GM returns to Cold War fear in talks to sell Opel

Behind GM’s hesitation to sell its unprofitable car business in Europe lies a Cold War fear: American technology will fall into Russian hands.

It’s among the main reasons why General Motors Co. has balked at finishing a deal to sell its Opel unit to a group led by Canadian auto parts maker Magna International Inc. and Russia’s state-owned Sberbank.

GM announced the tentative deal with Magna in May at a time when it was desperately trying to avoid bankruptcy protection.

But now, after exiting bankruptcy in better financial shape and encouraged by signs of better sales, the Detroit-based automaker is second-guessing the deal, worried that future auto designs could wind up with Russian rival GAZ, which competes with GM’s Chevrolet, the No. 2 brand in a growing Russian market.

GM is pushing a competing bid from Brussels-based investor RHJ International SA and may even keep Opel if its worries can’t be resolved. It’s playing hard ball, even though the German government, eager to preserve many of Russelsheim-based Opel’s 25,000 German jobs in an election year, has offered 4.5 billion euros ($6.5 billion) in credit for the Magna-Sberbank deal.

In the murky world of Russian capitalism, both Sberbank and GAZ, maker of the Volga sedan, have strong ties to the Russian government, which has made no secret of its desire to help its ailing and outdated auto industry.

“It makes sense that GM is looking to the other alternative,” said Jan Svejnar, a professor of international business and public policy at the University of Michigan. “In Russia these days large companies that have a significant state stake are obviously linked.”

Russian Prime Minister Vladimir Putin repeatedly has said that the government supports Magna and Sberbank’s bid and hopes that the deal would help the Russian car industry.

While GAZ is years behind GM and other Western automakers in vehicle technology, GM fears that down the road, GAZ could catch up by getting GM car architecture for Opel’s small and midsize vehicles and other property at no cost, using it to compete with GM in its second-largest European market.

Under the German financing deal, Opel would stop paying technology royalties to GM if Opel defaulted on its private loans, yet GM would still be required to provide new technology to Opel, said a person briefed on negotiations between GM and the German government. The person didn’t want to be identified because the talks are private.

GM and Magna worked out a deal to protect GM’s current technology, but the GM board fears future technology could be lost if Opel goes into default, the person said.

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