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GM returns to Cold War fear in talks to sell Opel

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

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GAZ, a maker of popular trucks, buses and minivans, has had trouble selling cars like the outdated Volga sedan. It is owned by Russian aluminum magnate Oleg Deripaska, who has strong ties to Putin. GAZ once owned a stake in Magna and recently hired GM’s top purchasing executive to head its board of directors.

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Also, the German government increasingly relies on Russia for oil and natural gas, so it wants to stay on Russia’s good side, Svejnar noted.

The U.S. government, which now owns 60.8 percent of GM and has given it $50 billion in aid, would not comment on the prospect of technology going to the Russians.

Some analysts believe Russia may create a national holding company by bundling its ailing domestic car manufacturers in an effort to drive efficiency and set out a strategy for the sector. Yet others say GM’s fears are overblown because GAZ has such a long way to go to really be competitive with Western automakers.

GAZ remains in business only because its cars are cheaper than those of other manufacturers due to Russian government subsidies and import tariffs, said Serguei Netessine, associate professor of operations and information management at the University of Pennsylvania’s Wharton School.

“GAZ is in the business of producing very cheap cars from very, very old technology,” he said.

GAZ, known in Russia for quality and corrosion problems, has tried to modernize through joint ventures or buying used technology from Western automakers. In 2006, it bought factory equipment from Chrysler that made old versions of the Sebring and Dodge Stratus sedans and used it to make the Volga Siber.

Netessine said that even if GAZ received Opel technology today, it would take years for it to begin producing vehicles because its manufacturing operations are so inefficient.

Also, GAZ, Sberbank and the Russian government don’t have the capital to invest in new factories, nor do they have the political will to eliminate thousands of jobs by updating production from 1970s technology.

“Even if GM completely stops doing any research and doing any product development, maybe they’re going to catch up with them in five or 10 years at the earliest,” he said. “I think those fears of GM are sort of a little overestimated.”

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Associated Press Writers Nataliya Vasilyeva in Moscow, Matt Moore in Frankfurt, Germany, and Ken Thomas in Washington contributed to this report.