Siegfried Wolf, Magna's co-chief executive officer.Gero Breloer
The Russian economy is battered, auto sales have tanked and Magna International Inc. was denied a chance to join with one of that country's banks to take over Adam Opel GmbH - but none of that has dimmed its vision of Russia as a spectacular growth opportunity.
Magna, looking eastward, has approved the appointment of its co-chief executive officer Siegfried Wolf as chairman of GAZ Group . GAZ is a Russian auto maker controlled by Oleg Deripaska, the oligarch who shared a controlling stake in the Canadian auto parts giant until he was forced to liquidate it during the credit crisis in 2008.
"This is to continue our strategic plan in Russia," Mr. Wolf said Thursday of Magna. "We have to expand. We have to grow with new markets."
That plan is to be in on the ground floor and ride higher as vehicle sales grow, auto makers expand and Magna restructures the creaking auto parts supply network that was established under the Communist regime and is in desperate need of modernization.
Magna and its chairman Frank Stronach first had this vision in 2007, when they hooked up with Mr. Deripaska, who paid $1.5-billion (U.S.) for a 42-per-cent stake in a new holding company that took over control of the company Mr. Stronach founded in 1957.
The links between GAZ and Magna represent the biggest bet the Canadian auto parts giant has made in any of the four BRIC countries (Brazil, Russia, India and China).
Mr. Wolf, like Mr. Stronach a native of Austria, has been on the board of GAZ since 2007, giving him a front-row seat as the Russian auto market melted down.
He was also a key player in the partnership Magna made with Sberbank of Russia, which bid to take over management control and a 55-per-cent stake in the Opel unit of General Motors Corp. last year, when GM fell into Chapter 11 bankruptcy protection.
The Magna-Sberbank partnership originally won the bidding, but the new board of General Motors Co. changed its mind once the company emerged from bankruptcy protection and decided to hang on to all of Opel.
"It was our view that a partnership among GM, Magna and a Russian company would strategically position all parties to capitalize on major growth opportunities in the Russian market," Mr. Stronach said in his message to shareholders in Magna's annual report issued last week.
The Magna board approved Mr. Wolf's appointment by GAZ, Mr. Stronach said yesterday, adding that the auto maker "needs some help." He will receive no compensation from GAZ.
"I'm quite convinced that Russia will recover - slowly, but very steady and very strong," Mr. Wolf said.
He expects vehicle sales to reach five or six million in the near future. That will require a sharp turnaround from 2009 sales, which plunged 49 per cent to 1.466 million, from 2.897 million in 2008.
The market began to stabilize last month with a decline of 7 per cent.
GAZ sales fell 8 per cent, but it outperformed Ford Motor Co., Toyota Motor Corp. and Nissan Motor Co. Ltd., to stand eighth in year-to-date sales.
Some global auto makers are also bullish on the Russian market, notably Fiat SpA, which announced a deal earlier this year with Russian auto maker Sollers to assemble 500,000 vehicles by 2016.