian company Russian Machines (which is part of the Base Element holding of Oleg Deripaska) paid $1.54 billion for 20 percent of the voting shares of the Canadian Magna, meaning that the company became somewhat Canadian-Russian.

Moreover, since Russian Machines made the acquisition with borrowed money and not its own resources, the Canadian shares were handed over as collateral to the lenders, the banks.

And the story is even more confused. I won't go into tedious detail, but in 2008 the Canadians announced that Russian Machines was no longer a shareholder of the Canadian Magna. Some sort of trust with an unknown jurisdiction took over the distribution of the shares between the Canadian and Russian partners.

Who benefited from this operation and who ended up with the $1.5 billion that had been put up by the Russians -- these questions are unanswered. But in 2009, the GAZ group, controlled by Deripaska, started being named as one of the participants in the consortium that planned to buy Opel.

RFE/RL: Do you think all these complicated and opaque transactions frightened the Americans?

They definitely might have. The opacity and secrecy surrounding the proposed financial scheme would be a serious reason for GM to rethink whether the deal made sense. The Americans long ago came to the conclusion that dirty money, unknown trusts, and offshore schemes always lead to disaster. The Russian authorities and some of their foreign partners don't want to admit this.

So what has happened makes perfect sense: the Americans simply want to get to the bottom of this entire opaque and foul-smelling German-Canadian-Austrian-Russian financial story.

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