MOSCOW (AFP)--Opel cars will be "made in Russia" after the
Germany-based General Motors (GM) unit was sold on Friday to
Canadian parts maker Magna (MGA) in a consortium bid with Russian
auto maker GAZ (GAZA.RS).
GAZ, Russia's second-largest car manufacturer, is poised to turn
over its sprawling assembly line and distribution network to
produce Opel cars for the Russian market.
And while debt-laden GAZ won't itself put up any cash as part of
the bid, the deal will also be partially financed in Russia, with
state-run Sberbank putting up the rubles.
For its part, GAZ brings to the table its industrial capacity
and large assembly line, newly-built in 2008 with Magna's help in
Nizhny Novogorod on the banks of the Volga river, 400 kilometres
(250 miles) northeast of Moscow.
Citing sources close to the deal, Russian business daily
Vedomosti reported last week that the consortium would aim to
produce 180,000 Opel cars at the plant.
And analysts say the deal could breathe new life into the
Soviet-era car maker as production grinds to a virtual halt at its
factories amid falling demand.
GAZ, controlled by indebted metals tycoon Oleg Deripaska's
holding, Basic Element, remains Russia's largest producer of buses,
trucks, road-construction equipment and heavy diesel engines.
The company turned a profit of 153 billion rubles ($5 billion)
in 2007, according to figures posted on its Web site.
But despite recent efforts to develop new models, such as the
Volga Sibir sedan, GAZ has struggled to compete with an influx of
foreign imports.
In addition, weighed down by the financial crisis, analysts
estimate GAZ is more than $1 billion in debt, at least half of
which is due this year.
The car maker's "situation is critical", said Gennady Sukhanov,
an automotive analyst with Troika Dialog.
And as the Russian car market goes from bad to worse,
manufacturers including GAZ have gone cap-in-hand to the state.
In March, Prime Minister Vladimir Putin pledged RUB4 billion
($129 million) in state support for GAZ as part of rescue measures
for the biggest players in the domestic auto industry.
Analysts also believe the Kremlin was the main driving force
behind the bid for Opel.
The deal with GM for Opel "makes sense" for Moscow because it
acquires foreign know-how and furthers its goal to promote
investment overseas, said Chris Weafer, chief strategist at UralSib
investment bank in Moscow.
"It fits with the government's ambition to use external
partnerships to both help key parts of the Russian domestic
industry to modernise and also to act as conduits for domestic
industries to expand internationally," Weafer said in a client
note.
"The current crisis could well allow the opportunity for
strategic Russian industries, such as the auto sector, to forge
long-term partnerships," he added.
"Sberbank's role would only be that of state-backed financier to
facilitate the deal."
Deripaska - who has seen his fortune shrink drastically from his
former Forbes magazine stature as Russia's richest man - lost his
20% stake in Magna to creditors in March.
But the new tie-up will likely strengthen the relationship
between the tycoon and his new Canadian partners.