MAGNA/SBERBANK: CLOSER TO ACQUIRING OPEL

C O N F I D E N T I A L MOSCOW 002336

SIPDIS

STATE FOR EUR/RUS, EEB/IFD
TREASURY FOR TORGERSON, WRIGHT
DOC FOR 4231/MAC/EUR/JBROUGHER
NSC FOR MCFAUL

E.O. 12958: DECL: 09/11/2019
TAGS: ECON EIND EINV RS GE
SUBJECT: MAGNA/SBERBANK: CLOSER TO ACQUIRING OPEL

REF: A. MOSCOW 2296

B. MOSCOW 1617

Classified By: A/ECON MC John Stepanchuk for reasons 1.4 (b. and d.)

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Summary
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1. (C) The Magna/Sberbank bid has cleared the most recent
hurdle in acquiring European Opel and received a green light
from the GM Board. Approval from the Opel Trust does not
appear to be an obstacle. The GOR, however, appears to have
unrealistic expectations about the impact of this acquisition
on the Russian car market. It looks upon this deal as a
gateway to cutting edge technology (to be used perhaps
throughout the entire Russian auto industry) and a way to
break into the European market. GM merely sees it as a way
to increase its production capacity inside Russia. It
appears that, even if the deal does close by the end of
November, there may still not be a "meeting of the minds".

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Deripaska Goes to Detroit...
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2. (C) Reports indicate that GM felt it had little choice but
to agree to the Magna/Sberbank purchase. Oleg Deripaska
(owner of GAZ Group, Magna/Sberbank's industrial partner)
traveled to Detroit to finalize the details of his role in
the Magna/Sberbank acquisition and demonstrate Russian
commitment to the deal. Magna/Sberbank enjoyed full German
government support -- to the tune of USD 2.2 billion in
bridge financing and USD 6.6 billion in state guarantees --
in return for promises to keep German factories open.
Furthermore, it was rumored that although GM wanted to keep
or buy back European Opel at a later date, it could not
source the necessary financing.

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...But the Devil is in the Details
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3. (C) Whether it is comfortable or not with Magna/Sberbank's
acquisition of Opel, GM sees a strong future in Russia --
despite the current steep downward slope in demand. GM CIS
is planning to expand production in Russia, either through an
earlier negotiated joint venture or the Magna/Sberbank
purchase of European Opel (reftels). That said, the
technology transfer question will likely bedevil this
partnership for years to come.


4. (SBU) Russia sees the European Opel acquisition as an
important way to "integrate Russia into the European economy"
according to Sberbank head German Gref. GM doesn't share
that vision; it merely wants to expend in Russia. The terms
of the deal specify that Opel's new owners will continue to
pay royalties for the use of GM technology and all plans
concerning Opel must be approved by the GM Joint Product
Board indicating that Magna/Sberbank will be on a tight
leash.
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Comment
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5. (C) It appears likely that the Magna/Sberbank acquisition
of Opel will be concluded by the end of the year. The GOR
clearly believes that Opel is a golden ticket to an
innovative auto sector supported by GM know-how. GM, in
turn, appears willing to gamble on letting the Russians have
some access to its technology in order to secure a strong
foothold for GM in the Russian car market.

Beyrle