Last week's deal for General Motors to give up control of its money-losing Opel unit has a big downside: If the deal goes through, Russian automaker GAZ will get its hands on GM technology.
Worse yet, GAZ, with cars that are light years behind most global automakers in quality as well as engines, transmissions and other technology, is likely to use what it gets from GM to compete against the Detroit automaker's Chevrolet brand in Russia.
"Each deal has a flip side. I think that is the risk that is currently being assessed by GM, and maybe they're willing to accept it," said Mikhail Pak, auto industry analyst with the Aton Investment Co. in Moscow.
GM said Sept. 10 that it had agreed to cede a 65 percent stake in the German-based Opel to Canadian auto parts supplier Magna International Inc. and Russia's state-owned Sberbank. GM keeps 35 percent and Opel's workers get 10 percent. Under the deal, expected to close by Nov. 30, the German government also pledged $6.5 billion in credit.
John Smith, GM's lead negotiator, told reporters last week that GM will share technology with the new Opel as well as GAZ. GM would get royalty payments for anything now in production, and GM must consent to use of new technology that isn't yet in factories.
GM, which emerged from Chapter 11 bankruptcy protection on July 10 and has received $50 billion in U.S. government aid, didn't want to sell Opel because its engineering is so integrated into GM's global product development, said Peter Kelly, senior director of global auto forecasting for J.D. Power and Associates.
Many of GM's next-generation vehicles are based on Opel's highly regarded midsize Insignia and its Astra small car, both designed by engineers in Ruesselsheim, Germany. GM didn't want to give those up but had to trade them to the Magna group so it would take on the money-losing Opel, Kelly said.
"They (Magna) have to be getting something reasonable for taking on the Opel business. The Astra and Insignia are pretty competitive cars in their segments," Kelly said.
If GAZ can produce GM-based cars, it could take sales from Chevrolet, which has grown to become the top-selling foreign brand in Russia.
Full story
